weekend update

REVIEW

Quite a wild week as DJ Trump is now president-elect. The market started off at SPX 2085, gapped up on Monday, and rallied to 2147 by Tuesday afternoon. Apparently on the assumption that Clinton would win the election. After hours when results started to roll in the ES futures tanked, and hit the 5% limit down just when Trump appeared to be the winner. Then after a continued volatile overnight session, the market gapped down on Wednesday to SPX 2125 and then started to rally. The rally ran into resistance on Thursday at SPX 2182. Then the market pulled back on Thursday into Friday. For the week the SPX/DOW gained 4.6%, and the NDX/NAZ gained 2.9%. On the economic front, except for the election, it was a quiet week. On the downtick: consumer credit, investor sentiment and the WLEI. On the uptick: wholesale inventories and consumer sentiment, plus the budget deficit and weekly jobless claims both improved. Next week’s reports will be highlighted by industrial production, retail sales and the CPI.

LONG TERM: uptrend

Six years ago, after the 2010 election, we posted a special report: https://caldaro.wordpress.com/2010/11/04/politics-and-secular-bullbear-markets/. Over the years our opinion didn’t change much, as this analysis was based on human psychology and historical repetitive cycles. The Saeculum conclusion was spot on. And, we even got the city correct, but not the man. We had not considered a reality TV star could carry a presidential election. That was then, this is now.

In the report we provided several links. One link describes the four turnings, which we call secular cycles, of a entire four generational Saeculum cycle. The fourth turning, which we call the Crisis secular cycle began in the year 2000, and made its presence known by the 911 event. The Fourth Turning is a Crisis. This is an era in which America’s institutional life is torn down and rebuilt from the ground up—always in response to a perceived threat to the nation’s very survival. Civic authority revives, cultural expression finds a community purpose, and people begin to locate themselves as members of a larger group. In every instance, Fourth Turnings have eventually become new “founding moments” in America’s history, refreshing and redefining the national identity. In Parsons’ terms, a Fourth Turning is an era in which the availability of social order is low, but the demand for such order is high.

When the Crisis period ends it starts a new Saeculum cycle which starts with the first turning. What we call the Growth secular cycle. We are not there yet, as the transition is still underway. But we believe it just made its presence known with the election of DJ Trump – a non-politician and non-CFR member. The First Turning is a High. This is an era when institutions are strong and individualism is weak. Society is confident about where it wants to go collectively, even if those outside the majoritarian center feel stifled by the conformity. In Parsons’ terms, a First Turning is an era in which both the availability of social order and the demand for social order are high.

spxweekly

Our long term count remains on track. We continue to believe a new bull market started in February 2016 at SPX 1810. From that low the market advance 300 SPX points, which we labeled Intermediate wave i. Then after a three wave decline to the Br-exit low at SPX 1992, which we labeled Int. wave ii, the market had a 200 point SPX rally to the 2194 all time high. After that, another three wave correction into last Friday’s SPX 2084 low. The last uptrend and downtrends we labeled Minor waves 1 and 2. With this week’s uptrend confirmation in the SPX, Minor wave 3 of Intermediate wave iii should be underway.

MEDIUM TERM: uptrend

An interesting wave pattern has unfolded since the February SPX 1810 low. A 300 point uptrend, followed by a 200 point uptrend, separated by three wave corrections of 120 and 110 points respectively. We have not observed a pattern like this since 1984, which had several similar characteristics. With the SPX/DOW now in confirmed uptrends we should now expect another 300 point uptrend to continue the pattern.

spxdaily

At last week’s low, as noted, the weekly/daily RSI was at levels normally associated with downtrend lows. And the hourly RSI ended that week with a positive divergence. Since then, with this week’s rally, all of these indicators have turned positive. We also had a WROC uptrend signal. It was quite an impressive advance in the cyclicals. The growth indices are lagging somewhat, as there appears to be some rotation out of the heavily weighted growth sector into underweighted cyclical stocks. Once this rotation ends the market should move higher as a whole. Medium term support is at the 2131 and 2116 pivots, with resistance at the 2177 and 2212 pivots.

