weekend update

REVIEW

The SPX started the week at 2399. After a higher open on Monday and Tuesday the SPX made a new all-time high at 2404. It then pulled back to SPX 2382 before ending the week at 2391. For the week, the SPX/DOW lost 0.45% and the NDX/NAZ gained 0.50%. Economic reports for the week were mostly positive. On the downtick: the WLEI and the Q2 GDP estimate. On the uptick: wholesale/business inventories, export/import prices, the CPI/PPI, retail sales, consumer sentiment, plus weekly jobless claims and the budget improved. Next week’s economic highlights include: industrial production, the NY/Philly FED, and housing. Best to your week!

LONG TERM: uptrend

While the long-term count has remained unchanged, the general market has made little to no progress since the day after the POTUS addressed Congress on February 28th. On March 1st the SPX hit 2401 and has since traded between 2322 and 2404, while the NDX/NAZ have gained about 4.5%. Cyclical stocks have been flat, while growth stocks have been bought. A Q1 GDP, initially reported under 1%, might explain it. However, with 90% of the SPX already reporting Q1 results, sales have been +7.3% while earnings have been +14.7%. And it is the SPX that has been flat to lower.

We continue to label a Major wave 1, of Primary wave III, bull market from February 2016. Intermediate waves i and ii completed in the spring of 2016. Minor waves 1 and 2, of Int. iii, completed in the fall of 2016. Minor waves 3 and 4 have recently completed in the spring of 2017. Minor wave 5, to complete Int. iii, appears to be reluctantly underway, but has already made a new high.

MEDIUM TERM: uptrend

In review of the NAZ, to determine a quantified short term count within its current 6-month uptrend, an additional observation was made. During the three-trend correction of Aug-Nov 2016 the NDX/NAZ both made a new high during their B wave, while the SPX/DOW did not. Since the SPX/DOW was clearly a three-trend a-b-c, we assumed the NDX/NAZ was doing the same thing. After all, all four indices had done something similar during the three-trend correction of Apr-Jun 2016.

Recently, however, there was a seemingly odd divergence between the SPX/DOW and NDX/NAZ. The cyclicals confirmed a downtrend in April, while the NDX/NAZ only pulled back and then easily made higher highs. Upon further review of that NDX/NAZ B wave, it looked like it could be counted as a small five waves up. This suggests the apparent bifurcation between the two sectors was recently cleared, and they are actually back in alignment.

Under this scenario the NDX/NAZ completed Intermediate wave i, with five Minor waves, from Feb-Sept 2016. Then had an Int. ii correction into November. And is currently in Int. iii. This would explain the lack of a downtrend in April 2017. The short term count within Int. iii suggests the recent NAZ 6133 high could have ended Minor 3. If so, then after a short term pullback for Minor 4, a Minor 5 to new highs should follow. This also fits the short term SPX/DOW count. As they both suggest at least one more new high to complete their uptrends.

SHORT TERM

The current SPX uptrend, which we are counting as Minor wave 5, has so far progressed in three short term waves. If the SPX turns down from here, and breaks through SPX 2361, then it is not Minor 5, but only a B wave of Minor 4. Then SPX 2300+ should provide support for the rest of Minor 4.

If the uptrend is Minor 5, as we suspect, then the SPX has at least one more wave up, if not more, to new highs. The uptrend can be counted as four waves so far: 2361-2345-2404-2382?, with a 5th wave to follow. Short term support is at the 2385 pivot and SPX 2361, with resistance at the 2411 and 2428 pivots. Short term momentum ended the week at neutral. Best to your trading!

FOREIGN MARKETS

Asian markets were mostly higher on the week for a net gain of 1.2%.

European markets were mostly higher and gained 0.2%.

The DJ World index gained 0.1%, and the NYSE lost 0.6%.

COMMODITIES

Bonds are in a downtrend but gained 0.2%.

Crude is in a downtrend but gained 3.5%.

Gold is in a downtrend too but gained 0.1%.

