Wednesday update

SHORT TERM: gap down opening, DOW +30

Overnight the Asian markets lost 0.6%. Europe opened lower and lost 0.5%. US index futures were lower overnight, and the market gapped down at the open to SPX 2134. The SPX had closed at 2143 yesterday. In the opening minutes the SPX hit 2132, and then began to rally. At 10am new home sales were reported lower: 593K v 609k. Then after the Crude inventory report as released the market rallied to SPX 2146 by 11am. As Crude reversed and began to selloff the SPX followed. And by 2pm it had hit SPX 2134. Then the market rallied again, hitting SPX 2141 by 3:30 before dipping to 2139 to end the day.

For the day the SPX/DOW were mixed, and the NDX/NAZ lost 0.60%. Bonds lost 8 ticks, Crude dropped 85 cents, Gold slid $7, and the USD was lower. Medium term support remains at the 2131 and 2116 pivots, with resistance at the 2177 and 2212 pivots. Tomorrow: durable goods orders and weekly jobless claims at 8:30, then pending home sales at 10am.

The market gapped down at the open today stunting another rally off the recent SPX 2115 low. Thus far we have observed quite a choppy mess from that low: 2149-2124-2148-2130-2155-2132-2146. It is now possible this market is creating a fourth wave triangle from the SPX 2194 high: 2119-2180-2115-2155-xxxx. If so, a retest of the 2116 pivot may be next. Just speculating here. But the two month choppiness is beginning to look like a triangle. Short term support is at the 2131 and 2116 pivots, with resistance at the mid-2140’s and low-2150’s. Short term momentum was extremely oversold at today’s low, then bounced to neutral. Best to your trading!

MEDIUM TERM: downtrend may have bottomed

LONG TERM: uptrend

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

About tony caldaro

Investor
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94 Responses to Wednesday update

  1. I closed my short, Now the market can tank, Good luck all

  2. jobjas says:

    TSX ready for next drop

  3. phil1247 says:

    /zb

    aggressive ext short about to break

    short squeeze brewing in bonds

  4. phil1247 says:

    /CL

    initial short traded 48.89

    took small initial position in SCO
    larger short is at 50.90….load up shorts if that resists

  5. EL MATADOR says:

    Thank Tony, only 2 more trading days left in month of October and it could mark the 3rd consecutive down month. 3 consecutive down month are rare but when they do happen ____ (fill in the blank)? Maybe it matters or maybe it won’t matter this time.

    Election impact on markets speculation;
    Trump wins and Neocons let the Mr Market correct and blame Trump
    Billary wins and Neocons buy the sell off but will the succeed

  6. blackjak100 says:

    Near perfect 61.8% retrace on SPY

  7. Substantial drop in GLD tonnage–from 953 yesterday to 942 today.Last Friday was 970.Will keep posted.

  8. bfquant says:

    TC. Respect your process-oriented conviction on the elusive 3rd wave. My 2 pences… Most S&P/GICS industries are in confirmed intermediate-term downtrends. All one needs to do is look at the R2K to see the deterioration in breadth. Also, interest-rate-sensitive sectors like REITs,Utilities, Treasuries, etc have been extremely weak. I know you often comment on different parts of the market being in either uptrends/downtrends to support your wave counts. This is just what I am seeing.

  9. captbara says:

    Nikkei is taking off, and Dax is steady. At some point US or foreign markets will need to realign for the next trending wave, up or down.

  10. mjtplayer says:

    While everyone is watching the S&P trade sideways for the past 3 weeks, the small caps are really breaking down. The IWM is down 5% over the past 3 weeks, breaking support and grossly underperforming large caps, especially today.

    The rot underneath the surface

    • I don’t see this at all. Smooth out the comparison to 1 year and it is identical. IWM spiked much higher than SP500 in that 3 month time frame, so naturally it will drop further. I see no major charts of any major indices that shows a breakdown is happening. If your short term technical are flashing danger bet accordingly. I tried guessing an event and invariably lost.

      Does anyone know the score on current SP500 earnings gains, if any, so far this quarter?

      • phil1247 says:

        no …..

        and earnings dont matter

      • mjtplayer says:

        Gary – the IWM never made a new high above it’s June 2015 high, unlike the large-cap indices, that’s a very large divergence. Unless the small-caps can participate and make new highs, we have a highly fractured market. Same story with the DOW Trannies.

