weekend update

REVIEW

The market started the week at SPX 2164. After a bounce to SPX 2171 on Monday the market pulled back to 2156. On Tuesday the SPX hit 2181, but this was followed by a pullback to 2171 on Wednesday. On Thursday/Friday the SPX made a new uptrend high at 2190, then dipped to end the week at 2182. For the week the SPX/DOW gained 0.45%, and the NDX/NAZ gained 1.40%. Economic reports for the week were mostly positive. On the downtick: import prices, capacity utilization and the WLEI. On the uptick: retail sales, export prices, NY/Philly FED, business inventories, the CPI, housing starts, building permits, the Q4 GDP estimate, plus weekly jobless claims improved. Next week will be highlighted by the FOMC minutes, more housing reports and the Thanksgiving holiday.

LONG TERM: uptrend

Some observations. Since the election the DOW, NAZ, R2K, SOX and TRAN have all made new yearly highs. The DOW and R2K highs were also all time highs. The NDX, NYSE and the SPX have been the laggards. While the NDX and SPX made all time new highs earlier in the year, the NYSE has still not made a higher high than 2015. Neither has any foreign index that we track with the exception of the FTSE. The NYSE continues to act more like an international index, than a US index.

spxweekly

After a long term downtrend low in February 2016, the first since March 2009, the market embarked on a long term uptrend. Since 2011 did not quantify as a long term trend change, and the May 2015 – February 2016 decline was only 16%, we have labeled the long term trends as follows. Primary I May 2015, Primary II February 2016, and Primary III underway. From the February low the SPX has rallied to 2111, did a three wave decline to 1992, rallied to 2194, done another three wave decline to 2084, and is now rallying in a new uptrend.

MEDIUM TERM: uptrend

We labeled the SPX 2111 high Intermediate wave i, and the 1992 low Intermediate wave ii. Then the SPX 2194 high Minor wave 1 of Int. iii, and the 2084 low Minor wave 2. The current uptrend should be Minor wave 3 of Intermediate wave iii. Since Primary waves unfold in five Major waves, you can see we are in the very early stages of Primary III. In fact, only in the subdivisions of Major wave 1.

spxdaily

At the Minor wave 2 low of SPX 2084 the market displayed the usual characteristics of a downtrend low. The daily/weekly RSI were quite oversold, and the hourly RSI had a positive divergence. Since that low the market has rallied 106 points, 5.1%, in just two weeks. And a few of the earlier mentioned indices have done even better: TRAN +9%, SOX +9% and R2K +13%. The recent action certainly looks like the kick off to a third degree wave.

As each new bull market unfolds, and we believe this is a new bull market, it develops its own characteristics. Thus far this bull market has displayed two month uptrends followed by multi-month corrections. As noted last weekend it looks similar to the 1984 period. Since this uptrend began this month we should expect it to last until at least January. Santa rally underway! Also the first two uptrends were 300 and 200 points respectively. This suggests this uptrend should be about 300 points, and reach the SPX 2380’s before it concludes. Medium term support is at the 2177 and 2131 pivots, with resistance at the 2212 and 2270 pivots.

SHORT TERM

Early this week we noticed another short term count unfolding, and it has worked out quite well thus far. From the SPX 2084 downtrend low we counted four waves up: 2147-2125-2182-2152, with a fifth wave underway. The fifth wave was counted as follows: 2171-2156-2181-2172-2190. This entire advance, SPX 2084-2190, is only Minute wave i of Minor wave 3. There will be five Minute waves during this Minor 3 uptrend.

spxhourly

Approaching the high, we noted on Thursday, there were negative divergences on the hourly/daily RSI. This typically occurs during a top of some degree. We also noted, due to the configuration of the waves, there was three resistance levels overhead: SPX 2194, SPX 2200 and SPX 2209. Two levels and then the 2212 pivot range. When the rally does end the pullback could take the SPX back to the 2150’s for Minute wave ii. After that Minute iii should kick in to the upside. Short term support is at the 2177 pivot and SPX 2151, with resistance at SPX 2194, SPX 2200 and the 2212 pivot. Short term momentum ended the week under neutral.

FOREIGN MARKETS

Asian markets were mostly lower but ended the week mixed.

European markets were mixed and ended with a 0.3% loss.

The DJ World index ended the week -0.2%.

COMMODITIES

Bonds continue their downtrend and lost 1.2%.

Crude appears to be uptrending again and gained 6.8%.

Gold continues its downtrend and lost 1.3%.

The USD reached 13 year highs while gaining 2.4% on the week.

NEXT WEEK

Tuesday: existing home sales. Wednesday: weekly jobless claims, durable goods, the FHFA, consumer sentiment, new home sales and the FOMC minutes. Thursday: Thanksgiving holiday. Friday: markets open but closing at 1pm. Happy holidays!

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

About tony caldaro

Investor
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135 Responses to weekend update

  1. jobjas says:

    DXY EW analysis

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  2. manunidhi21 says:

    Namaste Tony.
    Long weekend generally brings trend change. Does 2189 qualify for minute i ?

