Monday update

SHORT TERM: gap down opening then rebound, DOW -46

Overnight the Asian markets lost 0.9%. Europe opened lower and lost 0.4%. US index futures were sharply lower overnight, and the market gapped down to SPX 2323 at the open. The market had closed at SPX 2344 on Friday. In the opening minutes the SPX hit 2322 and then started to rally. At 1pm the market had closed the gap when hitting SPX 2344. A pullback to SPX 2336 followed by 2:30. Another rally pushed to SPX to 2345. Then a dip into the close ended the day at SPX 2342.

For the day the SPX/DOW lost 0.15%, and the NDX/NAZ gained 0.20%. Bonds gained 5 ticks, Crude slipped 15 cents, Gold rose $7, and the USD was lower. Medium term support is at the 2336 and 2321 pivots, with resistance at the 2385 and 2411 pivots. Tomorrow: Case-Shiller at 9am, consumer confidence at 10am, then a speech from FED chair Yellen at 12:45.

The market opened today by gapping below the 2336 pivot, which had held support during this decline. At the open it found support at the 2321 pivot, and then rallied. Everything I have read over the past several days, on the blog and in the OEW forum, suggests the market is in correction mode. There are lots of technicals to support this scenario, and it was even noted as possible in the weekend update. While this may be the most obvious scenario, the short term DOW count still looks acceptable. Which was noted as favored over the SPX count in the weekend update as well. The SPX short term count had been a bit choppy over the past month or so, while the DOW count has been quite clear since this bull market began over 13-months ago. The DOW count continues to suggest Micro 4 has been underway this month in an ongoing uptrend. Should the SPX lose the 2321 pivot (2314-2328) then the downtrend scenario would be more likely. Short term support is at the 2336 and 2321 pivots, with resistance at the mid-2350’s and the 2385 pivot. Short term momentum hit neutral during today’s rebound. Trade what’s in front of you!

MEDIUM TERM: uptrend under pressure

LONG TERM: uptrend

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

About tony caldaro

Investor
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120 Responses to Monday update

  1. micro wave 1 was only 49 points, Wave 1 of micro 3 was like 43 points. this wave is 40isg so far, guessing 2363 holds and we get at least a 12-15 point pull back

  2. micky says:

    lol, you gotta give the bulls credit, they do a much neater job than the bears can ever muster.

  3. mcgcapital says:

    Out of my shorts from 7440 and 7345 at 7350. Dangerous market to be long and impossible market to be short! GL all

  4. Page says:

    This is a relief Rally, more downside to come.

  5. vivelaamo says:

    Newbie is it ready to crash back down yet for C wave?

  6. vivelaamo says:

    Doesnt Transports normally lead the way….

  7. locanbbs says:

    This time there should really be “no looking back” (for a while, at least)! As long as Newbie and his “friends” keep worrying.

  8. bolderbob says:

    Tony, what level would confirm the micro 4 pullback has ended and micro 5 of minute 3 is underway?

  9. micky says:

    slowly taking a bit of scalps off, I have 1st taget right at Tonys 55, although I suspect the bigger stall will be at 60 area.

  10. So Ryan says he’s got votes now to repeal Obamacare—someday.Markets rally.2356 is the swingline.Above that negates a downtrend (Ira)

  11. NEWBIE says:

    Everybody bullish here so we can get monster wave down?

  12. locanbbs says:

    Looks like that could have been the expected “shakeout”. Really a “mini” one!

  13. I show the Nasdaq composite on the daily scale.(not shown…lol)

    The index has been climbing for quite a while now without a significant retrace. The rise started at D and climbed up to A.

    After A, it has moved sideways, forming another peak at B.

    Peak B is slightly higher than A, qualifying it as a 2B pattern.

    When the index dropped below the red line at C, it also qualified as a double top.

    Both of those patterns suggests the index is going down. However, often the drop after a double top isn’t anything to worry about (meaning it’ll likely be much less than 20%).

    It is time for the indices to retrace. Perhaps the index will just move sideways for several months, bobbing up and down without forming any sustained tren
    —Bulkowski on Monday.
    Quite a call.I’d say.
    Transports made a big low of 8800 and rebounded.Rebound continues today.This index is still a major predictor of equities as a whole.A drop below Monday’s low would be MY key…along with DXY.Miners disappoint today ahead of Yellen.Still early.
    Looks like Repubs want to tackle Obamacare again.They HAVE to,in order to get revenue for the tax cuts.Later.