        • I see that but looking at the 10 year comparison of both you can see that the IWM has always spiked higher than the SP500. In mid 2012 the same pattern was shown in IWM where the SP500 broke new highs while IWM lagged behind until it caught up. The short span you are using is not convincing since this pattern has been seen before. You seem to ignore the huge spike relative to the SP500 in 2015. It seems to always smooth out in the long run. Not convinced this time is different. I can’t use this as an indicator we are breaking down.

          Since the 2 date ranges (2012 and current) had a similar gap between the spike moves and retraces I can only conclude that the IWM will once again catch up and eventually exceed the SP500. Is this move really different than prior ones? To me this is a stretch to conclude a breakdown is occurring.

    • phil1247 says:

      mjt

      see my post oct 26 10pm

  11. ariez5 says:

    GDX also just filled Oct 18 gap.

  12. ariez5 says:

    GDX just did a .618 retrace of its gains since Oct. 11 (almost to the penny). It also dipped below uptrend line from then. Also, GLD is not confirming GDX. With USD and TNX showing some signs of being overbought, it might be a good place to get into GDX.

  13. It appears the downtrend channel is in place on GDX.A break above 25.50 would be needed to change it.Gold is slightly up and therefore hasn’t confirmed gold stocks–yet.Gold stocks usually foretell price.So it’s still neutrality for me(very small stake in my gold fund).When both start moving in one direction,we’ll know.Good luck all.

    • …and a drop below 22.50–without a +div would take the downtrend to 20 imho.I’m thinking of trying a very risky move… the day before the election,I might increase my GDX substantially in case of a Trump surprise.Brexit brought a $100 up day…a Trump win would be similar.I’m mulling it over based on price at the time.

    • phil1247 says:

      remember learned

      the larger gold cycle is due nov 11

      so we may hit our lower targets at that time

      also the dollar cycle that called for a sharp rally oct 7 to 21
      has peaked but the larger dollar cycle is still up till feb

  14. torehund says:

    Tbt going into a mini squeeze.

  15. phil1247 says:

    TLT is BURNT TOAST

    there was nonsense talk about TLT to 150 and 160
    as i showed the throwover at 144 was likely a terminal event

    and urged to “sell into every bond rally”

    now at 131……support drops to 115 but is not likely to hold

    target …….101

    raised stops on TBT

    • fionamargaret says:

      TLT is a buy at around 130…check the 200…..to 160
      GLD is a buy to 160
      SLV is a buy
      All 3 were higher during the night…stress..DB +..most of the banks in Europe

  16. mjtplayer says:

    Quietly, the US 10yr is up 50bps since the July lows. Impossible to count 5 waves up in the chart and the channel resistance comes in at 1.86% Is it time to buy bonds??

    https://www.tradingview.com/x/OPhAHOr3/

    • phil1247 says:

      mjt

      we are approaching the downside target in /ZB

      i will be either taking partial profits in TBT there
      or adding more TBT
      depending on whether or not there is a bounce at target

      if we go thru and start new extension shorts on /ZB
      we will have an all out bond crash

      • mjtplayer says:

        I tend to agree Phil, the channel should hold the 10yr rate at 1.86% or possibly max 1.90%. If we break through 1.90% and out of the channel to the upside, it could be an acceleration higher – i.e. a bond crash – though that’s doubtful. Just when you think something is going to crash, that’s usually the low 🙂

        • phil1247 says:

          we just hit initial /zb target now…..

          key area here …bounce or crash?

          • mjtplayer says:

            TLT critical support is at $130 – we’re there now. 10yr at 1.87%

            Bonds need to hold right here, right now.

            Just took taking a long position in TLT here, but with a stop at $129

            • phil1247 says:

              HA!

              i just took profits on half my TBT……..same differerence 🙂

              /zb bouncing off target …. and bonds could get a bid if stocks crater

              any bond rally is good to short now …bonds look doomed

  17. blackjak100 says:

    Well that was fun

    • stmro says:

      Yea that was. Its been a while since i last saw an overnight ramp rejected hard like this in the SPX. Bears put together a decent day here and we might (fingers crossed) finally get a range break.

  18. Lots of fuel for a squeeze, 2160-2180. Nicely done Bulls. Should of covered my 2144 short yesterday. I know better. Amzn and goog tonight end of month. Up we go

    • Didn’t not see that coming, I nominate myself for the worst trader for the month of October. Still short from 2144, no idea where we go today, Colossal failure gap up or suck in more bears.