The USD is also in a downtrend but gained 1.0%.

NEXT WEEK

Monday: the NY FED at 8:30, then the home builders index at 10am. Tuesday: housing starts, building permits, and industrial production. Thursday: weekly jobless claims, the Philly FED, and leading indicators. Friday: options expiration.

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

About tony caldaro

Investor
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117 Responses to weekend update

  1. i was long from Friday, just closed it out. Not sure what is going to happen from here. will watch the close.

    Good luck all

  2. tommyboys says:

    A/D rock’in…almost 3/1 positive on the NYSE…another new high today.

  3. soulsurfer says:

    The SPY:TLT ratio is starting to negatively diverge.

    Although divergence is only divergence till it isn’t, it should be noted:

    https://investingintelligent.com/2017/05/15/spytlt-ratio-suggests-a-pending-correction/

    GL!!
    Soul

  4. mjtplayer says:

    Today is certainly shaping up to be an ugly reversal day for GDX. We’ll see where it closes, but it’s not looking good.

  5. Bud Fox says:

    OEW’s SPX chart – reflects a chart pattern called, a reverse head-shoulders pattern.
    Text book suggest, we make a vertical breakout, above prior price highs. I tend to call
    this, and ending of the rally pattern. IMO

    • micky says:

      Bud, Fox, you had the nerve to critique Bouraqs chart, it would only be polite to answer his and other questions about it. Thanks.

      • Bud Fox says:

        Yes, I did. FYI — a price chart only, on technical basis is fine.
        However, a few good technical indicators are wise to display.
        Thus, providing some technical back drop for such an analysis.
        To be clear – Bouraqs charts and work. As useful. Good. But,
        to be clear. He is not a beginner, and has skill. So my views
        are from one tech to another. Not, personal.

  6. mcgcapital says:

    Stopped out of FTSE shorts from 7395 on Friday on the break of 7410. Looks very bullish now with the new all time high. Would buy a dip back to the 7400-10 area but otherwise I’m sitting out. It tends to grind higher when the conditions are like this, which generally isn’t profitable for my trading style. Need to see some sort of proper reaction off a level and a double top before attempting to short it. That being said, given Shell (8% of the index) is up nearly 9% in 7 days and back near the top of its trading range I’m not sure how much further it will run. All seems like a bit of an overreaction to the oil rally.

  7. One more…just read this
    Ralph Acampora is the director of technical research at Altaira Capital Partners and earned himself the nickname is being the “godfather of technical analysis.” Needless to say, when he talks, investors should at the very least listen to what he has to say.
    Speaking as a guest on CNBC’s “Futures Now” segment last Friday, Acampora said the “Trump rally” is currently going through a pause in the short term as the market is now testing its March highs. But beyond the short term, the market may be signaling trouble ahead for bulls.
    Acampora cited the “oldest theory in technical analysis,” the Dow theory, which explores the relationship between the broader Dow Jones Industrial Average and the Dow Transports index. Since the Dow transports index is now trading “well below” its March highs, then the Dow theory calls for a dip ahead.
    Not The End Of The World

    If the theory holds true, then Acampora believes a bear market could result in a 15–20-percent decline in stocks. But the good news is the expert doesn’t view this decline as “the end of the world.” In fact, a decline of up to 20 percent would represent “one heck of a buying opportunity” for investors.

    Nevertheless, Acampora has some advice for investors who may want to take money off the table in anticipation of a market decline. He thinks that so long as the Dow Jones Industrial Average trades above 20,404 and the transport index trades above 8,874, then the “secular bull” market remain

    • vivelaamo says:

      15-20% correction from here would be dream come true.

    • mcgcapital says:

      This guy talks so much rubbish.. he was bearish at the bottom last February then bullish now bearish again… it can’t drop 15-20% from here unless there’s a big reset in expectations on the economy or something from left field like North Korea. We can’t even sustain a 3-4% drop. I think ultimately a bear market will come and the gains for this bull phase are probably mostly behind us but only once people realise the growth story isn’t that great which is going to take time given everyone is so positive at the moment.

