Friday update

SHORT TERM: another gap down opening, DOW -89

Overnight the Asian markets gained 0.4%. Europe opened lower and lost 0.9%. US index futures were lower overnight, and at 8:30 the CPI was reported higher: 0.3% v 0.1%. The market gapped down at the open to SPX 2140, then declined to 2132 just before 10am. The market had closed at SPX 2147 on Thursday. At 10am consumer sentiment was reported unchanged at 89.8. The market then rallied back to the opening level at SPX 2140 just before 11am. After that the market declined to SPX 2131 by 1:30. Then another trip higher, this time to SPX 2142, in the closing hour to end the week at 2139.

For the day the SPX/DOW lost 0.40%, and the NDX/NAZ lost 0.05%. Bonds gained 2 ticks, Crude dropped 75 cents, Gold slipped $3, and the USD was higher. Medium term support remains at the 2131 and 2116 pivots, with resistance at the 2177 and 2212 pivots.

The market gapped down at the open again today, traded down to SPX 2131, then stayed within a 2131-2142 trading range for the rest of the day. Yesterday we noted that the 2131 pivot needed to provide support to suggest the downtrend had ended, and a new uptrend is underway. For today it held. More on this and some adjustments to the market probabilities in the weekend update. Best to your weekend!

MEDIUM TERM: uptrend may be underway

LONG TERM: uptrend


About tony caldaro

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36 Responses to Friday update

  1. magnus1234 says:

    DAx30: In V.3.3? I wish I could be confident but I am not. It is “just” a 23% retrace and that is little to shallow for my taste. Once bitten twice shy. However, I have taken an initial bet on V3.3 since it works on an int B as well.

    DAX 1h:
    DAX Daily:
    DAX week:
    DAX Month:

  2. anyone got any thoughts on why the USD was so strong I get the feeling the FED will surprise with a 25bp hike to try and regain some credibility with academic economists?

    • fionamargaret says:

      Well NZ, I have the impression the UK managers are just spooked…Europe wants to play hard-ball to try to prevent the UK from leaving, and at the same time if left to their own devices, probabilities suggest Europe will break up.
      All this is causing concern and stress, which is apparent at the bank level, as well as with Hollande and Merkel.
      There is concern that unless interest rates are raised in the US, there is no cushion, while on the other hand the Fed does not want another Greenspan/Trichet moment where rates are raised/left too high to be sustainable, and the economy suffers again…
      All these negatives suggest to me a stronger dollar (in case they raise, also safest currency).
      I also think the stock market will be higher at the end of the year…..with all these negatives, and I haven’t even mentioned the election, how could the market not be positive….

    • pete8675309 says:

      FED fund futures suggest 12% hike in Sept and 45% in Dec. Add in recent weak data and not wanting to be perceived as influencing the election makes a Sept rate hike highly unlikely. They will most likely raise in Dec unless data becomes extremely weak. I believe the FED jawbones to make the dollar stronger which allows CBs to hold off easing and going further into NIRP. They are out of bullets…IMHO

      • Tks Eplison theory published a very convincing agrument that the Fed members are worried about their credibility and they will hike in sept to demonstrate that their economic models still work. Jeff Gundlach also thinks the probabilty is higher in Sept that they go and blow themselves up. Seems the volility trade is best. I am thinking a lot of leverage on bonds and equities so risk of sharp moves.

        • CB says:

          Looking at the monthly chart ($DXY), we’re pretty much in the middle of the range right now (consistent with the Fed saying a lot and doing very little). And we could find ourselves at either of the extremes very quickly ( 90 – 100)
          So there is room for currency debasement, as mcgcapital points out. However, there is also room for extreme hawkishness ( if the Fed becomes very unhappy with the level of political disruption in this country)
          Also, re: Sept FOMC

        • pete8675309 says:

