weekend update

REVIEW

Another quiet week as the market did not make much progress either up or down from SPX 2258 where it started the week. The market rallied on Monday/Tuesday to SPX 2273, then drifted lower for the rest of the week, and closed at SPX 2264. For the week the SPX/DOW gained 0.35%, and the NDX/NAZ gained 0.50%. Economic reports came in positive for the week. On the downtick: durable goods orders, the Q4 GDP estimate, plus weekly jobless claims increased. On the uptick: existing/new home sales, Q3 GDP, FHFA housing, personal income, consumer sentiment, and the WLEI. Next weeks reports will be highlighted by the Chicago PMI and the Trade deficit.

GROWTH SECULAR CYCLES: past and present

Some market pundits are trying to compare the soon to be launched Trump-era to the Reagan-era. While they do have some interesting economic/philosophical relationships, the US economy was at polar opposites of the spectrum when Reagan took office compared to the present point in time.

When Reagan took office in January, 1981 the US was ending an equity market bearish Protest secular cycle (1966-1982) and about to enter an equity market bullish Unraveling secular cycle (1982-2000). Unemployment then was in double digits, inflation was double digits, US Debt/GDP was under 30%, the FED had rates at 13%, and four months later raised them to 14% in an attempt to choke the economy and kill the inflationary spiral of the 1970’s. The tactic worked as the economy entered a deep recession from Q3 1981 to Q4 1982. The SPX peaked with the election of Reagan in November, 1980 and declined with the economy into an August, 1982 low. The official end of the Protest secular cycle and the beginning of the Unraveling secular cycle.

When Trump takes office in January, 2017 the economy will look more the like the beginning of the last Growth secular cycle (1949-1966) than the above mentioned Unraveling secular cycle. Nearing the end of the Crisis secular cycle (1929-1949) unemployment was under 5% when Truman entered his second term, spiked a bit due to a recession, and was even lower than that when Eisenhower took office. Inflation during that period, at times, bordered on deflation. US Debt/GDP was beginning to decline from a 113% 1945 peak to around 80% when Truman entered his second term. And the FED had rates at 1.5% in 1949, and 2% in 1953. The SPX made a bear market low in June, 1949 and was just entering a 4-year bull market. Which would peak when Eisenhower took office in January, 1953. Then after short, and moderate, 8-month bear market another three year bull market followed.

Currently the unemployment rate is just under 5%. Inflation has been low for a number of years, with a short period of deflation along the way. The FED just raised rates to 0.75%, its highest level in 8 years. US Debt/GDP is currently at 105%. In February, 2016 the SPX ended a short, and moderate, 9-month bear market and a new bull market is already making all-time new highs. Notice the comparisons of Growth secular cycles.

One last comparison which was noted in the First Turning weekend report on December 10th. The political mantra during the Reagan-era, to the present, was to use the economy to build corporations, and a trickle down effect would benefit the working class. The political mantra during the Truman/Eisenhower eras, and until Reagan, was to use the economy to strengthen the working class, and their purchasing power would expand the economy. The political mantra appears to have come full circle with the election of Donald Trump. The trickle down mantra has ended, and a build up of the working class will be underway shortly.

LONG TERM: uptrend

We continue to label the market activity since the SPX 1810 February low as the early stages of a Primary III bull market. Primary waves I and II completed in 2015 (SPX 2135)and 2016 (SPX 1810) respectively. From the Primary II low we have labeled the three impulsive uptrends as Int. i, then Minor 1 and possibly Minor 3 of Int. iii. We note ‘possibly Minor 3’ as the current uptrend has somewhat stalled after it hit an all-time high of SPX 2278 a week ago Tuesday.

spxweekly

While we are still expecting this uptrend to hit the SPX 2380’s some time in January, and be similar in length to the first uptrend (Int. i) – which was about 300 points. It currently has stalled right around the length of the previous uptrend (Minor 1) – which was about 200 points. Should it fail to extend much beyond where it is already and enter a downtrend, we would then label it as another 1-2 subdivision, i.e. Minute waves i and ii of Minor wave 3. This pattern would be similar to what transpired between the years 1984 and 1985.