      • Avi sees it going to 2285 on a break of 2379.That ‘s only 23 points,but seems like 230 points.It’s all set up to correct,but no incentive to sell.GDX plays games like this all the time,could easily recover.It’s okay until the 20d breaks at 22.35 and the 10d at 22.10.Good luck all.

        • mcgcapital says:

          That’s definitely more possible.. hopefully something happens soon as this is so boring.. I’m sure 2013-14 wasn’t this bad despite the market going up 40%

  8. Daily SPX,add a -div. (BUY signal).MACD looks like it’s rolling over(buy signal).Me?Not buying at this point.Can’t do it.Later.

  9. gary61b says:

    ES below 2398.25 then to 2396.5 min.

  10. phil1247 says:

    as mentioned last week
    bond rally could be over already
    bot back some tbt

    • phil1247 says:

      took partial profits on uco

      crude rally could be done already but not ready to short yet

    • fionamargaret says:

      I phrased it wrong this morning…. McClellan suggests Chinese bond yields rising, and dragging our yields up with them….TBT…which is what I own.

  11. Now for the poor news.NY Fed contracts again.

    Prices paid and received both fell (deflationary threat from China), inventories shrank (bad for GDP), average workweek and number of employees dropped (not making America great again), and future capex expectations plunged to 7 month lows.
    –ZH

  12. Markets yawned at Korea.If no mushroom cloud or EMT event–no problem.Now that we settled that,we carry on busting those -divergences.
    Btw,COT reports on gold improved,though not quite to other “buy”levels.On the other hand,certainly not bearish either.G’ night all.

  13. fenster6 says:

    Everyone seems pretty bullish here.

  14. torehund says:

    Will California join the EU ?

  15. bouraq says:

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

    • pooch77 says:

      Should break thru to the 1340-50 area this week.Nice spot to lobg into June

      • vivelaamo says:

        Agree but futures look strong this morning.

        • fionamargaret says:

          It is all about the Saudis and the Russians agreeing to extend the oil cuts…so much for them trying to make the price so low, our shale producers would be unable to operate…it turned around on them and they found they couldn’t live with prices so low, and meanwhile our shale guys adapted quite nicely thank you…so now we are looking at oil n the fifties as GS suggested last week…..

          Chinese bonds are extending their rise, so we will have to see if our bonds do the same…as McClellan suggested…

        • pooch77 says:

          looks like they withered through out the night

    • Bud Fox says:

      Nice chart, but it seems to be lacking in
      a few details. I could never relay, simply on trend lines
      to define price direction. So, you might consider adding
      a tech tool to verify, you signals. What do you think?

      • scottycj1 says:

        Hopefully you won’t have to rely on trendlines.

      • micky says:

        What details do you suggest he should add Bud?

        • Bud Fox says:

          What details ? There are several, good tech indicators out there.
          For the trader/pubic to work with. I tend to like the Stochastic, say
          an 82%K for example. Then, there is the MACD 10,20.4 if I recall
          was also good, but don’t quote me – my memory at my age is is in
          need of repair. On a more softer tone. I have used an 82%K stochastic
          as well. Alas, my trading days of over, and I have been retired from trading
          for a long long time. Best to you…

        • Bud Fox says:

          A Stochastic chart using the 82%K for one.
          Oh – Stoch at 82% K was one of my own creations.

        • Bud Fox says:

          Can you be more specific, time/date etc.
          If it was the Buraq’s chart of 5/15.

          I have used several unique indicators in my long,
          past experience with charting. Try and 82% K.
          82,3,2 might work well. You see, the 14%K stochastic
          has a lot more volatility than the 82,3,2 setting.
          It’s all, what you like to setup. I had a special MACD
          as well, just can’t recall the settings. Been a while
          since I did my own charts — use OEW’s chart list now.