          Eplison makes a good argument but I disagree with their conclusion, a higher probability of a rate increase in Sept. I agree that the FED desires to be autonomous, but they can’t risk the financial fallout. Perhaps after the election… It’s a classic case of the tail wagging the dog. They tried to raise rates the end of last year and the markets responded in Jan and Feb. And if that wasn’t enough, the deflationary forces throughout the world were suddenly put under a microscope. And, just as US data improved during the Spring, they were staring down Brexit and the potential fallout down the road. Recently, stronger US economic data and improvement in world markets, led some FED members to consider a move sooner (Sept) rather than later. Hence, the Recent Hawk-speak from their dovish members. They ran it up the flagpole, like a politician taking a poll before deciding on a particular issue. Their response came Sept 9th when the Dow dropped almost 400 points. The markets returned a message that they weren’t prepared for a Sept hike. They probably wanted more than a couple of weeks to absorb a hike or perhaps they wanted to move past a volatile election. As a result, the FED sent in Brainard on Sept 12 and she delivered a very dovish speech which telegraphed to the markets that they would wait until after the election to raise rates. Immediately after the speech, market probability of a Sept hike dropped to 15% but increased to 59.2% for a rate hike by year end. So, returning to Ben’s argument at Eplison, I agree that the FED wants to be respected as a collectively independent and autonomous unit, but they still remain hostage to and have to play ball with the markets. We could go on about the market being part of the index of leading economic indicators (LEI) and therefore a potential self fulfilling prophecy of the economy if they collapse. We could also go on about the problems the FED faces with the European and Asian economies 2-3 years behind ours. It was the stronger European countries like Germany that were preaching austerity from 2010-2013 and are now experimenting with NIRP to dig themselves out of the hole. But this can wait for another day. As for Grundlach, I respect his opinion but his latest message of “sell everything” was a little over the top…

          • pete8675309 says:

            Just wanted to clarify when I said, “they tried to raise rates the end of last year” I meant to say that at the end of last year when they tried to telegraph 3-4 rate increases for this year, the market response was negative in Jan and Feb…
            I think it’s also worth noting that when the FED stopped its quantitative easing program of buying bonds, that had the equivalent effect of raising rates. Another view is that it took 10 years to increase rates by 25 basis points. What’s another 3 months to ensure that you’re not accused of influencing the election…

          • Great reply good call

    • Spot Gold is within a whisker of tagging it’s major trendline, if as suggested gold takes off north, the $US should weaken substantially, watch this space 😉

  3. rd3777 says:

    Will DB spoil all the fun? Europe thinks so.

  4. Ajney says:

    Thanks Tony and others!!

  5. torehund says:

    Clinton fund recorded just a few percent of what was actually donated, where did the rest of it end up ?

  6. FYI:Nasdaq 153 new highs 115 new lows.Still looks unresolved to me.Have a good weekend all.

  7. Thanks Tony and what I found interesting today is the respect accorded to 2131, today’s low and one of YOUR pivots. It was the best trade in an otherwise nasty market.

  8. jobjas says:

    My long term count (not to stir up a hornets nest !)

  9. 123 abc says:

    Thank you Tony et al for the great OEW daily updates this week.

  10. Jack Sparrow says:

    i present to you folks two options decide which one in play.
    first : move down to 2119 was A and now we are making B then C to follow to further down. Second- from 2194 to present we were forming a triangle (4th wave) and we just completed E this morning now 5th has started. pls take your pick

    • kvilia says:

      I’ll take a weekend off. Thanks Tony and have a good weekend. So far the force of gravity has not kicked in.

    • bfquant says:

      Those are the two most likely options in my opinion. I think we fill the 15 min/ hourly gap Monday morning slightly higher, then C down by Tuesday. I think we bottom shortly thereafter around 2095, and peak around 2200s in a Fifth wave on or about the last Trump/Clinton debate on October 19th.

    • As a pattern trader, that’s classified as a Bearish Cypher pattern, I can only assume SPX 2094 wasn’t hit yesterday was because of the OPEX effect, Monday may be a good candidate for a ‘swoon’, then the bounce up to the fib.786 retracement for the Cypher sell point, obviously we can’t give a sell value until the bottom of this wave is established, we will post it on Twitter @martinthomas208 and here when the calculation is done…

  11. fotis2 says:

    Tx Tony nice weekend to you and everyone else.

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