Friday update

SHORT TERM: gap up opening then pullback, DOW +39

Overnight the Asian markets gained 0.5%. Europe opened higher and gained 1.2%. US index futures were higher overnight. At 8:30 the PPI was reported higher: 0.3% v 0.0%, and retail sales were reported higher: 0.6% v -0.3%. The market gapped up to SPX 2146 at the open and continued to work its way higher. At 10am business inventories were reported higher: 0.2% v 0.0%, and consumer sentiment was reported lower: 87.9 v 91.2. Around 10:30 the SPX hit 2149, then started to pullback. The pullback continued until 12:30 when the SPX completely closed the opening gap at 2133. Then after a rally to SPX 2142 heading into FED chair Yellen’s speech at 1:30, the market pulled back after the speech: In the last hour of trading the SPX hit 2133 to close unchanged on the day.

For the day the SPX/DOW gained 0.10%, and the NDX/NAZ gained 0.05%. Bonds lost 11 ticks , Crude slipped 10 cents, Gold slid $7, and the USD was higher. Medium term support remains at the 2131 and 2116 pivots, with resistance at the 2177 and 2212 pivots. Today the Q3 GDP estimate was lower to 1.9% v 2.1%.

The market gapped up at the open today, rallied to SPX 2149, then pulled back for the rest of the day. Today’s early rally extended the advance from yesterday’s SPX 2115 to a Fibonacci 34 points at the high. A pullback to SPX 2128 would also be a Fibonacci number at 21 points. Thus far the pullback is 16 points, which is about half of the initial rally. However, losing the OEW 2131 pivot range (2124-2138) might require a retest of Thursday’s low. Will cover the possibilities in the weekend update. Best to yours !

MEDIUM TERM: downtrend may have bottomed

LONG TERM: uptrend


About tony caldaro

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40 Responses to Friday update

  1. Richard Glackin says:

    123abc, HW, and micky, Thanks guys for responding – I appreciate it very much. Again, I want to emphasize that I am not being critical of anyone. I wanted to ‘air’ my perspective and get your thoughts. Again, thanks for that!

    123abc, your first para: same difference, if you prefer stating it like that – that’s fine with me.
    2nd para, my apologies I have an error in the description. The ‘B’ wave end, which is the start of wave 1 down was at 2172.50 not 2156. Again, my error, in any event wave 2 did NOT travel beyond the origin of wave 1.
    3rd para, agree that wave 4 cannot penetrate wave 1 territory…except in the case of triangles and diagonals…arguably there is more than one triangle in that chop. Granted, this is the weakest part of the argument and is certainly up to interpretation.
    4th para, as indicated my error in stating the values. 2172 IS the start of the wave 1.
    As for your PS…thanks for the suggestion, but I’ve tried that and found that I can ONLY paste text…no links, no graphics, no charts.

    micky / 123abc: 3 wave ‘C’ waves are NOT in Elliott Wave Principles…by all means, correct me if I am wrong?

    Again, thanks guys very much appreciate the back and forth.

    • tony caldaro says:

      This should clear it up.
      A simple flat 3-3-5 and simple ZZ 5-3-5 have c waves endings in fives.
      But the corrections in this market have been anything but simple for a long time.
      Most have been complex threes abc-x-abc, where the abc’s can be flats, zigzags, and even ending diagonals.
      To simplify these structures were label the first abc an A, the x wave a B, then the last abc a C.

      • Richard Glackin says:

        Tony, thanks a bunch. Aside from the inability to post charts, my login becomes corrupted in less than an hour. Something is definetly not right. Regardless, when you get into ‘X’ waves, I still have a lot to learn. Thanks for the input. My only question is with the structure of the ‘C’ wave; How can a ‘C’ wave be an abc? I thought that was outside of the rules? Thanks in advance.

    • Richard Glackin says:

      PS I’m here to learn…not to be critical. Again, I very much appreciate your comments.

    • Richard: Why don’t you create a Word Press user name and password? Start logging in with Word Press and you will make things easier on yourself.

  2. Richard Glackin says:

    Since it is after market close on a Friday, I’d like to post what could be a slightly controversial comment. I’ve been monitoring (and occasionally posting on) this web site for a couple of months now. I’m not sure where many of you learned EW but I am taken back by [what I perceive to be] the excessive use of abc’s that dominate most of the wave counts. By the way, I sincerely hope that no one takes this personally 🙂 I’m just making a general observation.