      • bouraq says:

        Tech tool?

  16. J.Wenger says:

    Thx Tony. Still seeing an update as well.

  17. manunidhi21 says:

    Namaste Tony

    Is Major b done ?
    http://stockcharts.com/public/1269446/chartbook/67199593;

    If yes then it will take the Indices together up.

  18. phil1247 says:

    http://tos.mx/hHduRg?image

    /GC
    long term

    gold tested the downtrend line 1290 area and failed
    exited longs there
    not interested in investing until downtrend line is held above
    risk is retest of 1087 or 890
    .there will be whipsaw until this sideways chop is resolved
    good for daytrading…. bad for investing

    • mjtplayer says:

      You’ll notice that in gold/PM’s/miners, weakness into mid year and year end in most circumstances since the 2011 top. This is a result of window dressing, as managers do not want to show they own PM’s/miners, dumping their holdings and pressuring the market in late June and late Dec.

      After this bounce, I expect gold to continue falling into late June, helped by this phenomenon.

      • phil1247 says:

        re… gold above 2000……

        if 890 supports … target is 2318
        thats why there is no rush to buy anytime soon
        just want to rent gold…………..ie daytrade it ……..
        till its time to buy

        • allen kimble says:

          Hi phil…One could just buy the next low on your lower trend line on the triangle. Over the slow months of the summer it will probably get there?

          Gold surely will go below 1k. Too many people expecting it to ramp up from here stil

        • mjtplayer says:

          Agree Phil, a washout below $1,000/oz and possibly $900/oz then a massive bull market as Europe crumbles beginning in 2018

  19. vivelaamo says:

    Thanks Tony. I still think the lack of follow through in DOW and SP following a strong recovery on Thursday suggests more downside. Expect gaps to be filled this week or next before the next strong bounce.

  20. Tarun Varma says:

    Tony,
    Thanks for your thoughtful and interesting weekend update. I had to read it twice just to let it sink in! Three Qs:
    1- For the $COMPQ, if indeed the recount turns out to be correct, where do you see minor 4 support (5900-5940 or 6000)?
    2- To confirm my understanding, your intermediate/short term ‘base’ count is suggesting a continued (reverse) divergence betw cyclical’s & tech (naz/ndx heading into minor 4 pullback but spx headed to new highs in minor 5)? But if we use spx alternate count (in minor 4 wave C pullback), then the bifurcation has certainly ended.
    3- Looking at the link below suggests “The volume during wave B should be lower than in wave A.” Is that true in OEW as well (or just a EW principle)? If they’re the same, $SPY volume this week was about the same as Thanksgiving week and the week between Christmas and New Years. Another data point supporting the B-wave scenario in $spx/$spy.
    https://en.wikipedia.org/wiki/Elliott_wave_principle#Elliott_Wave_personality_and_characteristics

    Thank you in advance!

    • tony caldaro says:

      1. 6000
      2. the bifurcation relates to trends, not internal counts
      but the SPX/NAZ can do as you suggest.
      3. I don’t follow volume, only price

    • mjtplayer says:

      Correct, gold miners should bounce and have already started doing so since Kimble’s May 10th chart shown, but notice during all of the oversold bounces Chris Kimble highlights, all produced a bounce but none reversed the trend. The trend in gold/miners is down.

  21. torehund says:

    https://www.armstrongeconomics.com/world-news/taxes/imf-proposed-a-capital-levy-tax-on-money-in-bank-accounts-raise-property-taxes/

    “I am broke, how much is left of ours ” Eurozone bail-ins approaching FAST. Between nations and between banks and individuals.

    • mjtplayer says:

      Extremely bullish for the USD, very bearish for the Euro. Add to that the Fed raising rates here in the US while the ECB is still printing money and holding NIRP and you have a perfect scenario for king Dollar.

      • fionamargaret says:

        …and you have Home Capital almost falling down (Humpty Dumpty), and the Canadian banks being downgraded, so $US strong there too…..but gold likes currency problems, n’est-ce pas….

