weekend update


Another boring week until Friday. The market started the week at SPX 2180. After opening at SPX 2184 on Tuesday, it dropped to 2175 in the first hour of trading, then hit a higher high at the close. On Wednesday the SPX hit the high for the week at 2188. After that it declined into the close on Friday. For the week the SPX/DOW lost 2.3%, and the NDX/NAZ lost 2.4%. Economic reports for the week were light and slightly positive. On the downtick: ISM services and the Q3 GDP estimate. On the uptick: consumer credit, investor confidence, and weekly jobless claims improved. Next week, another options expiration week, reports will be highlighted by industrial production, the CPI/PPI and retail sales. Best to your week!

LONG TERM: uptrend

Quite an interesting market. While the free market enthusiasts continue to complain about the central bank interventions. The bulls and the bears had been locked in a 1.5% trading range for the past eight weeks. Last Friday FED chair Yellen, in her Jackson Hole speech, suggested no rate hikes until at least December. Right after her speech, in an interview with vice chairman Fischer, he, and a chorus of other Fed officials this week, suggested a rate hike could be on the table as soon as this month. Then on Thursday, when the ECB president Mario Draghi failed to meet market expectations of an expansion in the EQE program, the markets began to selloff. Notice what is driving these markets. It’s not fundamentals, which remain moderately positive. It’s central bank rhetoric!

The long term view remains unchanged. The key US indices are in long term uptrends. While many of the foreign markets, and secondary US indices, appear to be in long term uptrends as well. We continue to carry three counts on the US markets displayed on the SPX, NYSE and DOW charts. Last week we upgraded the most bullish count to a 40% probability, and placed a 30% probability on the other two counts. See previous weekend updates for details. In summary.


The DOW count suggests a new bull market began in February 2016.


The SPX count suggests an irregular ongoing bear market has been underway since 2015.


The NYSE count suggests the bull market from 2009 is still underway, and will not likely end until this index makes new all time highs.

MEDIUM TERM: downtrend

As noted above. For the past eight weeks the SPX had remained in a record 1.5% trading range. This week the NDX/NAZ/NYSE all made new uptrend highs. Yet, the SPX/DOW had not made an uptrend high in nearly four weeks: since August 15th. When short term selling began on Thursday, due to the ECB disappointment, this negative divergence came into play. As a result the indices moved more in one day, than it had moved in the last eight weeks.

As a result of Friday’s selloff all four major indices are in confirmed downtrends. The uptrend from the late-June Br-exit low did complete five waves up, with the fifth wave ending in an expanding diagonal triangle. Friday’s selloff confirmed the count and this new pattern.


With a downtrend underway there are several levels of support right under the market. Fibonacci retracement levels suggest the following SPX: 2117 (38.2%), 2093 (50.0%) and 2069 (61.8%). Since the fifth wave was the weakest wave there is support between waves 1 and 2, SPX: 2074-2109. Then we have the OEW pivots. In our review of the 2015-2016 bear market we uncovered a few new pivots. Therefore pivot support is at SPX: 2116, 2085 and 2070. Combining all these levels the first support is the 2116 pivot range, second the 2085 pivot range, and third the 2070 pivot range. All that analysis and it still leads to the three pivots. Medium term support is at the 2116 and 2085 pivots, with resistance at the 2131 and 2177 pivots.


During the uptrend we had noticed that wave three was shorter than wave one. This suggested that wave five would be the shortest wave. And it was. What we didn’t figure was that it would be so short and take over one month to unfold. But I guess neither did anyone else.


Since Friday provided a very sharp selloff we do not think this downtrend is going to last too long. Hourly and daily RSI are already extremely oversold. Plus the weekly RSI is already close to the low of the last downtrend. Should the downtrend continue lower over the next day or so it could bottom. If the market bounces Monday/Tuesday it is likely to require a retest of the lows before bottoming. Either way next week could be a reversal week for the downtrend. Short term support is at the 2116 and 2085 pivots, with resistance at the 2131 and 2177 pivots. Short term momentum ended the week extremely oversold. Trade what’s in front of you!


Asian market were mixed on the week for a gain of 0.7%.

European markets were mostly lower for a loss of 0.8%.

The Commodity group were mixed and gained 0.6%.

The DJ World index lost 1.2%.