  19. stmro says:

    Prediction: Gap up, ramp a little bit, camp for 5 hours, give back the ramp in last 5 mins before close. Tomorrow, give back all of today’s gap up and then some, then rise to 2140 in the last 5 mins before close.

  20. mcgcapital says:

    Just my observation – when the market is waiting on a news event (e.g. Fed rate hike, brexit, election) there’s a tendency for it to sell off in advance and then begin to rally a couple of days beforehand and rally some more after the event if what was expected happens.

    So even though Clinton is a heavy favourite it’s still likely we see some fear before the outcome is known. On that basis, I think we have another week of sideways to down before a big rally back towards the highs.

      • I think the outcome has been decided a long time ago and the street has not changed their assumptions in all that time. Even when the popular vote was tight the electoral vote was clearly one sided. The Given the self-destruct for Trump over last month the market is NOT behaving any differently as before. A non-event but should coincide with the start of Holiday run up. A 92 percent chance of Trump losing is as much a lock as any past performance.

        The 10 year note has no immediate restraint looking at the long chart pattern. It can easily hit 2.25 before we see any definite slide. The domestic economy is holding up better than most expected and the surprise will be on the forward strength. How that translates to much needed revamp of earnings is anyone’s guess. I have my on theory and will stick to it till proven otherwise.

        The slow drawdown in equities is a killer for traders but a good sign that we are not near the final top or even an intermediate one. Goes against logic since earnings are so stretched here. I still expect early November to early January to form an intermediate high.

        I find it amazing looking back 7 years in that hardly anyone expected the consumer to hold up this well and actually start improving financially. The zero rate policy, whether planned or by natural forces, has produced a perfect scenario for consumer healing. The front end of this recovery looked to benefit just the corporations but the capitalist system has prevailed with cyclical results. We are now seeing consumers on top. Interesting to see if corporations decide on the easiest expedient route for regaining earnings momentum. That would mean a drop in jobs. I suspect this time around they were prepared and have not built up personnel beyond what is needed. For that reason I suspect earnings will improve along with consumer spending but inflation and strong dollar will thwart their ability to gain enough traction to see a big earnings gain. that has been my theory all along. in fact one year ago I mentioned this as the most likely outcome but at that time there was zero visibility that it can be achieved. today we can easily see it as a possibility.

        The grind continues……….

  21. fionamargaret says:

    http://tradingdiary.incrediblecharts.com/2016-10-26-markets-gold.php
    Thanks Colin Twiggs

    From my view, the pattern is holding in place, with base 2120…then I think we will gradually go up towards the election date..2185 was the first number, 2330 the second, but I think we will go to the third..2550.
    Gold is setting up to go to 160, but be patient because it is right at the turn up….
    I cannot send charts as my browser was updated, and I still have to figure out links etc..thus no Raymond James until I can do this….micky, now I need your help…

    Thanks Tony…and everyone xx

    • pooch77 says:

      Me thinks sideways to down into election,with a few 1/2% up days here and there

      • fionamargaret says:

        My mailbox is full of bearish ideas Pooch, and I think the same way…. but that is not what the numbers are saying….it does not have to be up to the election…but the numbers say up.. with an outcome to around 2550…
        I cannot make money in this market at the moment….x

      • pooch77 says:

        The 1st paragraph does not make sense,we will gradually go up into election date(which is 12 days away)2185 is 1st number then 2330,but i think we will goto 2550???In 12 days???That needs to be rewritten

        • fionamargaret says:

          I was just musing with the up to the election suggestion…that is why I defined it further in my answer to you…I have no idea of the timeframe.

          • fionamargaret says:

            ….and in the end, you have to do what you think – I have no bullish suggestions in my mail.

    • micky says:

      Try Imgur Fiona

    • vivelaamo says:

      Hi Fiona hope you sort your browser out soon. Really enjoy the Raymond James links.

  22. chicotheman says:

    Thank you Tony and all.

    Ajay, in your scenario, roughly how much time do you expect wave 5 to run once 4 is done? Thank you in advance, always appreciate your comments.

    • Ajay Singhi says:

      Low should be in end of next week. I was expecting big down today, that may not happen but next Monday seems bad. Will update once we get better confirmation of the low.

  23. locanbbs says:

    Tony, thanks, as always for the great update! Do you really mean “…begging to look like a … triangle”? Or is that supposed to be “…beginning…”?
    Thanks again!