        • mjtplayer says:

          Gold will join the Dollar and rally alongside, but not yet. For now, the gold price drops as it’s priced in ever stronger Dollars. Gold and the Dollar rallying together is probably a 2018 story, maybe even 2019.

          When gold does bottom, probably sub $1,000/oz later this year or in 2018, the subsequent bull market will be astonishing, taking gold to new ATH’s and above $2,000/oz.

  22. torehund says:

    Thanks Tony and for highlight of the Naz. Thinking daily needs too cool off a bit, but look at he weekly macd hocking on Naz, holds nothing but good promises. Will a biotech rally manifest in a Naz blowoff top ?

  23. Bud Fox says:

    Tony….just wish to say. “thank you”, for your dedication, and hard work.

    • Millan Tomic says:

      You probably will be right, assuming we have a triangle forming which implies one more final short term up next week to complete. It could be as high as 2420 though before a downmove

  24. I follow these guys on Twitter and they (Elliot Wave Forecast) offer a completely novel wave count to explain the recent high and current weakness: https://elliottwave-forecast.com/stock-market/spx-elliott-wave-vienear-pullback/. As a student of EWT, my opinion is they do a lot of reverse engineering but It would be interesting for Tony, 123 and others to offer their thoughts/opinions.

  25. allen kimble says:

    Long time lurker here….Interesting counts all around. I would caution people to review the correct seasonality here in a post-election year. Post election years typically goes up until Aug1st and then down into late Sep or into early to mid Oct. Then an explosive rally takes place until year end.

    Would love to see the SPX around 2500 by August and then a sell-off into Oct to fill the recent gap created in April to around 2360. One interesting note about gaps. Typically if it’s on the cash market it may or may not get filled but I believe this particular gap at 2360 has a gap on the futures as well. This is extremely rare and typically over a 90% chance there will be a fill within 6-12 months. My point…… Wait for the Gap to fill and then go long. If all goes according to seasonality and the recent counts, that time will come in the fall time.

    • bfquant says:

      AK. Your postelection seasonality chart show some weakness that is imminent until end May. I am not following why you say strong until late summer.

      • allen kimble says:

        Hi bf- Well as we all know it’s not a perfect science and the chart shows 3 choices to the path. Since the democrats are not in power it won’t be the Red one I think we should be looking at the blue line and to a lesser extent the black. Forget the red. So imminent weakness seems unlikely. More likely is a short term top by late May, followed by a small swoon or consolidation in June, then another rally into Aug1st-6th as the blue one suggests.

        Hey it would be nice if it follows this route. As always. I’m in the camp this Bull has a good ways to Run before it’s over with above average returns over the next 2-3 years into.

      • allen kimble says:

        Thanks Tony!
        Question for you?
        I have seen you compare the period now to the period of the early to mid 1980’s in regards to crisis and EW counts. Back then(correct me if I’m wrong)Major 1 started in mid 1982(+/- a month) and only lasted for alittle over a year. This time you are expecting a much longer Major 1 in duration. What is your reason for this? Are you expecting this time to involve much more subdividing, thus the extended Major 1 or maybe the inverted 4 year cycle tops? If you were to give your best guess where we are now in comparison to the 1980’s, where would you put the market at now? Thanks in advance Tony

        • tony caldaro says:

          Actually there are three different references.
          1. the 2016 low compares favorably with the 1949 low.
          2. the 1984-1987 period started off similar to this one with the complex corrections early.
          3. the 1982-1984 period lasted two calendar years, but just over 17 months.
          2018 has been the minimum expected for a top

    • Hi Allen. According to a chart of /ES on TOS, there are currently 6 open gaps of 1 point or greater since the 2009 Bear Low. Each of these open gaps are near the start of a new uptrend or what “might” become a new uptrend of unknown size (no one ever knows until hindsight). There were even gaps in ES from the mid 90s that took up to a decade and monster bear markets to fill. I don’t mean to be combative here, but a strategy that waits for an ES gap to fill before going long has some of the worst R/R imaginable. I wouldn’t recommend this trading strategy, as it can leave a trader behind at the worst possible time and create a devastating level of FOMO. I’ve found that a better strategy is to not wait, but to go long (especially with gaps that come after a pullback has matured) and then use the gap-fill as my stop exit level. This is a beneficial R/R plan. A relatively recent example of this was the new-year 2017 gap that is still open. I posted about this topic on this blog in early January 2017 with the comments below. FWIW.

