Tuesday update

SHORT TERM: another gap down opening, DOW -258

Overnight the Asian markets ended mixed. Europe opened higher but lost 0.7%. US index futures were sharply lower overnight, and the market gapped down at the open to SPX 2144. The SPX had closed at 2159 yesterday. In the opening minutes the SPX hit 2139, bounced to 2146, then headed even lower. By 11:30 the SPX hit 2124, rallied to 2132 by 12:30, then hit 2120 by 1pm. After a rally to SPX 2136 by 1:30 the market headed down again. At 2pm the Budget deficit was reported larger: -$107.1B v -$64.4B. After a rally to SPX 2136 by 1:30 the market remained in a 2120-2136 range into the close, ending the day at 2127.

For the day the SPX/DOW lost 1.45%, and the NDX/NAZ lost 1.00%. Bonds dropped 13 ticks, Crude slid $1.40, Gold lost $9, and the USD was higher. Medium term support slips back to the 2116 and 2085 pivots, with resistance at the 2131 and 2177 pivots. Tomorrow: export/import prices at 8:30.

The market gapped down at the open for the third day in a row. This has not occurred since nearing the low of the August 2015 selloff. Which, btw, was substantially greater than the recent 75 point decline. While many market pundits were on holiday the SPX remained in a 1.5% trading range for eight weeks. Upon their return last week the market is now moving 1.5%+ in one day. Are they all day traders? After last Wednesday’s high at SPX 2188, which ended a diagonal triangle 5th wave, the market dropped straight down to 2119 at Monday’s open. Then we had yesterday’s sharp rally to the SPX to 2163, and now today the SPX hit 2120 at the low. This can be counted as three waves down: 2119-2163-2120 so far. Short term support is at the 2116 and 2085 pivots, with resistance at the 2131 and 2177 pivots. Short term momentum dropped to oversold during today’ decline. Trade what’s in front of you!

MEDIUM TERM: downtrend

LONG TERM: uptrend

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

About tony caldaro

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131 Responses to Tuesday update

  1. kvilia says:

    Ajay, why are you thinking short tomorrow EOD? Either we are breaking extensions shorts, or we are cutting straight through, and then there is no support below us until low-mid 1900s. Your thoughts?

  2. ajaysinghi says:

    Correction for the 2119-2164 wave took 2 days and is finally complete today. We should be up tomorrow.

  3. kvilia says:

    Where is cmucha? Must be looking for V shaVe 😉
    Here is what I see with target in low 1900s.

  4. phil1247 says:

    took profits sco

    back at ya tomorrow!

  5. blackjak100 says:

    can add the DOW to the lower low than Mon category

  6. Jimbo says:

    i can hear that trap door creaking……

  7. phil1247 says:

    target 2102

  8. ajaysinghi says:

    Go 100% short tomorrow EOD. 2100 will break within next week.

  9. johnnymagicmoney says:

    Aside from technicals these are 3 questions that puzzle me

    1) The FED has shown over time to induce bubbles by keeping rates too low for too long and then raising them too fast because they got behind the curve yet for some strange reason people have faith in their ability to navigate the unprecedented yield suppression they have created this time around, one which far surpasses all others. Why on earth cant people objectively look at the FED and at the very least use their track record to come to a conclusion how successful they willl be in navigating this intervention going forward?

    2) Elasticity is a fact of markets. When elasticity reaches its max levels it goes the other way and the shock of that move has negative consequences. The greater the elasticity the greater the negative consequences. The larger the market the elasticity pertains to the larger the mess it creates. So the biggest market on God’s green earth is the debt market and central bankers have distorted yields in a way that outpaces any other yield distortion in our lifetime, and the elasticity of the largest possible market is about as tight as possible especially when theire is 16 trillion dollars in negative yield, and you have crap countries like Italy and Spain with ten year yields trading below a US Treasury and yet for some strange reason people think the elasticity of this massive market is going to end well when all other elastic markets this elastic have not ended well. Why on earth do people think this time is different?

    3) We had a bubble in 2000 and it popped at prices went down 50%. We had a bubble in 2007/08 and it popped and prices went down 66% and yet even though two of the largest declines in the last 80 years have occurred in the last twenty people think its not possible this time when the distortion this time around is even greater than the previous two bubbles. Why on earth have you forgotten the overshoot to the downside in recent past and now think its not possible? Speed created by technology, interconnectedness created by maturation and progression of worldwide markets and economies, and as well as the number of tools and products that can increase leverage is a paradigm shift we didn’t have twenty years ago. Overshoots to the downside are the norm in down cycles now because of these realities.

    • NEWBIE says:

      Outstanding Post!

    • purplember says:

      com on it’s different this time…..

