Thursday update

SHORT TERM: market pulls back after ECB meeting, DOW -46

Overnight the Asian markets gained 0.3%. Europe opened lower and lost 0.3%. US index futures were higher, then lower overnight, and at 8:30 weekly jobless claims were reported lower: 259K v 263K. The market opened 5 points below yesterday’s SPX 2186 close, and continued down to 2177 by 10:30. After that the market rallied to SPX 2185 just past 11am, nearly reaching unchanged, and then headed lower again. Just before 2pm the SPX hit 2178, then bounced to 2183 by 3pm when consumer credit was reported higher: $17.7B v $12.3B. After that the market settled at SPX 2181 at the close.

For the day the SPX/DOW lost 0.25%, and the NDX/NAZ lost 0.50%. Bonds lost 19 ticks, Crude rallied $1.90, Gold slid $7, and the USD was higher. Medium term support remains at the 2177 and 2131 pivots, with resistance at the 2212 and 2252 pivots. Tomorrow: wholesale inventories at 10am.

The market opened lower today, dropped to SPX 2177, rallied to 2185, then dropped again. After the ECB failed to make any changes to its EQE program European stocks fell and the SPX followed. During the decline we updated the hourly chart, which is still on a negative divergence, to display a possible 5th wave diagonal triangle pattern we recently uncovered. This pattern was observed in the DOW during 2014, and this pattern was confirmed in the SPX during the 2002-2007 bull market. While the conventional diagonal triangle is a contracting triangle that works its way towards an apex. This diagonal does just the opposite. It starts with the apex and expands outward. We’ll call it an inverted/expanding diagonal. The five waves of the diagonal would be: 2194-2169-2193-2157-2188 (thus far). If the E wave failed at SPX 2188, then a potential downtrend is underway now. If a rally back to resistance at SPX 2193/94 is required to complete the pattern, then a potential downtrend could unfold at that point. Short term support is at the 2177 pivot and SPX 2157, with resistance at SPX 2194 and the 2212 pivot. Short term momentum is still declining after yesterday’s negative divergence. Trade what’s in front of you!

MEDIUM TERM: uptrend topped/topping ?

LONG TERM: uptrend


About tony caldaro

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202 Responses to Thursday update

  1. What a waste of energy.Fed induced selloff,Fed induced buying.Fed induced inertia the last few weeks.F the Fed.

    • CB says:

      lol… well said.
      Bond pain, and a little more gold pain ahead? weekly:
      However, all that money has to go somewhere and I think that Gary has made some good points about a possible spending acceleration in some areas…It’s already started in the housing market, for instance…so some sectors should continue to do well in this environment..

  2. Jimbo says:

    Fiona, would love to hear your thoughts on tran and bkx

    • fionamargaret says:

      I shall have a look at both for you….when do you need it for… you do futures..

      • Jimbo says:

        No rush Fiona, if you have time to cast your eye those charts i’d love to hear your opinion

        • fionamargaret says:

          Well, I took a look….both are still positive…what I think is, if the market corrects some more the $TRAN will be at the base of the pattern(Raymond James also talks about them on my Saturday update), and if the pattern is not changed, could go to about 9300 the $BKX is still really positive pointing to around 93.
          I shall look for you again if we correct more….I hope you do well Jimbo.

  3. With selling stengthening into the close, may see a “Black Monday.”

  4. johnnymagicmoney says:

    remember those 3 gap ups in TLT after Brexit? Gonna all be closed

  5. fotis2 says:

    Nice Tony!You rang the bell did not hear any others unless I missed them excluding those that are constantly ringing..😉

  6. jobjas says:

    SPX -5 wave move up from 1810 not complete

  7. blackjak100 says:

    No damage to the weekly charts yet IMO as both $SPX & $INDU remain in the upper half of their BB. Weekly RSI (14) still well above 50. My pt is I would not get too excited yet as an int term bear. That may change, but this one day sell off hasn’t changed it yet. If a third of a third is coming (int 3 of major 3) this is exactly the move that was needed to precede it.

  8. captbara says:

    Looks like we’ll get 1 month NYMO divergence too with today’s close, as long as it stays above -48. Last time this happened was at the Feb low.