MEDIUM TERM: uptrend

The current uptrend which started in early November at SPX 2084 appears to have completed three waves up. The first advance was quite strong, SPX 2084-2214, and we labeled it Minute wave i. Then after a pullback to SPX 2187 for Minute ii, Minute wave iii appeared to be underway. Thus far the advance is shorter than the first wave up SPX 2187-2278. Which would be acceptable as a third wave, only if the fifth wave is shorter than both previous waves.

spxdaily

For now we are going to consider the latest advance as only wave 1 of Minute iii, while we await further market activity. The SPX 2278 uptrend high occurred the day before the FED raised rates 25 bps for the first time in a year. Since then the market has had two potential upside catalysts, i.e. the electoral college confirmation, and the best GDP report in two years. But the reaction was mute. Nevertheless it is the holiday season and markets have been fairly quiet. Medium term support remains at the 2212 and 2177 pivots, with resistance at the 2270 and 2286 pivots.

SHORT TERM

The first wave up of this uptrend, Minute i, was 27 small waves and travelled 130 points. Then after a Minute ii pullback to SPX 2187 the market has rallied in just 9 small wave and travelled 91 points. This seems a bit small for a wave three, unless as mentioned previously, the fifth wave is even smaller. While the recent sideways activity (2248-2278) could be counted as a fourth wave. The holiday activity makes that inconclusive. The last four trading days of this week had trading ranges of 7 or less SPX points. Maybe next week, after Monday’s holiday, will be the same.

spxhourly

Short term support is at SPX 2254 and SPX 2248, with resistance at the 2270 and 2286 pivots. Short term momentum ended the week overbought. Happy holidays!

FOREIGN MARKETS

Asian markets were mostly lower on the week for a 0.8% loss.

European markets were mostly higher and gained 0.4%.

The DJ World index ended the week down 0.1%.

COMMODITIES

Bonds continue to downtrend but ended the week flat.

Crude continues to uptrend and gained 0.1%.

Gold is still in a downtrend and lost 0.3%.

The USD is still in an uptrend and gained 0.1%.

NEXT WEEK

Monday: Christmas Holiday. Tuesday: Case-Shiller at 9am and Consumer confidence at 10am. Wednesday: pending home sales. Thursday: weekly jobless claims and the trade deficit. Friday: the Chicago PMI.

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

About tony caldaro

Investor
This entry was posted in special report, weekend update and tagged , , , . Bookmark the permalink.

94 Responses to weekend update

  1. fionamargaret says:

    https://twitter.com/search?q=%24TLT&src=ctag
    Scroll down to $SPX vs $TLT…..did not quite expect this.

    • phil1247 says:

      this has been well known for many years

      if you had the performance chart
      of long term treasury zero coupon bonds vs stocks
      they would be way off the top of the chart

    • Linda West says:

      I’m long time observer, Today, Larry Williams just released his 2017 Prediction, Stock Market Crash Coming in 2017. Larry won Robbins Trading Championship back in 1987 with his prediction of crash. Just passing information along, maybe, someone can study his prediction and counter it. http://www.ireallytrade.com website where Larry prediction can be found. Larry gives the date when it will begin too! plus, he shows his past predictions as well. 2015 & 2016

  2. allen1929 says:

    Now this on nyse NYSE Composite 11151.07+ 22.27
    bad tics?????

  3. Hugh Jazole says:

    Does anyone know the PE of the RUT?

  4. HUI approaching 175 resistance level.

  5. EL MATADOR says:

    Wowza! Somebody is pouring lighter fluid under the commodities

  6. Jimbo says:

    Is that $NYA action right? Up 558 points

  7. allen1929 says:

    Is this NYA quote correct NYSE Composite 11590.93 462.13 4.15% 465.71

  8. vivelaamo says:

    RUT Needs to break out here.