Bonds continue to downtrend and lost 0.4% on the week.

Crude appears to be in a volatile uptrend and gained 3.2%.

Gold appears to be in an uptrend too and gained 0.6%.

The USD is still in a downtrend and lost 0.6%.


Monday: a speech from FED governor Brainard at 1:15. Tuesday: the budget deficit. Wednesday: export/import prices. Thursday: weekly jobless claims, retail sales, the PPI, the Philly/NY FED, industrial production and business inventories. Friday: the CPI, consumer sentiment and options expiration. Best to your weekend and week!

CHARTS: https://stockcharts.com/public/1269446/tenpp

About tony caldaro

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299 Responses to weekend update

  1. cmucha68 says:

    Perfect V shape rally.

  2. captbara says:

    Back inside the BBs for both SP and Vix in one shot, impressive. Buy signals and NYMO divergence mentioned on Fri will be confirmed at the close.

    • vivelaamo says:

      SP is still below the Centre line, back testing the breakout point and currently sitting at 61.8% fib of the 2 day move down. A few small hurdles yet.

  3. vivelaamo says:

    I’ve closed my S&P Long positions from Friday. There is something I don’t like about this move. Surely in terms of a pb that can’t be it?

  4. micky says:

    I will be surprised if we clear the 60 area well today

  5. vivelaamo says:

    I didn’t expect the bounce to be this strong.

  6. jobjas says:

    wave 1 target from 2120 bottom is 2158

  7. captbara says:

    Fed strategy is just endless doublespeak by all their members. Anything is possible.

  8. micky says:

    Bounce was from exactly c=1.6 a, the 1st target

  9. phil1247 says:

    2142 short has traded

    above 2153 /esz6

    2234 target is back on the table

  10. blackjak100 says:

    Everything going exactly as I laid out so far which actually makes me more nervous. It may change, but hasn’t yet. If this is int iii of major 3, I want to see a strong close.

    Fact of day: $SPX has never traded within .5% ATH and then dropped to 2 month low in 1 day. Welcome to the fed induced market!

    • blackjak100 says:

      Also something I didn’t add this weekend is I want to see the Vix quickly close under 14.75ish this week – it’s long term rising trend line from its bull market low. This would imply a false breakout.

  11. rd3777 says:

    Boy today is “hot” you can just see and feel it. The bulls always buy the first dip and we might try further upside. But I feel it will fail and then we could get a lot bigger collapse. The JPN225 chart tells me the top technically is already in…..the next leg down will be a 3rd wave.

  12. abchart says:

    Brainard urges continued prudence before hiking.
    I think no hike before early 2017.

    • Page says:

      and I will be surprised if we see rate hike in 2017 either, may be in 2018, let these FED Governors jawbone all they want, they are stock in a dark room.

  13. Ajney says:

    Mr. Fibonacci has induced a fist fight between the bears and the bulls.

  14. She’s saying the same thing she said in her June speech.Wants 2% inflation.She’s consistant–unlike the others,who veer off when the DXY moves a couple ticks.

  15. vivelaamo says:

    If I was to short it would be now at halfway point of the marabozu.

  16. mtu MTU says:

    [120pm] SPX update-
    Potential reaction at potential resistance. See chart.

  17. stmro says:

    Divergence between stocks and bonds. This rally is fake.

  18. phil1247 says:


    / ESZ6
    Squeeeeeze parameters from this AM

  19. captbara says:

    Brainard speaking in 15 min

  20. johnnymagicmoney says:

    I find it hysterical that there are so many people who claim that the reason that the market wont go down a lot is because so many people expect it to. That is the biggest bunch of baloney. This market is chuck full of complacent investors and traders who believe it will never go down not the baloney that I keep hearing.

    • vivelaamo says:

      Market won’t go down because of central banks.