    The problem that I see is that with the extraordinary dominance of abc’s is that it obfuscates the true wave counts and makes it extremely difficult to forecast the market. (Which is tough enough to forecast). Incidentally, I truly regret that I cannot post charts or any kind of graphics as this would make it far easier to explain my point of view. I suspect it has something to do with the fact that I am using a google login instead of a wordpress login.

    In any event, my example will be the current wave pattern wherein I’ll stick my neck out and provide the forecast that I am expecting for the market. If I’m wrong, then I’ll crawl back into the hole I came out of and not bother anyone with this point of view afterwards.

    First, I am in agreement with the consensus that the big drop to 2100.25ES was an ‘A’ wave and the ‘B’ wave rose to 2156ES. Now, in my understanding of EW, the next thing that should follow is a 5 wave drop in a ‘C’ wave. ‘C’ waves are ALWAYS 5 waves. So, where you all come up with an entire series of abc’s blows me away. This has been described as ‘choppy market’. And, while I certainly agree with the description, I disagree with the count. Point is that this type of counting has resulted in many believing that the drop has completed at 2107.75ES. Certainly, if you’ve been counting with a whole series of abc’s that is the conclusion. But, I think an incorrect one.

    Fact is we are nearing the completion of a 5 wave ‘C’ wave down which took the shape of a 1-2, 1-2, 3-4, 3-4, to be followed by the final 5th wave down. Specifically, following the ‘B’ wave that ended at 2156ES, the first wave 1 down ended at 2138ES on 9/7/2016. Wave 2 ended at 2168.25ES on 9/30/2016. Next, wave ‘i’ (of 3) dropped to 2136ES on 10/4/2016, followed by wave ‘ii’ (of 3) which rose to 2163.50ES on 10/10/2016. This wave ‘ii’ (of 3) was a complex abc(A)BC. Next, wave ‘iii’ (of 3) dropped, in 5 waves of course, to 2121.75ES on 10/11/2016. Wave 3 completed at 2107.75ES on 10/13/2016. Next, we have the abc wave 4 that topped out at 2143.25ES. Note that the MACD confirmed this 5 wave down ‘C’ wave count as it typically has the highest peak on the ‘iii’ of 3.

    So now, I am expecting the wave 5 down to around 2085ES. You would never know to expect another drop using a whole series of abc’s instead of the correct 5 wave ‘C’ wave pattern. Time will tell.

    • 123 abc says:

      Not sure what type of EW method you are following, but you’ve broken several standard EW rules:

      —”which took the shape of a 1-2, 1-2, 3-4, 3-4, to be followed by the final 5th wave down.” —Your count, whatever it may be, is missing a nested 5th wave; it should be: 1-2, 1-2-3-4-5, 4-5

      —”Specifically, following the ‘B’ wave that ended at 2156ES, the first wave 1 down ended at 2138ES on 9/7/2016. Wave 2 ended at 2168.25ES on 9/30/2016.” —Your second wave which you have stated ends at 2168 completely retraces and travels beyond the beginning of your first wave at 2156. This is a violation of EW rules.

      —”Next, we have the abc wave 4 that topped out at 2143.25ES” —Your wave 4 which ends at 2143 overlaps your “first wave 1 down ended at 2138ES”. This is a violation of EW rules.

      —You’ve not accounted for the wave that ended at 2172 on 22-SEP; how does that fit into your count?

      P.S. To post an image: upload your chart to and paste the generated sharing link here.

      • HW says:

        Your attempt at correcting other opinions didn’t do well, if you wanna do that your reasoning needs to be accurate and with no errors… even as an EW noob I can see several violations of essential EW rules..

    • micky says:

      It is prudent to count in a corrective manner until proven otherwise. For me its clearly corrective up to this point. As I pointed out numerous times, we have seen many counts that started out as impulsive and ended up being all part of a correction. Even EWI fell into this trap many times. As Tony has pointed out and proved C waves may be counted as three waves too. Being disgusted with EW after quite a few years I started following OEW and found its counting method much more accurate once you get to grips with it. Also, by counting in abc,s there are possible targets lower, but as corrections are treacherous I take them one step at a time. As an example, the b wave was very choppy and unclear till the last wave, but trading the st abc moves I managed to gather many points with minimal losses. When the c wave down started I was able to identify two potential support areas within a few points, 2125 and 2110 ES. If it decides to head lower than 2107, I have 2080 area at this point and will be able to adjust the targets as the waves develop. All this by counting and trading in a corrective manner. I doubt it will be possible by working and st trading the c wave in an impulsive way.