  9. vivelaamo says:

    Santa is sticking around this week. 😊

  10. torehund says:

    Looks like Rut finished an abc down from 8th December, up we go:)

  11. jobjas says:

    Don’t ‘get married’ to any one asset for trading / investing
    In other words one can ‘ watch the paint dry ‘ in the indices or trade some other asset with some good price movement (like many of the commodities).I had mentioned in my blog few weeks back that NG has completed a 10 yr bear market recently and one can double or triple ones investment with correct entries and exits in a short time.
    Here is a small swing trade lasting 3 days that made a 40% return.using only EWP.
    Base asset NG / Asset traded UGAZ,
    One can argue all one wants whether EW is subjective or objective OR even whether it works but correctly applied it can give pretty precise entry and exits AND above all confidence to remain in a trade till the whole wave is completed.

    For those who have some faith in EWP can check out charts in my blog posted in real time as the trade progressed. note that counts get adjusted as waves progress while remaining in the trade.

  12. Thank you for sharing your innovative and thought-provoking research, Tony.

  13. bud67 says:

    GLD set to rally. 107 to 118….:)
    Shaping up to be a good trade..

  14. locanbbs says:

    UPDATE: GOLD breaking out!
    – Gold Futures hourly –

  15. Tony has published some very compelling info on major cycles.
    Just thought I would add this, as I saw it.

    Has to do with POTUS Dwight Eisenhower.
    About 15 years ago, I was doing some graphic work for a small furniture maker in eastern PA.
    The man asked me to go to the D. Eisenhower farm in Gettysburg.
    The company had made some reproduction furniture for “Ike’s” house, a National Parks Service Museum.

    The U.S. Parks Service Curator showed me the reproductions. I was able to take some pics of those. The piano in the living room had pics of his son David, and the General standing behind him. I started to take pics of that. The Curator was clear: no more pictures.

    Then the Curator lead me into Ike’s private office. There was an old desk.
    The Curator explained, that wasn’t really an old desk, but it was an exact copy of George Washington’s executive desk. Ike had asked the White House “carpenters” to make one. And they made it out of discarded floorboards from the White House, from one of the renovations.
    I was stunned to just look at it.

    So … if Donald Trump asks for a copy of G. Washington’s desk, we are in new New First Turning?
    Could be.
    Go for it Donald.

  16. bud67 says:

    Mike, think it will be in 2017. Expecting a big short position setup in SDS, in 2017…
    Thank you.

  17. Arthur Knopf says:

    SENTIMENT UPDATE:Alarm Bells are Starting to Go Off
    https://sentimentsignals.blogspot.com/

  18. bhuggs52 says:

    Merry Christmas to Tony and everyone else on board here. May this ship of players chart a prosperous course for the forthcoming new year. This past Friday I covered my longs on the recent election run-up, for the sake of this tax year. I expect to re-enter long at the start of 2017, and then see what happens later in January. Stay nimble, as the wise man sayeth, trade what the dog barks at and not what the cat sleeps on. Or something like that. Meanwhile, OEW remains one of my favorite sites on the web, second only to the actual wave forecast for our North Coast surf where I regularly make my drops and paddle out for more. It’s life or death out there. Cheers and good fortune to your trading!

  19. bouraq says:

    Chart of the weekend is $DJIA at http://www.tradingchannels.uk

  20. floyd drummer says:

    thanks tony, ….and enjoy your holidays!

  21. jobjas says:

    Merry Christmas to Tony and all who visit this blog !

  22. stormchaser80llc says:

    Friday’s post is open for all to see. But if you would like to read these posts every trading day, please sign up for a FREE user account at the bottom of my post.

    When performing my analysis of the market and internals, the one thing that really stood out to me today was how low my proprietary Volatility Model is currently reading. Very low readings such as these usually occur near market tops.

    Other bearish items include a new $VIX uptrend, negative streak occurring in McClellan Oscillator, and recent negative divergences in both McClellan Oscillator and New Highs. The number of stocks above their 20/50 day moving average could be starting a significant deterioration, Even in a continued bullish scenario, my hourly SPX analysis continues to indicate a new low below 2247.9 seen on 12/14. My proprietary Technicals Model was negative again for the 2nd day in a row, but less so than Thursday. Still can’t ignore the negative divergences vs. SPX seen since mid December.

