Friday’s update

SHORT TERM: higher open then consolidation, DOW +14

Overnight the Asian markets lost 1.1%. Europe opened lower and lost 0.7%. US index futures were lower, then higher, overnight, and at 8:30 the CPI was reported higher. The market opened at SPX 2444, 6-points above yesterday’s close, then declined to yesterday’s close in the opening minutes. The market then rallied to SPX 2448 by 10:30, dipped to 2441 by 11:30, rallied to 2447 by 2:30, then hit 2438 again at 3:30. After that a bounce into the close ended the week at SPX 2441.

For the day the SPX/DOW gained 0.10%, and the NDX/NAZ gained 0.70%. Bonds rose 8 ticks, Crude added 20 cents, Gold rallied up $6, and the USD was lower. Medium term support remains at the 2428 and 2411 pivots, with resistance at the 2444 and 2456 pivots. This week the Q3 GDP estimate was reported at 3.5% v 3.7%.

The market opened higher today, retested yesterday’s low, then went into a trading range for the rest of the day. Some consolidation after a 2% decline in two days. With the thought that the NK threats could turn into some sort of black swan event, we reviewed the seven major indices (SPX/DOW/NAZ/NDX/TRAN/SOX/R2K). Since these indices usually top/bottom around the same time in bull/bear markets, we figured each ones’ wave structure should offer some clarity. Details in the weekend update. Best to your weekend!

MEDIUM TERM: uptrend

LONG TERM: uptrend

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

About tony caldaro

Investor
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28 Responses to Friday’s update

    • fionamargaret says:

      It always interests me to gain insight into a musician such as Richter.
      This Sonata by Schubert was supposedly his favourite. Why?.
      Was it the poetic phrasing, that he himself was renowned for…maybe a subliminal connection.
      Richter who preferred a backlight to his piano rather than the full lights of the stage was considered a demonic player, but maybe he was more at home in sensitivity, poetry.
      I feel Richter gets lost in the beauty of this Sonata and as a listener almost feel I am intruding on intimacies….and maybe there lies my answer. x

  1. pooch77 says:

    So LOT of talk shit hits the fan in Sept-Oct ,so big question do we rally back up but not to highs then turn down with bigger correction in Set -Oct or expend all that energy moving down now and move up in Sept?

    • JK1987 says:

      my 2c, I am thinking next Monday strong down to take out the low of all indices.
      yesterday I was thinking Aug 2015 type move (first 3 sell-off day all matched), but today’s candle / pattern invalidated the move. (that 2015 Aug down was -11% for spx, 25% for qqq in 5 days, so i was advising no long).
      you still have tna & tqqq? or have tza & tqqq?
      isn’t vix telling us something? it has done something we have not seen for the entire 2017. not an usual correction?

      • NEWBIE says:

        Jk, you are becoming one of my favorite contributors here. I think down another 10 spx points on monday followed by a 30 to 40 point rally.

        • JK1987 says:

          NEWBIE, my honor to have your acknowledgement. just some luck.
          I am thinking the same. the gap on Jul 11 needs to be filled, that’s about 10 points. then we rally maybe to fill the gap from yesterday. then down from there.
          when I said multiple times about vix 100, I do mean it. it’s all calculated, history based. cheers!

          • Anyone notice the bizarre behavior of XIV today? Anyone who bought into XIV at the close Thursday for a quick Friday morning scalp if the market scooted higher got fried. This AM the VXX fell…and the XIV fell with it X 5. Ouch.

            • JK1987 says:

              imho, possibly xiv has one more wash out down on Monday, while uvxy has one more up.
              both of them have 8 waves, need 9 waves to complete the trend.

  2. Thanks Tony and I’m looking forward to the WE update.

    As of late, there has been much discussion of VXX….the first ETN offered by Barclay’s iPath deigned to offer exposure to trading volatility. As with most structured financial products, it complex and poorly understood. Because of some experience in trading volatility, I though I would offer a brief description of VXX and highlight some of its characteristics.

    VXX, in simple terms, is a basket of VIX futures contracts. And the value of VXX is set by the market, but it’s closely tied to the current value of an index (S&P VIX Short-Term Futures) tied to a hypothetical portfolio of the two nearest to expiration VIX futures contracts. Every day the index specifies a new mix of VIX futures in the portfolio and short-term contracts are sold while longer dated VIX products are purchased, resulting in contango loss.

    Because of this, its only useful for very short term trading using options. Alternatively, you can invest in one of the four VIX products offered by the CBOE, including VIX.

    From Six Figure Investing (https://sixfigureinvesting.com/2013/03/when-a-hurricane-messes-with-a-volatility-index/)

    Unfortunately using VIX futures introduces a host of problems. The worst is horrific value decay over time. Most days both sets of VIX futures that VXX tracks drift lower relative to the VIX—dragging down VXX’s value at the average rate of 4% per month (30% per year). This drag is called roll or contango loss.