    • Yup, I think we started a Bear Market 4 days ago, and think we will see 1800 eventually.
      Close under 2120 will get it going.

    • No surprise that I agree completely (except for calling Italy a crap country:). If you don’t follow John Hussman’s blog, you should. He pounds the table about these things all the times and backs it up with all kinds of historical data and facts. When overextended, everything in this world tends to eventually revert to the mean, which in this case is around 1140 for the S & P. And, I posted a historical study the other day that said that in the average reversion stock prices overshoot 40% BELOW the mean, so feasibly, the S & P can drop as low as 700.

      • johnnymagicmoney says:

        I love Italian food and Italian women =) Their economics, banks, and bonds are crap =)

      • va89blog says:

        Christine, you’re correct. The Shiller PE is 27 and Vanguard says this is the single best indicator of future returns looking out 10 years. We never really had a bear market low in 2009 as the Shiller PE only hit 13. If it hits single digits, say 9, then we’re looking at 700 on the SnP. This isn’t hyperbole, but something that occurred at every major bear market low.

        • tony caldaro says:

          did those lows have ZIRP, and central banks buying stocks/bonds?

        • cwallace90 says:

          Exactly. This is something that is overlooked by most. The fact that we did not make a value low in 2009, along with the fact that, clearly, the system was not properly purged of it’s excesses, is very strong evidence that the secular bear market low was not made, as more of the same insane behavior by central planners continues today. The topping process has taken many years, which again is indicative of just how big of a top we are forming. It’s bigger than 1929, and the resolution will be breath taking.

    • CampFreddie says:

      Jmm,Yes, very good post.
      The problem is that although I agree we are seeing extremes and distortions in fin/mkts, the “game” can continue a lot further than any of us could imagine.

      • johnnymagicmoney says:

        I agree CF and that of course has been the difficult thing to judge……..how much longer and how much time. Gagillion dollar Q of course! I guess the way I see it is by the time you get a confirmation that the bear is actually here, if you are long then you have gotten crushed. I don’t see an impulsive move of similar nature to the upside at these levels. Investing is not perfect but you use probabilities to the best of your abilities. The risk reward ratio of being long is just not an attractive position to me right now. I think AAH looks at this perfectly. Of course his trades are supported by his model but from just a conceptual standpoint he has been putting in shorts at certain levels and he has unwound them for small gains or losses and set them higher when his model indicates. Ultimately I think that will be most successful because when it drops it will catch many bulls by surprise and it will be ugly. I don’t see the market going from 2194 to 2260 in a single day but I see the reverse and as evidenced by Friday that’s exactly what happened.

  10. phil1247 says:


    43.42 target coming up

  11. blackjak100 says:

    Is there any doubt this sell-off has everything to do with trump momentum and uncertainty surrounding HRC? This sell-off has nothing to do with the Fed and monetary policy.

    • johnnymagicmoney says:

      BJ – all this move up today is working off oversold conditions so it can go lower,

      • blackjak100 says:

        Possible, I wouldn’t bet on it until price bounces followed by a close below 2116 pivot. There are 2 positions which make sense right now, neutral or long.

        • johnnymagicmoney says:

          BJ you have made some great calls but if you are super long I wouldn’t push it. I am guessing you are more neutral right now. These markets are f-ing dangerous.

          • blackjak100 says:

            cautiously long for a trade and thanks for asking – thinking to add with a lower low below 2119 which is only 2.5pts away.

  12. Page says:

    Oil is buy b/w 43-41 and Gold b/w 1308-1300.

  13. phil1247 says:

    short and long both breaking…………


    anyone ? anyone??? …bueller?

  14. shauryagh says:

    Twice the market has richly rewarded us this year for buying the violent V shaped recovery ….will it really reward us thrice ? Given crude’s failure to move decisively over 50 which basically decimates the 2017 / 2018 earnings picture I have a sneaking suspicion the bear is upon us and it will be very evident in November….Crude closing above 50 will negate the bearish view…

  15. Jack Sparrow says:

    oil just broke the HS if it doesnt get aboe 44 then- downside to high 30s

  16. vivelaamo says:

    This is bearish behaviour. I see spx below 2100 some time this week.

  17. gtoptions says:

    Thanks Tony
    SPY ~ Inside Day Fake Breakout possibility! Also today can create another inside day.
    In the end it goes higher. Buckle up Bears!


  18. vivelaamo says:

    Did a Fed member just fart?

  19. Just from recollection,these kind of down 300,up 250,down 250–after low Vix for a prolonged period of time AND an H.O.AND open gaps to the downside–means more selling–PPT willing–over the next couple weeks.Good luck all.