    On the bullish side, SPX Daily analysis showed no negative divergences at recent highs, which most often means a new high is expected. HYG:IEF continues to make new 2016 highs. While my legacy swing trading signals are neutral, all 999 members of my new ensemble are currently bullish.

    More discussion and charts here: http://navigatethemarketstorm.com

    My site is 100% free. If you are visiting for the first time, be advised that I do ask new users register for a free login to see daily posts. This takes 15 seconds. This is to protect myself, ensuring that everyone agrees to my legal documents.

  23. fionamargaret says:


    Making Christmas Great Again.

  24. fionamargaret says:


    Thanks Chris Kimble
    https://raymondjames.bluematrix.com/docs/pdf/0ca50e31-5c07-46dc-8218-2d60b355ea12.pdf
    Thanks Raymond James

    Thanks Tony and everyone……xx

  25. A key mathematical constraint on growth vs. the 1950s is population growth i.e baby bomer aging. The grow the in the 50’s was heavily influenced by population growth. Real GDP is currently 2.5 percent Trump policies will bump up productivity via instructure spend from 0.80 percent to say 1.6 percent that gets us to 3.3 real GDP p.a. his policies should boost inflation as well as we are not far from full employment based on U6 employment. Inflation is 2 percent on the way to 3 percent at 4 percent it hurts corporate profits and private investment. Athe 4 percent inflation this becomes negative for profit growth and eventually hurts GDP growth. I am bullish long term but realise there are constraints emerging as the business cycle matures. European and Japanese equities look more attractive as a high beta trade on global recovery.

  26. Hugh Jazole says:

    When Trump takes office in January, 2017 the economy will look more the like the beginning of the last Growth secular cycle (1949-1966) than the above mentioned Unraveling secular cycle. With the exception of PE ratio, which was single digits at that time.

  27. torehund says:

    Happy Christmas, Tony and all in here !
    Just a thought, Trumps assumed lowering of Corporate tax could have a deflationary effect on housing, as contractors could build for a much lesser price, hence put pressure of what already exists. Armstrong had the reaction top (wave two up awaiting wave 3 down) in real estate the day Putin entered Syria Oct 15. Smashing 2 flies at once Donald has sold or is selling out what he owns, exiting at top AND keep his presidential- integrity as non-involved.
    Winston Churchill once uttered “History will treat me nicely, as I will write it myself”.
    See you all on Monday 🙂

  28. mike7x says:

    Thanks Tony! Merry Christmas to you and everyone here. Another year is coming to an end. Will 2017 trump this year? We shall see…

  29. Merry Christmas Tony and everyone

    i think 20k was left to celebrate the new year

  30. canadianloonie says:

    Merry Christmas Tony..I hope you and your family have a happy healthy and prosperous New year! Thanks for all you do!

  31. soulsurfer says:

    thanks tony and happy holidays to you everybody

    simple charts are sometimes all we need to get us out of the weeds and daily scribbles:

    https://investingintelligent.com/2016/12/24/sp500-update-what-do-the-simple-moving-averages-tell-us/

    nothing bearish to see here imho.

  32. Thanks Tony for sharing your insights and offering illuminating historical parallels.

    In your historical parallels, you weave together economic backdrops, Saeculum theory and economic policies.

    And you then you make the keen observation “The political mantra during the Truman/Eisenhower eras, and until Reagan, was to use the economy to strengthen the working class, and their purchasing power would expand the economy. The political mantra appears to have come full circle with the election of Donald Trump. The trickle down mantra has ended, and a build up of the working class will be underway shortly.”

    On this we agree. Irrespective of the economic backdrop, I believe a first turning is underway and Trump’s proposed policies are very similar to those enacted by Reagan.

    And how did those policies work out?

    “The Reagan years brought annual real GDP growth of 3.5 percent — 4.9 percent after the recession. In inflation-adjusted 2009 dollars, GDP jumped from 6.5 trillion at the end of 1980 to 8.61 trillion at the end of 1988. That’s a 32 percent bump. As Peter Ferrara pointed out on Forbes, it was the equivalent of adding the West German economy to the U.S. one.