SHORT TERM

Despite a volatile week the rally from last Friday’s SPX 2084 low looks quite impulsive. We have not been able to make that statement since August. At Thursday’s SPX 2182 high it looked like the rally had completed five small waves with many subdivisions: 2099-2085-2147-2125-2182. After that high the market had its largest pullback of the entire advance, dropping to SPX 2151 on Thursday. Then after a rally to SPX 2178 the market pulled back to 2152 on Friday. If our short term count is correct there is probably more sideways to downside activity ahead to complete this pullback.

spxhourly

We will tentatively label the SPX 2182 high as Minute wave one of this Minor wave 3 uptrend. And the current pullback as Minute wave two. We would expect the hourly RSI to get oversold, which it does quite often, when this pullback ends. Short term support is at SPX 2151 and the 2131 pivot, with resistance at the 2177 pivot and SPX 2194. Short term momentum ended the week around neutral. Best to your trading!

FOREIGN MARKETS

Asian markets were mostly higher for a gain of 1.4%.

European markets were also mostly higher for a gain of 2.1%.

The DJ World index gained 1.6% on the week.

COMMODITIES

Bonds continue to downtrend and lost 2.5%.

Crude continues to downtrend as well and lost 1.5%.

Gold resumed its downtrend and lost 6.2%.

The USD remains in an uptrend gaining 2.0% on the week.

NEXT WEEK

Tuesday: retail sales, export/import prices, the NY FED and business inventories. Wednesday: the PPI, industrial production and the NAHB index. Thursday: weekly jobless claims, the CPI, housing starts, building permits and the Philly FED. Friday: options expiration. Best to your weekend and week!

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

About tony caldaro

Investor
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281 Responses to weekend update

  1. captbara says:

    If nothing nefarious is in the works, then there’s a decent chance FANG has bottomed and thus stop being a drag on markets. Most are OS daily and have +ve divergence on MF, and tagged 233 DMA.

  2. scottycj1 says:

    Many traders are “Velocitized” or suffer from “Relevancy” . We have been in a sideways consolidation and traders are used to the small up and down trading range. When a large advance happens traders are uncomfortable as thier recent “Relevancy” is challenged. Many just watch from the sidelines …aghast as the market just goes up and up and up—(or down and down) It just does not seem natural because the last 2 years has been sideways and the norm. A breakout is often seen as way to overbought……………….

  3. tarheel74 says:

    Phil, I’m going to be look at uco tomorrow if cl breaks above today’s high. What about you? Almost looks like we could have fallen short of 61.8 for a 5 wave lower

    • phil1247 says:

      by not hitting the target today we are in no mans land in /cl now

      i will be looking elsewhere to trade

  4. H D says:

    very interesting update Tony. If I understand correctly we are still in 4th turning, crisis, last 4 years of this? the wall of worry for your 3 of 3 of 3 of 3 up perhaps. Maybe a literal wall….

  5. johnnymagicmoney says:

    Looking at the top 50 stocks or so on the S&P

    GOOG down 2%
    Apple down 3%
    Microsoft Down 2%
    JNJ down 2%
    Wells Up 2%
    Merck down 1%
    Boeing up 1%
    Amazon down 3%
    Facebook down 3%
    AT&T down 1%
    JPM Up 3%
    Pfizer down 1%
    Walmart down 1%
    Verizon down 1%
    Visa down 4%
    Comcast up 2%
    Citigroup up 3%
    Home Depot down 2%

    So the Banks is the main reason the market isn’t selling off massively?? Don’t know about all of you but that isn’t a broad advance and frankly pretty f-ing scary to go long over

    • bud67 says:

      You have to make up, your own mind about SP trend.
      For me, I am long OIL, for example. I see the $15-16
      range as a value low, to invest for 3-12 months out.

      SP500 is in a Bull trend, as I see it. With a W4 low, last
      July (?) now W1 top in place, last Aug. W1 done, now a
      W2 decline, likely near done as well – this then suggest (if
      correct) that a strong SP rally, or W3 will soon form.

