weekend update

REVIEW

Another choppy week. The week started at SPX 2133. After a decline on Monday to SPX 2124 the market rallied to 2148 by Wednesday. Then monthly options expiration kicked in and the market declined to SPX 2130 by Friday. For the week the SPX/DOW were +0.25%, and the NDX/NAZ were +0.85%. Economic reports were mixed. On the downtick: the NY FED, capacity utilization, the NAHB, the WLEI, housing starts, plus weekly jobless claims were higher. On the uptick: industrial production, the CPI, building permits, existing home sales, the Philly FED, and the Q3 GDP est. Next week’s reports will be highlighted by Q3 GDP, durable goods orders and more housing reports. Best to your week!

LONG TERM: uptrend

The long term trend remains unchanged: up from February 2016. We continue to label the March 2009 low as the end of a Super cycle bear market. The five waves up to May 2015 ended a Primary wave I bull market. Then the three wave decline into February 2016 ended a Primary wave II bear market. A Primary III bull market, of the five primary wave Cycle [1], began at that time.

spxweekly

For a number of years we had been tracking, on a weekly basis, the WLEI. This is a leading economic indicator offered by the ECRI. Earlier this year we put it aside and started following the Atlanta FED Quarterly GDP estimates. With estimates again coming in around 2% GDP growth we decided to revisit the WLEI. Four weeks ago this leading index recorded its highest projected growth level in nearly 6 1/2 years, May 2010. Growth then was in the 3% to 4% zone. This indicator suggests a pickup in economic growth will likely occur in 2017. We will offer the weekly reading again on the SPX weekly chart.

MEDIUM TERM: downtrend may have bottomed

In last week’s update we noted the SPX 2115 low on October 13th fit the potential completion of the complex flat correction we had been tracking for about two months. There were positive divergences on several timeframes, and the market rallied strongly off that low on Friday the 14th to SPX 2149. Then after a pullback to SPX 2124 this Monday the advance stalled, as the two rallies off that low were both weaker than the initial surge.

spxdaily

While the cyclical SPX/DOW/NYSE have not been able to get much going to the upside in two months. The growth sector NDX/NAZ/SOX have been in confirmed uptrends for some time. The last two times, small sample, the SPX/NDX were out of sync for a similar period the resolution was to the upside. We continue to favor that scenario. Medium term support is at the 2131 and 2116 pivots, with resistance at the 2177 and 2212 pivots.

SHORT TERM

We have been tracking the downtrend in the SPX as a double three, taking the form of a complex flat. The first decline from the SPX 2194 high was: 2157-2188-2119. Then after a counter rally to SPX 2180, the market declined: 2142-2175-2115. We had observed that the first decline was: 37-31-69 points, and the second: 38-33-60 points. Notice how similar the smaller wave movements were.

spxhourly

From the SPX 2115 low the market rallied to 2149. Then after a pullback to SPX 2124, the market rallied to 2148. On Friday the SPX hit a low of 2130, and then rallied. We now have four waves off the SPX 2115 low: 2149-2124-2148-2130. What is needed now is a breakout above the SPX 2149 level to keep the potential uptrend scenario intact. A breakdown below the SPX 2124 level would suggest the downtrend is still unfolding. Short term support is at the 2131 and 2116 pivots, with resistance at the mid-2140’s and low-2150’s. Short term momentum ended the week at neutral. Best to your trading!

FOREIGN MARKETS

Asian markets were mostly higher for a net gain of 0.8%.

European markets were mostly higher for a net gain of 1.5%.

The Commodity equity group were all higher gaining 2.2%.

The DJ World index gained 0.7%.

COMMODITIES

Bonds continue to downtrend but gained 0.4%.

Crude continues to uptrend and gained 0.2%.

Gold is downtrending but gained 1.0%.

The USD is uptrending and gained 0.7%.

NEXT WEEK

Tuesday: Case-Shiller, FHFA housing and consumer confidence. Wednesday: new home sales. Thursday: weekly jobless claims, durable goods orders and pending home sales. Friday: Q3 GDP and consumer sentiment.

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

About tony caldaro

Investor
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136 Responses to weekend update

  1. Flash Manufacturing report surged in October. Looks like Tony had the forward looking economic indicator correct. Hard to imagine the dollar not reaching 100 soon. Goldman Sacks finally acknowledged that earnings expectations will be reduced for this year and next. Not painting a bad picture but more muted than the big surge that the street expected. how this plays out in the general market going forward is anyone’s guess. Any talk of recession or more QE is barking up the wrong tree.

    Now looks like we might not get a decent correction to make money off of. Still possible but chart and seasonal time decay suggests the window is closing. SPX of 2179 now seems like a good candidate and major resistance. A whole lot of newsletter has been warning of an imminent drop here. If by November 5th it fails to materialize watch out for a big rally after that.

    Signs of everything coming together such as consumer spending, overseas acceleration, manufacturing, energy, and even business spending (which should be the last to achieve). It could very well force the hand of the FED. The signs are very strong for a rate hike in December and if the world economy does start to pick up together rate hikes in 2017 will be the ONLY talk of the town. how many and how fast. The momentum buildup is there. we shall see if it translates to sustained momentum gains in 2017. I expected this and have always maintained the stock market fall significantly (because) of this set up. Squeeze on earnings even as spending picks up along with inflation and dollar strength. I stated a full year ago that my MACRO long term view was a steep correction in market as economy picks up. We are setting up for such an event. Bulls should be careful and not relate economic strength with stock market strength.

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