  9. kvilia says:

    Miners – exactly what I was afraid off – washed away along the general markets dump. Really did not think NUGT would not stop at 20. 75% short in all accounts, positive in one, slightly down in another – that’s how quickly markets fall. The signs were there but bulls did not listen. SPX drops to 200 MA, if no support, then aahmichael is right. Prepare for bloody Monday. Thank you Tony, and let’s see wave C in action.
    Newbie – high five!

  10. johnnymagicmoney says:

    this is what I find amazing is how many people look at this as a buying point and maybe it is but the reminder is the following

    From Feb 15 to August 15
    the market traded in about a 4% range
    It lasted 6 months
    From the peak in May it took 3 months before the bottom fell out

    From October 15 to January 16
    the market traded in a 4% range
    It lasted 3 months
    From the peak at 2116 it took about 2 months before the bottom fell out

    From July of 16 to September 16
    the market has traded in about a 2.5% range
    It so far has lasted 2 months
    From the peak it has been about a month
    Could the bottom be falling out again??

    It conceptually makes sense in that the longer this bull gets and the more fragile and elastic the markets become the shorter the time frames. This last move from 1810 is not indicative of a Primary 3 wave, nor do I subscribe to a Primary B wave. Primary 5 waves are notoriously weak. Volume has stunk. momentum has been rolling over, and its had an inability to follow through with strength after piercing 2135. This should be the tail end of the bull. Maybe there is one more shoot up maybe not but either way doom is coming. Everything points to a immaterially higher 5 over May of 15. Should we even discuss the monthly negative divergences????

    • vivelaamo says:

      What you didn’t mention there was the strength in the rally each time the bottom fell out. The powers that be want to buy equities but not at these prices. Sharp pb’s are bullish in my opinion.

      • Look at the trend in domestic economy. No change in job growth and spending pattern. Any drop should be related to corporate profits and any additional squeeze to those profits. 6 month projection is for a 9 percent surge in earnings. that by itself could cause a 20 percent drop in market. I don’t see that happening however till after the elections and most likely till January of next year. No recession in sight. Worldwide I also see no problems till next year.

        I look for cause and affect. What dynamics have changed today that would indicate a reversal long term? IMO spending patterns should accelerate while earnings goes positive but not anywhere near where street expects. 2017 should go down as an earnings shortfall in a strong domestic economy.

      • mcgcapital says:

        Agree with both to an extent… 2194 may or may not be a significant top, but if the last 2 tops we had around 2100 are anything to go by it will likely be retested a few times before it rolls over precisely because there’s so many people looking to buy into weakness. A few months of trading 2100-2200 wouldn’t be that surprising and then a post election sell off. Either way I think we have a hard time breaking and holding above 2200. That would be bullish.

        Vive out of interest where would you stop yourself out? Under 2100?

        • johnnymagicmoney says:

          I’m convinced Golly is Janet Yellen. You and your employment growth. Yeah I am so glad we have an ample supply of bartenders so when this implodes people will be served sharply with their choice of depressant.

          • Look at wage growth verses inflation. look at the actual jobs data supplied by our government. they break it out every which way. JOLTS repot shows surge in want ads. Qualified workers are not there. You can slant it all you want but the dozens of reports go to great length to clarify what the jobs are and segments that do well. Give me examples of job patterns from verified data that shows they are phantom jobs. the surge in spending had to come from somewhere. Impossible to fake these reports since there are so many from different sources. Deny car sales and housing. House price appreciation, consumer confidence, small business confidence. Very long string of job growth. This is going on for years. No way the economy can hold up this long and strong if the jobs were flipping burgers. I’ll stick to real reports and consequences as opposed to faked reports and hiding real damage all these years. If anything the trend is strengthening, not getting worse. Summer is know slowdown but this one is minor and suggests more strength ahead.

        • vivelaamo says:

          Yes under 2100 but that’s only because I’m trying to keep disciplined and adhere to my own rules with correct Risk to reward and always use stops etc. If I do get stopped out I will be still evaluating where to go long again at those prices. Im fully prepared to be ‘underwater’ for a few weeks if required hence is my belief the bull market will

  11. blackjak100 says:

    A false breakdown?, the million dollar question right now.

  12. micky says:

    Wow not even 40 can hold, guess I will have to wait or miss a short entry

  13. Viva la Hindenburg….lol.Worked again.

  14. captbara says:

    Should get a nice bounce in the coming days, just in time for the CB meetings. All 3 buy signals ready to be triggered.

  15. vivelaamo says:

    First S&P long triggered. I will continue to add positions the further we fall. Been waiting for this for weeks!