    With lethargic tracking to the VIX, erratic tracking with the S&P 500 and heavy price erosion over time, owning VXX is usually a poor investment. Unless your timing is especially good you will lose money. For a backtest of VXX starting in 2004, see this post.

    (At market close a portion of the shorter term contracts are sold, and longer term contracts purchased—the goal is to give these indexes a constant expectation of volatility (e.g., 1 month or 5 months).)

    Barclays collects a daily investor fee on VXX’s assets—on an annualized basis it adds up to 0.89% per year. With current assets at $1.15 billion this fee totals around $10 million per year. That’s certainly enough to cover Barclays’ VXX costs and be profitable. But even if it was all profit it would be a tiny 0.1% percent of Barclays’ overall net income— which was $10.5 billion in 2012.
    From a public relations standpoint VXX is a disaster. It’s frequently vilified by industry analysts and resides on multiple Worst ETF Ever lists. You’d think Barclays would terminate a headache like this or let it fade away, but they haven’t done that even though 3 reverse splits—which suggests that Barclays is making more than $10 million a year with the fund.

    From iPath

    You May Lose Some or All of Your Principal: The ETNs are exposed to any decrease in the level of the underlying index between the inception date and the applicable valuation date. Additionally, if the level of the underlying index is insufficient to offset the negative effect of the investor fee and other applicable costs, you will lose some or all of your investment at maturity or upon redemption, even if the value of such index level has increased or decreased, as the case may be. Because the ETNs are subject to an investor fee and other applicable costs, the return on the ETNs will always be lower than the total return on a direct investment in the index components. The ETNs are riskier than ordinary unsecured debt securities and have no principal protection.

  3. bfquant says:

    NOKO or not, there has been a lot of damage in my view. Look at the long term trendline breaks in Small Caps, Transports, High Yield Bonds (HYG), Preferreds (PFF). Even the S&P is just below its intermediate trendline from May. No new intermediate high in Semiconductors (SOXX). Vix index closed the week not in contango with one of the largest wedge breakouts I have ever seen in any chart.

    • allen kimble says:

      agreed 100% odds are very high the market really struggles in all of August. up to sideways in Sep(allowing the vix to retest the breakout and the bam,,,in October a spike in Volatility and then IV will be over

  4. Bud Fox says:

    Thank you, Tony. Relax, this weekend, come to a Florida, white sandy beach/
    Like Panama City, or Gulf Shores

    • allen kimble says:

      Hey bud ….no offense please…but Florida is an ugly state(flat with no mountains/cliffs) and the beaches don’t compare to California. I don’t mean to offend but Florida is a crap state all around…Ohh wait,,,,no state taxes…thats good I guess

      • lunker1 says:

        Allen just because you’re a moron doesn’t mean you have to post everything you think

      • Bud Fox says:

        Allen,,, No offense taken. For I have lived n Redlands For many years,and worked at ONT as a controller.
        But, the mountains of LA (Baldy) to SBD, are not really so great, while Baldy peak does standout, it’s only one peak. But — your right Florida is no Cali. Yet the Beach Siesta Key, is a white sand. Which I love to visit, often. Oh, did I mention, less traffic ?
        Keep that 10 Fwy cars out there. Thanks…
        Oh, there is one spectacular view in Ca. A the top of Mt. Baldy, what near 11,000 feet high……hmmm

      • JK1987 says:

        allen share with you.

        “Judge not, and you will not be judged; condemn not, and you will not be condemned; forgive, and you will be forgiven;

        “There is no fear in love, but perfect love casts out fear. For fear has to do with punishment, and whoever fears has not been perfected in love.”

        if Trump understand these, then we all be good.

        • fionamargaret says:

          Did you ever think JK that you would be writing this on a blog…Corinthians sums things up nicely too…x

  5. vipulm555 says:

    Smartz are cash….

    • hohoho598 says:

      I was wondering when you would show up, according to your trading strategy, we should be “buying the Vip”. Couldn’t resist.

      • vipulm555 says:

        Not when support is broken, we need abase it’s no longer PB

        • allen kimble says:

          Dude …what is with your enlglish….lol abase?….smartz?

          • Allen, what’s with YOUR English (talk about the pot calling the kettle black!): If you knew what “dude” meant, you wouldn’t be insulting people all the time. Or perhaps you do know…? (A “dude” is a beginner, like in “dude ranch”, where all the beginners can assemble to get a little instruction. So if you call someone a “dude”, that implies that he’s more or less stupid, and you’re the expert, get it?)

  6. Lee X says:

    Thanks Tony

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