  14. micky says:

    At least we have low and hod for markers now, if 46 goes we should get 50 odd today.

  15. jhjoyner says:

    Tony was minute ii a zig-zag or flat?

  16. H D says:

    SPX last weeks pop ~22 points and the pop off yesterdays low, 22. sellers hitting that symmetry

  17. H D says:

    Tony, BDI in an uptrend?

  18. blackjak100 says:

    Setup looks simple…if a retest of 2332ish (50 dma) holds and a bounce ensues, time to get long with stop at 50 dma

  19. Richard Glackin says:

    Silver is currently in rally mode. Since that last low at 16.84 we have a 1-2, i-ii-iii

  20. Richard Glackin says:

    Some really great posts here!

    Wow! Even while I’ve learned to expect wave 4’s to be ugly beasts that tend to drag on and on – beyond the expectations of most chartists, I have to say that this wave 4 (iv) is certainly one of the more difficult to count. Let me rephrase that…it’s not that difficult to count after the fact BUT it has been very difficult to forecast its next moves.

    FYI, I’ve been told by some very smart people (Elliott Wave folks) to NEVER bet on a wave 4 ! I admit, that I don’t always follow their advice but will tell you that half the time (at least) I wish I had followed their advice.

    Nevertheless, as long as you carefully maintain risk management, there will only be minor damage to your account. The problem is that with unpredictable swings in this kind of wave 4, you end up getting into and out of the market way too many times via stops etc. Not the best approach for making money…unless, of course, you are a skilled day trader.

    Noting that I warned that when the ‘perceived’ wave iv was believed complete after an ‘abc’ down to 2355ES, that was only the ‘A’ wave of a more complex wave iv…and I was expecting a drop to 2327ES (the 1.382 of wave A). Since then, the market blew through that point in a not so simple ‘C’ wave where the count has been 1-2, (i,ii,iii,iv,v) 3, and now we have a wave 4 of ‘C’ that penetrated the territory of its own wave 1. Consequently, we have to look for an ending diagonal. Indeed, it does look like an ending diagonal is forming.

    [Again, my apologies for not being able to post graphics i.e. a count chart.] But if you look at a chart of the ES from the 2401 high and you draw the upper trend line from the end of the ‘B’ wave (start of the ‘C’ wave) at 2389ES and continue that downward trend line across the 2353 peak and the most recent 2344 peak (those are waves ‘b’ and ‘d’. Next, draw the lower trend line across the 2332 low and the most recent 2318 low. Those are waves ‘a’ and ‘c’ of the ending diagonal.

    Now, from the last high at 2344ES I am expecting the ‘e’ wave drop. And yes, as Learned points out, that could get down to the 2280’s.

    Let’s check the math: Looking at the extensions of ‘C’ vs ‘A’; Wave ‘A’ was 47 pts. The ‘C’ wave started at 2389. Therefore,

    C = A x 1.0 at 2342ES
    C = A x 1.382 at 2324
    C = A x 1.500 at 2318
    C = A x 1.618 at 2313
    C = A x 2.000 at 2295
    C = A x 2.618 at 2266

    The lower trend line is currently at 2312 and dropping. So, the end point clearly depends on the time for the next drop. 2308, 2300 and 2295 are certainly within range.

    Is this count absolute? Of course not. EW is all about probabilities. And, if you look at the internal structure of wave 3 of ‘C’, it is possible there are sufficient waves for this entire ‘C’ wave to have completed. I don’t see that as the highest probability but it’s possible.

    Therefore, if you choose to short this market at this time, be sure you have moderately tight stops. On the other hand, waiting to see if this drop actually materializes and then betting on the next higher degree wave 5 up might be the smarter choice. And/or we continue up after a small pullback. Good luck to all.

    • What you are labeling the ‘b’ wave at 2390 might as easily be a declining double top of the previous up move.

      • Richard Glackin says:

        Thanks egeorge.

        • In my simplistic count I was in a dilemma about whether the move to 2390 was a B upwave or part of a double top of previous move. I never did really resolve the dilemma, but looking at it as the peak of a B wave opens the possibility of a double zig-zag rather than a simple zig-zag (including the second big downleg which has yet to occur).
          I don’t try to count every tiny wave, which explains why my counts are not as complex as some others, such as R. Glackin.