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  3. kvilia says:

    Thank you, Tony. This is very interesting work of yours and I maybe converting into a bull if markets soon approve your road map. Now I’m interested in your (and others!) opinion on the following. I think I found smth interesting – was under impression that Trump would put pressure on Fed to raise rates and strengthen dollar. Maybe not after all – excerpting from here: http://www.hollywoodreporter.com/news/steve-bannon-trump-tower-interview-trumps-strategist-plots-new-political-movement-948747
    That’s what Bannon is saying: “…I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Ship yards, iron works, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks. It will be as exciting as the 1930s, greater than the Reagan revolution — conservatives, plus populists, in an economic nationalist movement.”
    So if this is true, this will translate in very few rate hikes and Fed switching to the dovish tone in order to support these massive spendings. For gold lingering around hwb retracement from 2016 high it maybe a very good news. As I mentioned before, DXY is measured against a basket of foreign currencies, also there is a huge DXY/GLD divergence – you can simply compare gld/dxy charts to confirm that. So I would not even worry about DXY moving up as gold my very well join it. I’ve been flipping my view on gold several times over past few weeks and you may have witnessed this. However the more I think, the more I’m getting inclined in accumulating gold positions at these levels. Please comment, I’m eager to hear educated views on this subject.
    Cheers,

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    • tony caldaro says:

      The FED will follow its dual mandate, and the market will dictate interest rates.
      Gold has no place in this scenario, as it only enters bull market during inflationary and deflationary secular cycles. We are entering a secular growth cycle, i.e. 1949-1967

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  4. learnedmylesson25 says:

    I do have one more question Mr C.When and if DXY hits 120,would you buy gold then…or is there a chance that DXY could be revised higher in some kind of extension?Thanks.

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  5. fbender7 says:

    Thanks Tony for an outstanding weekend update.
    According to the count: wave 1 of minute i was 63 points in length and wave 3 was 57 points.
    Since wave 3 cannot be the shortest wave, wave 5 must be shorter than 57 points in length. This means that if wave 5 of minute i is still ongoing, it must end shy of 2209. Am I correct in this?

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  6. learnedmylesson25 says:

    Thanks Mr C…happy holidays.The previous – divs this year on SPX,seemed to take 3 weeks to drop about 70 points,from peak to trough.Do you see similar in time and price…or less this time?Thanks.
    Not sure what part the dollar plays in this upcoming SPX pullback or whether gold drops with SPX.There IS a +div on weekly gold and GDX.Maybe that kicks in around December’s Fed meeting?Or a little earlier.Or if gold/GDX keep dropping because of the dollar ramp-up…the div is lost.
    Gold seems to want SPX to drop,but we need to see that happen first.COT report on gold appeared to be similar to late May–when a rally occurred.But that was a different bullish time for gold.Right now I’m just hoping for some PM bounce short term.Later all.

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    • tony caldaro says:

      SPX does not appear to have too much upside left before the Minute ii pullback
      Gold had its run. Crude probably getting its track shoes on now.

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      • learnedmylesson25 says:

        Agree on SPX and gold…idk on crude.Thanks again.Though an interesting viewpoint on gold from someone was that gold went through a mini-bull market this year,followed by,what might be a mini-bear…leading to a regular bull in gold.But the dollar will dictate that–and price action.

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  7. Thanks Tony for your always useful insight and taking time to patiently paint the larger picture.

    The CNN Fear and Greed index is in a moderate stage of greed, having moved from 48 to 63 in the past week. This might suggest selling versus buying, but the case is not strong. And short term volatility as measured VXST is very low and at levels typically associated with minor future losses. Put/Call ratios, which act inversely as does the CNN F&G index, are fairly neutral. But the NAAIM exposure index has not confirmed recent prices and the Goldman Sachs measure of financial conditions is falling while stocks have been rising, introducing a diversion. In looking at these measures and others, cross market analysis is suggesting a MODERATE case for selling rather than buying. We will learn much Monday.

    Yesterday I offered some price levels based upon the mathematical relationship between wave 3 and the ongoing wave 5 which suggested we may have approached a high at 2190. Then reader 123 offered a relationship between wave 5 and wave 1: Wave5 = Wave1 * 0.618. Wave 1 was around 64 points and after doing the math we get around 40 points. 2152 plus 40 equals 2192. Tony mentions, among other levels, 2200, which is the upper limit of what I said yesterday. And a decent case made can be made for 2190.

    Not shockingly, the magic number is LIKELY between 2190 and 2200. Before shorting, I will wait to see signs of the market rollong over. Any my stops are very tight because points are expensive whereas commissions are cheap.

    Lastly, as Tony suggests, the imminent correction is likely to be both shallow and fast to provide space and time for the Santa rally.

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  8. micky says:

    thanks Tony(one of my few thanks so as not to clutter the board) every report is appreciated.

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  9. llerias7 says:

    Thanks, Mr. TC. I am following close your EW Count. The intermediate top in January (spx2380) should be the end of minor wave 3 or Intermediate (III)?

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  10. floyd drummer says:

    great work tony, ….thanks!

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