      • From John Hussman’s blog post yesterday: http://www.hussmanfunds.com/wmc/wmc160912.htm

        “It’s not just that investors have oversimplified a complex interaction, which they are certainly doing here in assuming that “easy money makes risky assets go up.” This simplification fails to explain, for example, how the U.S. stock market could lose more than half of its value on two separate occasions since 2000, during periods when the Federal Reserve was persistently and aggressively easing. It also overlooks that the Japanese stock market shed more than 60% of its value on two separate occasions since 2000, despite short-term interest rates that were regularly pegged at zero and never breached even 1%…The fallacies underlying today’s “this time is different” mantra go even further, assuming not only that central bank behavior has permanently changed, but that we can also abandon everything we’ve learned from centuries of economic dynamics, human behavior, and even basic arithmetic…Having repeatedly borrowed enough short-lived bursts of consumption from the future to keep U.S. real GDP growth barely above 1% over the past year (and indeed, over the past decade), monetary authorities have convinced investors of a cause-effect relationship between activist monetary policy and economic outcomes that is entirely absent in actual data (see Failed Transmission – Evidence on the Futility of Activist Fed Policy). Worse, central bankers have convinced investors that the progressive overpricing of financial securities can substitute for actual growth. The recent speculative episode has even convinced investors that human nature itself has changed. Centuries of financial market behavior can easily verify that periodic cycles of greed and fear are an inherent part of market dynamics. Instead, investors have abandoned that lesson, believing that central banks have discovered the ability to do “whatever it takes” to keep markets higher (without realizing that the effectiveness of easy money is entirely dependent on the absence of risk-aversion among investors).”

        • tony caldaro says:

          part of the bears case

        • vivelaamo says:

          I get this but as mentioned before the setups are completely different. Look at the differences in the moving averages, in particular the 200 day. We need a lot more considolidation and swings before it looks anything like the previous 2 crashes.

        • tommyboys says:

          This is the chronic flawed narrative that the Fed has caused the entire rally off the ’09 low. If they had the power to do THAT then they should have no problem KEEPING it afloat – or pumping it higher – to eternity! Maybe – just maybe – all that “Fed money” is still sitting on banks’ balance sheets and did nothing other than spawn confidence when needed most? You can’t just remove any modicum of thought that overall economy has improved and will continue to do so for the next year or two or five. Good luck shorting based on the “Fed” narrative hoping for a crash.

        • va89blog says:

          Christine, there’s a reason the median PE on the SPX today is higher than it was at the 2000 peak. Eventually this euphoria will end and probably occur as credit is repriced and people realize rates can indeed rise.

  21. abchart says:


    2119 maybe minor a?

  22. wavegenius says:

    W4 is in SPX..crash is over

  23. So far,textbook gap fill for GDX at 26.47 and bounce.

  24. vivelaamo says:

    Perfect bounce. I think half this blog called it. Fair play.

  25. Jimbo says:

    Can anyone get me a live price for $BPSPX? Stockcharts not working

  26. locanbbs says:

    UPDATE: Short squeeze or double bottom?
    Spx hourly futures –

  27. Ajney says:

    Ameritrade’s risk management system is that they close down :))

  28. captbara says:

    When are the presidential debates starting? I wonder if she can find some way to get exemption from it.

    OT: I spot 5 waves up from the low. DLyons and Vix studies pointing to strong chances of a continued bounce.

  29. phil1247 says:


  30. Subtract another 4 points for FV.Down 7-8 to start.DAX down 200(why haven’t they bounced?I guess PPT figures,one market at a time).

  31. gtoptions says:

    Thanks Tony
    SPY ~ WS1/S2 @ 212.97 ~ 211.56
    Test of WS2 in pre-market. Nothing political about the pivots!😉
    GL All

  32. phil1247 says:


    in ext shorts
    all downhill since extension long failed at 1350 where i bailed out
    1326 target hit to the tick!
    now collapse in new extensions
    or bounce from 1325 support?

  33. phil1247 says:

    in extension shorts
    bearish below 2117
    target 2094

    if 2117 is broken above
    short squeeze to 2142 should develop

  34. blackjak100 says:

    TC, what is the lowest 60 min RSI (5) you have seen? seems like it could print under 2 of the market opens up around 2110.

  35. purplember says:

    anyone watch Hillary video from 9/11 memorial on drudge? holy cow… something serious wrong and could effect the election

  36. rd3777 says:

    The JPN225 looks done with it’s 8 month corrective sequence and is impulsing down which probably means a test of the NL and break since it will be a 3rd wave. The Japanese market has resumed it’s 26 year secular bear market.

  37. kvilia says:

    Bob, few people know that there will be no next bull market until there is a reset. That’s all I have to say.

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