  16. mtu MTU says:

    [125pm] SPX update-
    SPX gaped down and dropped hard to below its MA50. Currently at potential support. Next support area is between the TL and 2110 breakout area. See chart.

  17. bfquant says:

    Anyone with a long-term count for TLT? And what happens when the go-to hedge isn’t there anymore for institutional investors?

  18. gtoptions says:

    SPY ~ Failed @ MR1 ~ Testing MS1 @ 215 & WS3 @ 214.94
    Temp Support, maybe?

  19. CampFreddie says:

    Is today one of those “Energy dates” ? 😉

  20. Correction that’s not …. P5 appears small…. but Major 5

  21. Dear Tony,
    As much as I find your scenario, of having begun Primary 3, very interesting in deed. In fact, back in 2011 I felt your calls on Primary 1 and 2 were premature, but it didn’t matter because you were correct on the direction of the market anyway. That being said, I felt that the decline to SPX 1810 was P4 and that we had begun P5. But now, you have the advantage of the rear view mirror and your 40% possibility of P3 having begun at SPX 1810. Nevertheless, IMVHO a bear market began on in August 2016. Which means, IMVHO, that we have ended Primary 1 at SPX 2194 and are currently in Primary 2. My only other observation, is that P5 does appear to be small but meets the minimum requirements. So we both agree on the direction, but not on the degree. Thank you for your wonderful blog!

  22. micky says:

    Targets are lower but I have us near a minor support area

  23. Just one note…GDX gap filled at 27.46.Another one to go at 26.47.If that doesn’t reverse it,probably more downside.GDX never made it above the 20sma of 29ish–doesn’t mean it can’t succeed on a 2nd try.Fast moves.Good luck all.

  24. rd3777 says:

    I have commented on this chart and AMZN in the last 2 weeks. If this count is right we should see a swift decline down to the 120 area in FB… my count the Z wave is over and the 8 year bull market.

  25. Battle going on with FED members. Majority will win out. Rate hike is being constantly reinforced so the market will capitulate.

    Economic data is solid if not exactly exciting. Dollar continues to hold at high levels and Gold stuck in sideways move. Crude holding up nicely.

    Not sure if September will see any action but it is clear they will telegraph for a move right after.
    What happened to the supposed recession and dire warnings given here for the past 2 years? JOLTS report surged and suggests solid jobs growth to come.

    Enjoy the drop while it lasts. Anyone expecting a much larger drop during election season is going against the long established odds. No way in this economic environment.

    I stated before that the ONLY cause of wild swings will be FED hike talks and action. In such a deep rate discount today the 25 basis point move should actually have the opposite effect on our economy. The next rate hike should push consumers to make purchases sooner rather than later. This will in affect accelerate the speed of improvement and force the FED to raise another 25 basis points soon after.

    Imagine the market dropping big time on solid economic news. How many bears these last many years saw that coming? I suspect this move is just another “normal” 3 to 5 percent maximum pain.

  26. Last week’s lows were taken out. Market is not too far from the breakout point. We may get a wider trading range today than we’ve had for the last 40.

  27. captbara says:

    First touch of hourly 377 MA and daily 55 MA since 2074.

  28. Peter Sliney says:

    Ok, fun is over. Back to sideways for 4 and half hours. I’m guessing next week is a down week.

  29. aahmichael says:

    Tony, great call on last night’s update. As I wrote on 8/23, I have a different preferred count than you, as I see it as a ED from the Brexit low, but the result is the same, at least in the short term. I’ll try to write more over the weekend, but here are a few quick observations:
    1. The 4th wave contracting triangle that many were counting was invalidated today when 2157 was taken out. Actually, for many other reasons, that count was invalidated several days ago.
    2. As of this morning’s open, wave c of 5 of the ED has now become a 4 day island reversal.
    3. The hourly SPX pattern from 8/15/16 to 9/07/16 is identical to the daily SPX pattern from 11/03/15 to 12/29/15.
    4. The weekly 3BR that completed on 8/26/16 remains firmly in control. (Note: a close below 2099.34 on 9/30/16 would create a monthly 3BR.)
    5. NDX had a 3 wave rally from 8/24/15 to 12/02/15 that was 953 points, and now it has completed another 3 wave rally from 2/08/16 to 9/07/16 that was 951 points. Symmetry matters.

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