      So, I like the long side of this SP market….

      • phil1247 says:

        bud this is not what you said yesterday

        bud67 says:
        November 13, 2016 at 12:13 am
        What concerns me, with the SP500 index, is the fact there
        is no confirmation seen in the NYSE index pattern. Weakness,
        in the NYSE index vs the SP500 — not one pattern I would chase
        in the long position cat….IMO

        • bud67 says:

          Understand Phil — I used to see wave patterns, in “rigid” form.
          11/13 12:13am is just such a comment. For – I now see the SP500
          in a 5th wave up pattern, where 2085 now appears to be a solid low.
          If correct – then the SP can go much higher.
          From a EW pattern, looking for W2 low of importance. Not so sure
          but, we could have seen that low in early Nov at 2085. Least, this
          my most recent view. Thanks, for the comment….

        • bud67 says:

          bud67 says:
          November 14, 2016 at 1:51 pm Read it…

        • bud67 says:

          Phil…in my view, 11/13/2016 at 12:13 am…is the wrong analysis for the SP500.
          To restate. I am long, and not suggesting otherwise….Bud

        • bud67 says:

          Reply…the comment made 11/13 was
          not correct. I re-evaluated. then restated my more Bullish view…end 5:12pm 11/14..

  6. fotis2 says:

    Must be crazy to go long here..

  7. skmcobra says:

    Tony, On your 12 Weekly SPX chart please tell me what wave the blue I and II labels represent. It appears that you have vastly changed your position as to what wave we are now in. Have you changed this to a new Cycle beginning off of the Jan/Feb lows? You have the blue I at 2134SPX and the blue II at this year’s lows. Are those Primary Waves or Cycle waves?

  8. Lower BB at 21.87 for first resistance.At 21.53 currently. (GdX).

  9. Current picture seems interesting. I see a defined target on the downside for major support of this current rally. 2145-50 should hold if it is to rally further. I can also see a breakdown to as low as 2050. Will most likely bet off those targets. I have been obsessed with the strong dollar and it is NOW hitting the area that caused damage to equities in the past. The Trump tax cut will most likely not take affect for a minimum of 3 months. Valuations are stretched here and expectation are very high for a double digit profit surge soon. The move higher recently is exclusively off the assumed tax cuts. How much higher can it go against rising costs and strong bond yields? Will money start flowing into bonds and at what yield would it become counter productive to own equities?

    If 2145-50 range is breached I can assume another wave down to start attracting buyers. 2050 is my best guess right now. We might know today how it is going to play out.

  10. phil1247 says:

    BONDS

    reaching initial targets
    taking some chips off the table

  11. 282 new highs 179 new lows.Zerohedge had a chart of this kind of phenomenal rotation.11 times there were instances of these kinds of numbers.All 11 showed negative gains for time frames up to a year.I couldn’t copy the chart to post it.McC Osc probably hanging around 0.

  12. llerias7 says:

    Tony, acording to your daily chart (SPX) the EW count at the moment is: minute (iii) of minor 3 of Int. III of Major 1 (P3)…is this interpretation correct?

  13. phil1247 says:

    SCO

    next target at 103

  14. In order to be sure about gaps on GDX,I took a look back-thinking a gap fill of 20ish this morning might be a chance to rally.Then I went back to view the January to June timeframe and found February had a gap at 16.You’d think if THAT happens,P&F would be correct about a PO of 11.Full circle.Not surprising now that gold broke the 200d.Just a matter of how much pain you can take,to participate in a short covering rally.

  15. phil1247 says:

    bought 10 yr notes

  16. Whatever happened to the theory that a higher dollar kills corporate profits domestically?

  17. captbara says:

    GOOGL still searching for the low, maybe wedging with an ED. Same with AMZN. Still staying with my FANG catch up theory.

    And look at USD rip! I’m thinking there’s some assistance going on though, maybe yen intervention.

  18. mjtplayer says:

    GLD is nearing support at $115, a virtual must-hold level.

    The Dollar is sreaming higher, trading now at 100.14 which is up and out of the uptrend channel.

