weekend update

REVIEW

The market started the week at SPX 2264. On Tuesday the market rallied to SPX 2274 in the opening minutes and then started to pullback. The pullback lasted all week, with one 9 point rally along the way, and hit SPX 2234 on Friday before bouncing to end the week at 2239. For the week the SPX/DOW lost 1.0%, and the NDX/NAZ lost 1.5%. Economic reports for the week were slightly positive. On the downtick: pending home sales, the Chicago PMI, plus the trade deficit increased. On the uptick: Case-Shiller, consumer confidence, the WLEI, plus weekly jobless claims decreased. Next week economic highlights: monthly payrolls, FOMC minutes and the ISMs. Happy New Year!

GOLD

To this observer the continued interest in Gold is reminiscent of the 1980’s. After a 10-year bull market, 1970-1980, when Gold soared from $35 to $873, it entered a 5-year bear market and dropped to $283 – losing 68% of its value. The problems of the tumultuous 1970’s had not completely disappeared by 1985, and many thought Gold was cheap, and a good safe haven against potential future economic problems. By 1988 Gold had risen to $507, retracing 38% of the entire bear market. But that would prove to be the highest price Gold would achieve for the next 17 years. So what went wrong? Actually nothing if one understands the Commodity, which includes Gold, long term cycles.

gold1970

During the first nearly two centuries of the United States the price of Gold was relatively fixed. The USD was either backed by Silver, with a 15-1 or 16-1 Gold ratio, backed by Gold, or backed by both during a period of bimetallism. One would think with prices fixed over such a long period of time, it would be difficult to observe any sort of cyclical movement. But if one knows what to look for, it is there. In previous reports on Gold, and Commodities, we have noted an approximate 30-year cycle: a 10-year bull market followed by a 20-year bear market. In this report we are going to make it quite simple to observe, and historically confirm it.

gold1800

We can all agree that Gold peaked in 1980 and 2011: 30-years apart +/- 1 year. We can also agree that Gold bottomed in 1970 and 1999/2001: 30-years appear +/- 1 year. Since the Gold price was fixed in the US for all but these last 45 years, only temporary peaks in prices, due to monetary demand, are likely to appear in any historical chart of Gold. If we then project back every three decades, starting with simply the 2010’s, we should see the cycle. The decades are the: 2010’s, 1980’s, 1950’s, 1920’s, 1890’s, 1860’s, 1830’s. Notice there was a small blip higher in the 1830’s due to the 1834 Coinage Act. There was a spike higher in the 1860’s due to the 1863 National Banking Act. There was also a spike higher in the 1950’s probably due to the 1948 Marshall Plan. The only other price blip on the chart, which is unaccounted for, was in the 1810’s. The 30-year cycle was even at work during a 200-year Gold price fix. This cycle suggests a Gold bull market will likely peak in 2040 +/- 1 year, after a bear market low in 2030 +/- 1 year. Until then Gold is likely to remain in a bear market trading range, similar to 1985-2001.

LONG TERM: uptrend

From the February 2016 SPX 1810 bear market low the market has risen, thus far, in three impulsive uptrends: February-April, June-August and November-December. The first uptrend was 2 months and about 300 SPX points, the second was 2 months and about 200 SPX points, and the current uptrend 1 month old and about 200 points thus far. The characteristics of this bull market suggest the current uptrend should extend into at least January, even though it has already reached about the minimum length for previous completed uptrends. The weekly RSI, however, has weakened with this week’s decline. As a result of these three characteristics, a completed, or near completed uptrend, should now be considered as a possibility.

spxweekly

The first uptrend was labeled Intermediate wave i. The second uptrend was labeled Minor 1 of Intermediate wave iii. The current uptrend has been expected to be Minor 3 of Intermediate wave iii and about 300 SPX points. If it has already ended, or near completion, then it will be labeled as only Minute i of Minor wave 3. One lesser degree than anticipated.