  24. bouraq says:

    Chart of the day is $RUT at http://www.tradingchannels.uk

    • cosmos77 says:

      I hadn’t been looking at the RUT, so thanks for the heads up. This changes my outlook somewhat, but now I need to figure out if this is a fourth wave break of the orange uptrend (and black support), as so often happens before a fifth wave rally or if it is something more bearish. I tend to lean toward the former, but you seem to be leaning toward the latter. The touch of the strong resistance at the blue and orange line could have been wave 3 with an a, b, and now c corrective fourth wave ending about where it is at. Thanks for the informative charts you post. Good job!

    • phil1247 says:

      RUT

      is a more honest picture of what is going on

      da boyze are not interested in manipulation of this index

  25. Lets assume a 4th tringle and lows around 2116. How does that translate going forward?
    I can assume that initially it would mean yet another decent move higher to perhaps 2160?
    Help. Does this pattern fit into any larger picture and assumption on intermediate trend?
    I bring this up because i assumed 2160 was the target that should have already been hit. now it seems that there is a stall before possibly hitting that target. I ask because I assumed once that upper target was hit (2160) we would experience an even deeper drop.

    Have patience with a non-techie.

    • CB says:

      From what I understand (correctly, or not =), I think Tony is probably referring to a dynamic E wave that could potentially breach the 2114 low.. I’m sure Tony will explain if that’s not correct. Thanks for the heads-up Tony! Much appreciated.

      • tony caldaro says:

        max low above 2111

        • CB says:

          Thanks Tony. That helps.

          • Another way to count this as I interpret it from trader joe is on this wave 4. A finished at 2114. B finished today as an a-e triangle and C in works with 5 waves down to below 2000.

              • CB says:

                Thanks , trying. Appreciate it. I was just thinking about that ( testing 2000 again) =) and how re-testing the Brexit low might be in our future, which is quite possible…Some stocks have already traded at their Brexit lows, which is either telling us something about the entire market or it simply indicates some stock-specific issues. On the other hand, the bank index is acting very well, so perhaps all the Brexit -related angst will not affect us until January..

        • cosmos77 says:

          Thanks Tony. That answers what’s bugging me about what happens if we break down here. I was thinking the 2116 OEW pivot, so I’m pretty much on track with your scenario, and that’s good. I always want to be in line with your thinking, even if I put my own spin on things.

      • The golf course will give me more pleasure until President Clinton is crowned…

        • CB says:

          Just remember, Trump wants you to know that the grass is always greener on his golf courses…😉
          Yes, this has never been done before, but now we know that a guy can actually hijack a major political party to promote his brand…
          Enjoy your vacay!

    • 123 abc says:

      Not entirely sure with the “fourth wave triangle” in today’s post, but assuming Tony is referring to the following…

      Wave-1: 1810-2111 (300 points, Impulse)
      Wave-2: 2111-1992 (130 points, Irregular Flat)
      Wave-3: 1992-2194 (200 points, Impulse)
      Wave-4: 2194-xxxx (xxx points, Triangle)

      Given that Wave-1 is greater than Wave-3 in size, it implies that Wave-5 must be shorter than Wave-3 in size. So, assuming that the current ongoing Wave-4 triangle ends at 2116, then maximum theoretical allowable upside of Wave-5 would be about 2315 (under 200 points). However, would doubt that Wave-5 would travel its maximum allowable course, there are plenty of Fibonacci projections and OEW pivot levels on route.

      P.S. this “fourth wave triangle” count doesn’t work in the NYSE index due to Wave-4 already overlapping with Wave-1.

  26. 123 abc says:

    Thank you Tony et OEW team for the update. We built chop city, we built chop city with bulls & bears, we built chop city.

    Q: “fourth wave triangle” —Since the 2194 high, aren’t we supposed to be in Minor-2 wave (and second waves can’t be triangles)? Or, are you suggesting that Intermediate-iii ended at 2194, and now an Intermediate-iv triangle is in progress?

    Updated count as follows, expecting a retest of the 2131 pivot range…
    — Wave-1 (Impulse): 2115-2149
    — Wave-2 (Irregular Flat): (a)2149-2124, (b)2124-2155, (c)2155-xxxx [@2130: a=c]


  27. sopriscap says:

    Tony,
    This would be a potential 4th wave triangle from the larger wave that began February 11th?
    Thanks

  28. jobjas says:

    RUT update ( looks similar to SPX count wise)

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