      • jobjas says:

        I count c wave as 12345 – does not mean it is an impulse wave as it is part of a larger abc. In short correction can be 3-3-5 or 5-3-5 . Complex waves with intervening X wave(abc) is another matter.

  3. joecthetruthteller says:

    Agree but stochastics and the RSI are turning neutral to bullish hinting that a short-term low might be in or is near

  4. For Gold followers:GLD tonnage went from 947 on Monday to 965 today.Important for that to keep moving higher.I’ll keep everyone updated when there’s a decent move,one way or another.Have a good weekend.

  5. They’ll do it in December,just so they can threaten to do it all 2017.

  6. johnnymagicmoney says:

    Look at the weekly chart…..any time you had months of range bound action especially with a downward rolling bias it dropped hard…..that’s 7 years worth. I don’t understand how as a bull you can feel comfortable with the last three months of a chart especially on the DOW plus as soon as the R2K go to its highs of 15 it sold off. It’s hanging on by a thread. When one month of Chinese CPI data today trumps horrendous export/import data, massive capital outflows and currency depreciation that exceeds that which caused the huge drop I’m January it just shows you how ridiculous the rationalization is. BJ you screamed of breadth to justify the up move fromFEB but where is the dicussion of eroding breadth now? I just don’t understand how people can feel comfortable long without a bigger reset first. Not being short I can understand too because this market is capable of all kind of nutty behavior but long???? Neutral seems sensible to me followed by short followed by long.

    Looks just like before last two big drops

    • johnnymagicmoney says:

      My call is that the market drop will finish at 2070 or so by election time then head to 2200 area for a fake out to at most 2300 level to complete this bull late in the year early next year just like late 15/early 16

  7. 123 abc says:

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

  8. blackjak100 says:

    Thx TC! May need to retest 2180ish before dropping below 2119. This would be a ‘c wave’ up of a flat to complete B. I know pretzel likes this idea along with NK. The drop from 2170 was a clear 3 so either int 2 ended as WXY or ongoing minor B. Both counts suggest upside early next week IMO.

  9. fotis2 says:

    Your last paragraph tells me you been trading for a long time.

  10. Peter Sliney says:

    I think the Brexit low is a magnet that will get stronger the closer we get to it. We need serious rocket fuel to push us up and over for new highs. Where’s the fuel?

    • Non-event. Not for the Brits however which did long term serious damage to their own economy. Did they actually believe they had bargaining power? The EU survival will force them to treat England as all the other non-binding nations. Feel sorry for the young folks. As I predicted Scotland will be saying goodbye soon to England. We humans allow emotions and selfishness to dictate over common sense when any trouble arrives. We are a very young species and unfortunately our intelligence is advancing at a much greater rate than our ability to control our emotional behavior.

  11. kvilia says:

    I am quite disappointed gold is hanging around support. SPX down next week. Lets see where they buyers are jumping out from to save it.
    Thanks Tony, have a good weekend.

  12. The consumer is SOLID. I mean gaining strength. PPI check, Wages check, Retail Sales check, Confidence check, Discretionary Income check, Business inventory check.

    On and one the list goes.. Where she stops no one knows.

    The FED (IS) raising rates December. To all those that said it was a ruse will just have to forget they were wrong on this and so many other issues.

    I still see a nasty mini flash crash developing soon. Fits in with the pre-holiday swoon. Jittery markets now. Outflow is getting larger, earnings in question for 3 months out. Dollar still strengthening and wage pressure might become a problem down the line.

    This all happening today. This 7 year bull guy is seeing at least a temporary but steep drop happening soon.

    This bull is cautious till the smoke clears. till the end of October. Any decent sustainable rally early next week will be met with PUT options by me. I see a GOLDEN opportunity developing for a quick kill. Lets see how Monday starts out. I expect a slow start but continued strength thru the day. If it becomes a BIG up day I bet the PUTS. If it is a slow steady riser I wait till Tuesday or Wednesday.

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