  21. I hope Monday’s interday low of 2322 was the bottom of a possible A leg of a zig-zag correction of micro 4, but the futures are not strong late Tues night.

  22. vivelaamo says:

    Doesn’t anybody think we can rally from here like so many times in the past following pb’s? While I totally get the technicals suggest more downside this blog does feel a little ‘deja-vu’ with calls for more downside.

  23. Today could have been the end of leg A of a double zig-zag A-B-C comprising micro 4. If so, an irregular leg B could travel back up to near 2401 before leg C kicks in.
    That would be a good opportunity to sell and wait for leg C to complete to buy back. If the B retrace is a modest regular one, that would be be a more difficult trade. Of course I realize that day traders buy and sell on much smaller fluctuations than that.

  24. mjtplayer says:

    The oil ETF USO – to say it needs to hold here is an understatement. A break lower from here could trigger panic selling into the low $40’s in short order.

    https://www.tradingview.com/x/0fkpbb9p/


  25. couple Rambus charts.Backtest to 2280 possible.

  26. mtu MTU says:

    [EOD] Stocks-
    The 50DMA in SPX held (Chart 1). SPX is back at its overhead resistance area (Chart 2). While odds of a short term low has increased given the rebound, near term bearish options have not been exhausted (Chart 3 and Chart 4).
    http://market-timing-update.blogspot.com/2017/03/market-timing-update-32717.html

  27. opader says:

    Thanks Tony for the update.

    SGS ticked down slightly, We need to see where SPX ends up tomorrow. If we get a close above 50 D-SMA, then chances would be good that the correction since 2400 (around 3%) is done.

  28. stormchaser80llc says:

    Friday I made a case for a bounce within a downtrend. I was a little early with the call as a W5 lower was put in this morning. Then the market bounced very nicely. Breadth indicators, SPX Hourly technicals, and my proprietary Technicals Model all show positive divergences with today’s lower low. There is strong evidence of a sustainable bounce here.

    My favorite signal and signals based on my Technicals Model all support a bearish or short position, and I continue to hold 100% SPY June Puts. This is because I look for larger trends (swing trade). Good luck to all!

    Much more FREE analysis at my site (http://navigatethemarketstorm.com). However be advised that I do ask folks to take a few seconds to register for a log-in, making sure you agree to my legal documents.

  29. kvilia says:

    Learned – that’s my wish: http://imgur.com/a/coZQ5

  30. Ira Epstein summary:
    Yen and Euro bullishly embedded,dollar is bearishly so.I looked on my charts,TLT seemed to be bullishly embedded,but he didn’t mention it.All this is bullish for gold.
    Crude:Bearish embedded stochastic.
    GdX and Gold:TRYING to embed,but not yet.He sounds pretty enthused about gold,IF his 100d crosses the 18 day (his favorite MAs).Could happen tomorrow on a nice up day.But what do we have?Yellen and 8 Fed speakers.
    Fotis was hoping for a drop to jump in and buy on PMs,but a drop like he was hoping for would not be bullish price action.
    I saw the 10 crossed above the 20d a week ago–an early bullish indication.It’s a little faster way to confirm good price action.The 13/34 cross is slower.In the future ,I may go with the 10/20 crossover.
    Wrapping up,tomorrow is huge.A gap up will do a lot for PMs.One more thing.PPT–please quit playing with the DXY H&S!!!!Let it go.Good night all.

  31. Tony any feeling towards a long-term peak in the USD vs JPY and EUR, what the risk here we have hit a peak in the USD. I am thinking the deceleration in Q1 Atlanta GDP estimate might be a statistical aberation as those estimatation models are not based on accounting have an error rate of + or – 0.8%. Plus Trump is short-term irrelevant to the US economy as it is slowing moving to full employment. I think the key is the Democrats and Republicans both agree on infrastructure spending, the good thing is Trump likes to spend and build which should mean bigger government deficits and a hotter economy. The problem is he needs a dovish head of the Fed to help, Yellen fits the bill, but poltics will decide this. Also noticed the Chinese has tightened interbank rates to try and cool the property market, this might flow through into commodities and the AUD & NZD. All the best.