    Supermoon today, perhaps things are extremely overextended and need a retracement – like gold, the Dollar, bonds and the DOW. We’ll see….

    https://www.tradingview.com/x/rPx7xG6G/

  19. scottycj1 says:

    AAPL + D closing gap at 105.19………some tasty calls around

  20. mcgcapital says:

    Expecting a deep retrace on US indices now, possibly back as far as 18300 and 2115. FTSE still looks bearish and could test the overnight low from last Wednesday at 6500.

  21. tommyboys says:

    RUT new ATH high this morning WOW

  22. Pulled out of my Calls on SPY for a small profit, The dollar hit 100 and chart looks like it wants to go a lot higher. 10 year note spiking with it. Oil is not recovering and will be put under pressure from the dollar. I can’t see a rally in equities continue under these circumstances.

    • johnnymagicmoney says:

      we agree for a change. Rotation asset class and sector wise is just simply insane right now. Gap ups all over the place and oversold conditions all over the place as well. What made January/Feb happen? Weak oil, strong dollar, higher yields/yield fears, and weak emerging markets with capital outflows……………..same exact thing which is happening now.

  23. fionamargaret says:

    ..apart from the China infrastructure play, I was given a note (which presumably the big boys received as well) to say with the dismantling of the Iran agreement, Iran’s oil will be off the market…just be mindful if you are short, as they have not played that yet…that is what I meant in the early morning about a counter rally…

  24. phil1247 says:

    /cl

    raised stops on SCO

    no new crude oil shorts yet
    target still 41.70

    • cosmos77 says:

      Thanks Red. The markets are pulling back just now and looking weak, maybe an opportunity to reduce my short exposure during this super moon potential buy signal. It’s early in the day but so far your morning analysis of choppy market today is right on the money.

      • reddragonleo says:

        We’ll probably chop around for several weeks Cosmos. I expect to see a slightly higher high of 2200+ before another mini-crash of 5-10%, which I expect to see in Dec/Jan.

        • cosmos77 says:

          Thanks for the reply. If OEW is correct and we are in the final states of wave ii, then It’s hard for me to reconcile making a new ATH from here and then a mini crash. If we do make a new high from here that would be an OEW wave iii of Minor 3 (i.e., Rocket ship time). I can agree with more chop sideways without the new high and maybe a mini crash before wave iii starts. But hey, that’s what makes markets. Good luck my friend.

          • reddragonleo says:

            I only think we’ll have that “slightly higher high” because of the old saying that “No stops go untouched”… meaning that SkyNet (the algo’s) will take out all the bears’ stops before they drop it. In EW terms it would be some final 5th wave up of some degree I guess?

            • cosmos77 says:

              Agree You did say the mini crash would be 1st Qtr 2017, which gives it the pattern time to complete Minor 3, so I see your scenario as very plausible.
              However, I’m concerned about the apparent triangle that seems to be forming since the wave i high. According to OEW rules (as I understand them) triangles do not form in wave 2’s. Hopefully, Tony can look at this and explain what is going on.

              • cosmos77 says:

                Clarification: I am looking at minute ii of minor 3 that should not be forming a triangle, IMHO.

              • reddragonleo says:

                If I had to guess I’d say we start moving down in early December and bottom around the FOMC date of the 14th or so. Then a late rally (Santa rally) into the end of the month and year. Follow that with another bigger drop in January. I guess that would be some degree of an ABC wave pattern down. This should start after we tag 2200 or at least a rally back up to a double top to get the bears’ out of their shorts before the drop. That move up might not show up this week but it could early next week I guess.

              • cosmos77 says:

                Thanks Tony. The pattern is still unfolding, so its premature for me to call it a triangle. Maybe it will end up as a bull flag (which I guess could be a complex flat) to kick off the next rally.:) That’s my three comments for today. Good luck all.

  25. phil1247 says:

    BONDS…. TLT

    everyone was gaga for tlt at 143

    BULLISH sentiment now is ZERO percent

    exited 90% of TBT premarket

    looking for long entry in CASH bonds for counter trend rally

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