    Under Obama, GDP up to June 30, 2014 has grown an anemic 9.6 percent, total . Reagan-era growth was far more than double the Obama rate.

    Ah, but did all of that Reagan bounty trickle down to ordinary Americans, though? Yes. Real (inflation-adjusted) median household income shot up some ten percent in the Reagan years. It has flatlined under Obama.”

    As I mentioned yesterday, Obama’s presidency has been something of an obscenity laced with progressive liberal thinking in the extreme and flawed policies, including the adding of 21,000 new business regulations.

    Much will depend upon increases in core capital spending as this line item will drive both productivity and employment increases, the two drivers of long term economic growth. Fortunately, Haver Analytics sees growing appetites to increase capital spending in a more welcoming and less hostile political environment.

    Hopefully, this will lead to increases in employment as the labor force participation grows along with increases in median incomes. Inclusiveness will depend upon the individual exercising the initiative to take advantage of new found opportunities. Success will follow individual enterprise, not state directives or assistance

    As to the market, I’m inclined to think we will see a couple of days of buying and then a resumption of selling under the pressure of a descending triangle. My level of confidence, though, is not high because of the oddities in last week’s trading. https://www.tradingview.com/x/PvT5MghD/

    Best wishes to all.

  33. mjtplayer says:

    Merry Christmas and Happy Holidays to Tony and everyone!

    • Linda West says:

      Someone once said “Trading is mostly just a collection of success formulas.” At one time the United States of America was the only nation that knew how to develop atomic power and then Klaus Fuchs sold our formula to the Russians. Eventually, all roads lead to sudden destruction, a postulated sequence or development of events type of scenario!
      An expert trader can turn few dollars into fair amount of dollars, by following a blueprint. Tony, your weekend analysis along with daily analysis offers that blueprint material. Just as a good cook needs a book of recipes! Traders like myself and investors need outstanding analysis such as yours. A trader increases his or her ability when there is set of useable and dependable recorded information on shelves. Tony, your blog offer perfect procedure to foundation of principles that can lead anyone with desire to learn to achieve success in trading. Merry Christmas and Happy New Year to everyone!

  34. locanbbs says:

    Thank you, Tony, for your great analyses and great site! What would we do without you? Happy Holidays to all!

  35. vivelaamo says:

    Thanks Tony. Merry Christmas to all from the UK.

  36. gtoptions says:

    Thanks Tony ~ Merry Christmas & Happy New Year!

  37. greggw2gs says:

    Merry Christmas Tony and Crew! Wishing everyone a happy, safe, and profitable 2017!!!

  38. Hugh Jazole says:

    Most of the comparisons to the 49-66 era do seem to line up. However the PE ratio in 1950 was much lower.

  39. Wouldn’t it be something if the CB(PPT)induced rally from 2083 stops approximately 200 points from the lows–similar to Brexit’s CB buying spree?Followed by a 100 pt SPX drop to 2185ish as a minute 4 and a truncated 5 of some kind?Wonder what the odds of that happening are.A break of 2277 would mean min 3 is ongoing,I’m assuming.I was 100% and cut down after the MACD crossed down.Thanks Mr C for the excellent WU btw.

    • mcgcapital says:

      2185 would mean 4 overlaps 1 though… the symmetry is there though and I think it’s lining up that way. Even in the context of a longer term uptrend we should expect some sort of giveback soon to test the trend, so a 3-5% pullback in January would be normal

  40. Hi Tony, what you describe matches my 17.6 year stock market cycle which is looking to zoom off to Dow 100000 by 2035. I made this prediction in my book published in 2013 and we had the bear market 2015/6 as I forecast. I always check your counts for the finer detail.

    https://www.amazon.com/17-6-Year-Stock-Market-Cycle/dp/0857192736/ref=sr_1_1?s=books&ie=UTF8&qid=1482585028&sr=1-1&keywords=Balenthiran

    Happy Christmas and all the best for 2017.

    Kerry

  41. Hugh Jazole says:

    In the environment we are headed into, is it possible small cap stocks could outperform?

Comments are closed.