    • tony caldaro says:

      Currencies have been stuck in a trading range for some time.
      Watching but do not see any reversals just yet

    • alexhartley1 says:

      I’d imagine if and when a corporate tax reform bill is passed in the US (August perhaps) it will act as a form of QE in the US (without Trump having to go cap in hand to Yellen if we fall into such a date) whilst at the same time causing the USD to go bid as US companies bring back huge amounts of USDs to the US to benefit from the one off tax amnesty. I am far from an expert on such things but this sounds reasonable right?

      • The key thing to not about government deficits is that they are largely a function of lower tax take and welfare payments and happen automatically in a recession, there is very little discretionary spend, this has been tested empirically, government deficts are just an accounting function of higher household and business savings. Also note on the demand side Asian’s are natural buyers of treasuries as they accumulates lot of USD from the trade surplus with the US, they don’t have much choice of assets to invest the USD in so typically buy treasuries. Hope that helps.

    • torehund says:

      Spx says, its my way or the highway 🙂 Only genlemen buy bonds 🙂

    • locanbbs says:

      Thanks, Fiona! Another bull’s eye hit!

    • Why does the right side “tail risk” increase and not the left side?

      • fionamargaret says:

        Tail risk represents the possibility that the magnitude of returns on an asset/portfolio will exceed some threshold (usually 3 standard deviations) on the normal curve.
        If you visualize a normal curve on standard axis, the tail on the left side corresponds to an extreme low return, and the tail on the right side corresponds to an extreme high return.
        In other words left versus right is a measurement of (the likelihood of) extreme low or high
        returns.
        An analyst might look at these in order to estimate the impact of rare but significant events.
        Jeffrey Saut was mentioning left tail risk.

        • Thank you for that very complete and precise answer. I would think that possibly they arbitrarily assign likelihood of exceptionally low or high returns to the left or right sides respectively, but maybe there is a mathematical reason why low returns are on the left end of the bell shaped curve and high returns on the right end.

  32. Thanks Tony

    Today was more or less expected though it did slip beneath the 50 DMA but put in robust recovery off the bottom, reaching 38% of the span from where it started (about 2380) and today’s low.

    I tend to see more corrective movement before us but am very uncertain as to where and when the next leg down will begin. The last time it cracked at the 50% retracement level right around 2360. The new 50% is around 2348 but my gut tells me it will go higher just to make life difficult.

    And fractal symmetry is everywhere: the old 50% if the new 62%

    While Trump remains a controversial figure, I’m not sure anybody can unify the unruly GOP as its inherently factious: religious right, evangelicals, neocons, libertarians, and countless caucuses, including the Freedom Caucus. And they all want to be heard, bringing into question the ability to press forward without a new coalition; Ryan is useless.

    I think disunity may prove costly as long as the market is coupled to the Trump train. But the market has the option of decoupling, possibly a longer term option.

    • Correction: 2360 should be 2355

    • locanbbs says:

      Problems inheritant in a two-party system. Since third parties have negligible chances, the various splitter groups are practically forced to join together in the two major parties, where they constantly bicker INTERNALLY over control of the “steering wheel”, leaving the public (“res publica”) out of the picture and causing constant immobility. If nobody controls the steering wheel, the train can never get moving. UNLESS a strong President can unite public opinion and bring the bickering factions into line and get the “train” moving! Obviously such a President is lacking now!

      Preferable seems to be the (European) type of flexible coalitions, giving the public a real voice and choice and providing for the movement so lacking in American politics. This system is generally viewed with horror in the U.S., but my experience with it over the past 50 years of living in Europe has been quite favorable, while the immobility of American politics is stifiling and extremely frustrating, always just “muddling through”. – Unless, of course, you’ve just got used to it and think it’s “inevitable”!

      • torehund says:

        https://www.armstrongeconomics.com/international-news/politics/obamacare-survives-thanks-to-corruption-as-usual/

        Its not so much about the will of the president, he is just riding along a bubble in healthcare costs.

        • locanbbs says:

          Don’t understand. Healthcare costs are just a belief system (“progress” at “all costs”), mainly caused by the same frustration and immobility (flight into consuming => overweight, drugs, alcohol, medicine etc.) together with the ingenuity of the medical system to sell its “drugs” to the public as a consumable “solution”. – On that score Trump is moving in the right general direction. My main point was that given the present political system – and his obvious naivety and clumsiness in managing it – he will probably not be able to “get the train moving” at all, whatever he “wills”!