MEDIUM TERM: uptrend

The current uptrend began in early November at SPX 2084. This advance thus far has been counted as three waves up with a fourth currently underway. However, this week we have considered that it could have been five waves up. The short term characteristics of this bull market are still not completely defined. Nevertheless we have tracked three waves up, with a fourth underway, . However, since we are dealing with possibilities/probabilities we offer other potential scenarios until the short term count clears.

spxdaily

Should a downtrend/correction be underway it should be limited to the OEW 2177 pivot. As corrections thus far have been about 5%. Medium term support is at the 2212 and 2177 pivots, with resistance at the 2270 and 2286 pivots.

SHORT TERM

With the several variables noted in the previous sections we have decided to update the count to three Minute waves up to the uptrend high, and a Minute iv underway. This count suggests there is still one more high, Minute wave v, before this uptrend concludes. Also, since Minute iii was shorter than Minute i, there is a limit to the upside potential of Minute v. If we use SPX 2234 as a Minute iv low, the limit is SPX 2325.

spxhourly

The current pullback has declined in many small waves, but basically three larger waves SPX: 2248-2274-2234. This pattern now looks like a complex zigzag. If SPX 2234 does not hold support then the next likely target is SPX 2225 – where wave c equals 1.618 wave a. Should the market drop down to the OEW 2212 pivot, then the uptrend may be over and a downtrend may be underway. The decline this week, as previously noted, offers many possibilities at this point. Short term support is at SPX 2225 and the 2212 pivot, with resistance at the 2270 and 2286 pivots. Short term momentum ended the week with an ongoing positive divergence. Best to your trading in the New Year!

FOREIGN MARKETS

Asian markets were mixed on the week and gained 0.6%.

European markets were also mixed and gained 0.2%.

The DJ World index lost 0.2%.

COMMODITIES

Bonds remain in a downtrend but gained 0.4% on the week.

Crude remains in an uptrend and gained 1.3%.

Gold is trying to uptrend and gained 1.6% on the week.

The USD remains in an uptrend but lost 0.7%.

NEXT WEEK

Monday: Holiday. Tuesday: construction spending and ISM at 10am. Wednesday: auto sales and the FOMC minutes. Thursday: weekly jobless claims, the ADP and ISM services. Friday: monthly payrolls and factory orders.

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

About tony caldaro

Investor
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208 Responses to weekend update

  1. thcconsulting says:

    GDX and JNUG got dumped at the close with GDX volume @ 20M. GDX sell-off was bought back within a few seconds.

    GLD and NUGT w/ high buy volume at the close. GLD hit the 23.6 retracement from the Nov ’16 high before pulling back.

    Looking for a short entry at the 112 extension level on signs of weakness.

    Best,
    Tom

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  2. fotis2 says:

    How do you guys feel about no gap close?I think it reads bullish

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    • Your bullish interpretation is correct. However this week–especially Wednesday–is key to validating the bullish interpretation. FWIW, my opinion below is based on studying long-term E-mini S&P (ES) data: Unlike the cash market, the ES open gaps are rare enough so that one can use them with higher confidence. An Open Gap to me is a gap larger than 1-point that stays open by 1-point or more. If today’s Gap from 2233.50 remains open this week, then it indicates today was a turning point on a larger pattern and the gap could stay open at least 2-3 weeks. Practically speaking, since I never know what’s going to happen, I like to use an open ES gap as a stop level (trade exits with a closed gap) for a trade that I intend to have open on the medium-term to longer term. I’ll then adjust this “gap stop” to something at higher prices when more uptrend evidence is in. Aside from today’s gap, the bull market from 2009 still has 3 open ES gaps—all near the earlier stages of major up-waves. It’s unlikely that today’s is the kind of gap we can expect to stay open a very long time. But who knows, just take it one day at a time and see what happens.

      Liked by 1 person

  3. scottycj1 says:

    If we close here or higher today, it will be a new high in the Cum daily NYAD line

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  4. vivelaamo says:

    Gandalf is standing at R2K 1352.

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  5. bud67 says:

    ref GDX….OBV is not strong, and thus the price might reverse down,
    at anytime today…..

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