  20. torehund says:

    C-3 up on Btk since yesterday, waiting for another 2 bottom.
    Something is getting final soon 🙂

  21. phil1247 says:


    as mentioned yesterday

    44 target is next

  22. fionamargaret says:

    Joanne Klein’s charts….and outlook…

    Thanks Tony.

    • kvilia says:

      Last poop up before falling apart? Breaking even in the morning with XIV and NUGT. I will be selling XIV into this rally if its even a rally. NUGT has some potential, really hard to see Fed raising the rates.

  23. stormchaser80 says:

    I’m back today because my Technicals Model is showing negative divergence vs. the SPX, at a magnitude which is wildly bearish! More discussion about that at: http://navigatethemarketstorm.com

  24. mjtplayer says:

    Thanks Tony!

    Another market to watch is high grade copper. After bouncing off critical support in Jan, copper has done nothing for 8 months and is quietly re-approaching this very long term support.

    14yr+ chart and uptrend line, monthly bars, COMEX high grade copper. $2 copper is an absolute mush-hold level for the orange metal. Below $2 would be a very ominous sign for the global economy.


  25. stmro says:

    Inside day. Break yesterday’s low @ 2119.5 and a trip below 2100 follows.

  26. rd3777 says:

    Still in the triangle, until the market “breaks” it on high volume…this market remains in a possible 3 wave paradigm. But it looks to be getting ready for a high volume break to the downside.

  27. bouraq says:

    Chart of the day is $GBPUSD by http://www.tradingchannels.uk

  28. 123 abc says:

    Thank you Tony et al; great informative daily update, appreciated.

  29. Ajney says:

    Tomorrow the indices may rise, while bonds are on life support. Where will all the big $$ go? Not that we have an answer! Charts at https://astroanalytics.wordpress.com

  30. NEWBIE says:

    So down before up or gap up and go tomorrow?

  31. chicotheman says:

    Yesterday and today seem like an A/B of a flat.

  32. bolderbob says:

    Thanks Tony, Do you still think this downtrend will end this wee? .It is Interesting how the big $ creates volatility so it can profit now that beach time is over. Thanks for your blog!!

  33. mtu MTU says:

    [EOD] SPX update –
    Be aware of a potential triangle (bullish green, bearish red) if stocks continue to struggle with the blue and green lines (Chart 1). Also see squiggles in Chart 2 and Chart 3.

  34. alexh110 says:

    Tony, I notice you seem to have Primaries II and IV on the Nikkei both as flat-waves.
    The move up from the June low looks corrective to me. Isn’t it quite likely Primary IV will extend substantially lower into a complex zig-zag, to provide alternation with Primary II?

  35. blackjak100 says:

    Thx TC! I was premature with my ‘third of third’ call yesterday. However, my stance will not change until 2116 pivot is taken out. with price well below lower BB 2/3 days and 2/3 90% down days, it still looks like capitulation selling and a retest of 2 yr consolidation before launching higher. even if I was a bear, I would not short here. A gap down below 2119 tomorrow represents a terrific long even if you’re a bear. Looks like big +div potential on 60min RSI(5), daily RSI(5), and daily RSI(14).

    • The dramatic impulse down to SPX2119 and subsequent retracement have setup a potential Bearish Cypher pattern. For the Cypher pattern to work there needs to be a 1.27% – 1.414% drop of the 2187 – 2119 impulse. The weekly DeMark S1 = 2097.78 which is also the weekly 34EMA fit perfectly. If SPX gets a big bounce here, we have a Bearish Cypher pattern. The pattern can be viewed on our Twitter account @martinthomas208

      • blackjak100 says:

        I’m not big into harmonics mostly because they have not been reliable enough from my experience. daily +div has worked very well throughout bull market to mark int bottoms. When I see it on RSI(5) and RSI(14) which is very likely tomorrow barring an outright crash, I’ll take my chances from the long side and hold.

        • I only pattern trade using DeMark pivots and DeMark 9 & 13 Combo counts. Daily 13 Combo sell signals are extremely rare, we had one last week on both the SPX and DAX, the first time in years, normally a substantial correction follows, 5%-10% usually…

          • blackjak100 says:

            Still possible, then P5 is certainly carving out an ED IMO. However, the weekly chart still looks fine as of last Fri. If we get another red weekly candlestick this Fri, probabilities would shift to a bigger correction. usually 90% down days occur near the end of corrections/pullbacks and we’ve had 2 in last 3 days. this pullback, by my count, is on day 24. I think we’ll have more clarity on Friday.

        • SPX 2134.72 was the previous ATH, it was also the last day we had a DeMark combo 13 daily sell issued, until last week’s, and we all know what happened last time around 📉

  36. manunidhi21 says:

    Namaste Tony.
    “Are they all day traders?” You also know they are not 🙂

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