      “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 4 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.”

  26. Thanks Tony; your effort is always appreciated and the reconciiation of counts provides a measure of clarity in anotherwise murky environment. As noted by Bloomberg:

    “For 14 straight sessions, the S&P 500 has been both within 0.5 percent of its all-time high and stuck in a 0.6-percent trading range. A similar stretch of stillness has never happened before, according to data compiled by Bloomberg.”

    Yesterday I suggested OPEX week (next week) could provide a catalyst and push prices higher but after, digging deeper, I find May OPEX is not a strong week; it’s evenly divided between winners and losers according to an analysis done by Rob Hanna of Quantifiable Edges. We could get lucky though.

    And based upon studies of VIX, our friend Tom McClellan sees one push higher into the week of the 25th and then a retreat. This fits nicely with your suggestion of the possibility of one more wave up to complete Minor 5

    http://www.marketwatch.com/story/top-technician-sees-absence-of-fear-leading-to-stock-market-top-in-late-may-2017-05-12

    The best fit, though, with seasonal patterns would be for 2404 to be a B of an ABC pattern which would suggest we are in a C that would last through late June to be followed by Minor 5 which, in turn, would be followed by Intermediate IV. http://charts.equityclock.com/sp-500-index-seasonal-chart.

    And as of this writing, the entire complex of McClellan indicators for $SPX has rolled over albeit modestly. For the bulls, next week is critical

  27. vivelaamo says:

    Do you all remember Christina? (I think that was her name) she was very very bearish and this was before the Trump rally. I’d be interested to know what her thoughts were now.

  28. Mr C:Any thoughts on my theory that we’re in a similar chart pattern to weekly June-Oct 2014?RSI seems 98% identical–which led to a 12% drop in Nasdaq that year.Stochastics are embedded now,but if that happened,the rest of the market would probably follow.Would a 10% pullback qualify as a C wave(or more?).Thank you.

  29. stormchaser80llc says:

    My complete blog post today is open to the public to read. If you like the post, you can sign up for a FREE subscription to view this analysis daily at the bottom of today’s blog post!

    Friday 5/12/17 was the second day in a row both my signals were bearish. Breadth is weakening again. My proprietary technicals model turned negative for the first time in 13 trading days, further extending the second of two negative divergences.

    But volume is muted, and my proprietary Volatility Model remains historically low. VIX fell today, giving a MACD SELL signal, a change in recent behavior on Fridays. The yield curve is improving. The trend higher in oil does not look complete. HYG:IEF had uptrend highs on 5/10-11 before falling hard on 5/12/2017. It would also be strange for it to reverse lower here as it gave new uptrend highs after the SPX May 7th All Time High.

    SPX ended the day right at the 2391 resistance line. If the bears are to gain control, it needs to stand. If 2391 breaks significantly to the upside, the bulls would remain in control (after almost 3 weeks of consolidation), and all indicators will quickly flip positive once again. Next week the trend will become clear.

    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.

  30. blackjak100 says:

    Based on a certain indicator I use to assist in what wave count is correct, I can’t disagree with the minor 5 scenario. However, I think it’s clear minor 5 has not even begun. No 5 waves up from 2322. The lack of downward movement is reducing the minor 4 flat scenario, so I can’t help but wonder if a triangle is nearing completion. Minor 2 took 11 weeks and minor 4 will begin week 11 on mon.

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