        • locanbbs says:

          The result is STAGFLATION, just another word for IMMOBILITY.

      • locanbbs says:

        BTW: According to my Information, the only traditional market winners under STAGFLATION are Gold & Silver – due to the inherent political crises arising from political IMMOBILITY and the widespread FRUSTRATION due to it.

        • torehund says:

          Gold and silver is OK if you can afford food, if not then no. Look no further than Venezuela. If healthcare is to bloat itself further IT will be at the expense of something else, and thats where cheap oil comes into play during the real dollar bull. I fully agree on negativity towards the pill solution, IT mostly keeps problems under the rug until whatever you try alleviating decompensate itself, its like buying yourself a little time, not always dealing with the problem up front. But the universe is a dynamic system, problems arise and wane all the time. And if you kick the can far enough you may never have to SEE IT again🌊🌊🌊

          • locanbbs says:

            Under Stagflation – if you can’t afford G & S – is to either work for the government, they always profit, or find some essential service to work in, like garbage removal or computer repair, they never run out of work. As an investor there’s not much you can do besides wait it out, if you can wait that long!

  33. bouraq says:

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

  34. mcgcapital says:

    I want to stay bearish on this market but FTSE makes it difficult.. looks like another hammer candlestick, and the last 2 were followed by 100+ point rallies. If we don’t head back down overnight I will be exiting shorts on the open tomorrow.

    • vivelaamo says:

      Setup across US indices look similar to previous pb reversals but the whole move down looks the same as oil. Oil carries on down I can’t say how indices can be strong. Gold looks like a shorting star top that may confirm tomorrow.

  35. jhjoyner says:

    VIX reversal today resembles Nov 9th.

  36. Page says:

    Thanks Tony.

    “MEDIUM TERM: uptrend under pressure”.
    (time to be cautious).

  37. Hi Tony

    Many thank you’s for all the good work your do us novices in OEW.

    Tony you stated,”Should the SPX lose the 2321 pivot (2314-2328) then the downtrend scenario would be more likely.” Does that mean the probability that minute wave iii completed?…or the probability that minute wave v completed?

  38. 123 abc says:

    Similarity in wave patterns and weekly technicals from Oct-2011 to Oct-2012 and Feb-2016 to Present (red boxes, first chart below)…

    Oct-2011 to Oct-2012
    RSI > 30, Intermediate-ii
    RSI < 30, Minor-2
    RSI 30, Intermediate-ii
    RSI < 30, Minor-2
    RSI < 30, Minute-ii (—Will this happen again? Perhaps the rise from 2084 is currently Minute-i wave?).


    • 123 abc says:

      Formatting issue, correction…

      Oct-2011 to Oct-2012
      —RSI greater than 30 for Intermediate-ii
      —RSI less than 30 for Minor-2
      —RSI less than 30 for Minute-ii

      Feb-2016 to Present
      —RSI greater than 30 for Intermediate-ii
      —RSI less than 30 for Minor-2
      —RSI less than 30 for Minute-ii (—Will this happen again? Perhaps the rise from 2084 is currently Minute-i wave?).

    • lunker1 says:

      abc, I wondered the same thing today. What if this is Minute 2 and not Micro 4. It would shake a lot of bulls loose and get more bears to pile on. Which then sets the scenario for an explosive set of upward wave 3’s.

      • 123 abc says:

        Agree. Would expect one final wave higher to complete Minute-i wave towards the 2411 pivot; and then, Minute-ii commences to target the 2270 or 2286 pivot range; i.e.

        • lunker1 says:

          I meant to say if 2401 was Micro 1 and now in or have completed Micro 2.

          Minute 2 might have been more complex and lasted into the 3rd week of January.

  39. vivelaamo says:

    Thanks Tony. I’ll like to see more upside tomorrow but I think oil is the problem.

    • torehund says:

      Thanks Tony.
      Vivelamo sure oil is the problem, its too expensive still to fire the economy. Solution for both China and the US is a reset, a la 1999, that is 10 Usd a barrel, then the party begins 🙂 :):)

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