Bull market headwinds

With the market only 2.6% off the all-time highs various indices, indicators, and the OEW count itself is suggesting the bull market is losing upside momentum. The most troubling of the indices is the Transports.

With the recent downtrend confirmation in the Transports we can now count a completed nine waves up from the 2016 low. This is simply five waves up with a subdividing third wave. Over the past 50-years whenever the Transports have topped a significant correction in the SPX has eventually followed. One was a minor 10% (1994), two others were a bit larger 15% (1984 and 2016), but most have eventually led to bear markets in the SPX. Typically, the lead time between a Transport top and a SPX top is several months. In 2015 the lead time was six months.

The next troubling index is the NYSE. It recently confirmed a downtrend, suggesting it has completed seven waves up from the 2016 low, with also a subdividing third wave. This implies, after this downtrend concludes it too will complete nine waves up during its next uptrend to new highs. Notice, both of these counts support the popular long-term Primary V scenario.

The DOW is currently in a similar position for this bull market, but it has yet to confirm a medium-term downtrend. When it does it will have completed seven waves up from the 2016 low, like the NYSE, and will also require one more uptrend to new highs to complete the nine-wave pattern.

Elsewhere the DJ World index looks similar to the DOW, and the DAX looks similar to the NYSE.

On the technical side. The SPX made a momentum peak in Q1 2017 at 2400, and upside momentum has been waning during the last 90-point rise. You can see the peak in the weekly RSI and MACD. Declining momentum can trigger a large selloff like 2011, or wane for months and months on end. It is a warning. When added to near completed five wave patterns it is its most effective warning, i.e. 2011.

Normally when these wave patterns begin to complete there are some fundamental factors at work. In 2007 the CDO’s were unwinding. In 2011 the European debt crisis. In 2015 the end of QE, and the first rate increase. In 2017, the stalled GOP/Trump economic agenda? When one adds the fact that the economy has not experienced a recession since 2009, one has to think one is long overdue. Especially with the FED planning on gradually reducing their balance sheet soon. The gradual balance sheet increase gave us the 2009-2015 bull market. Will the unwinding of that balance sheet give us a recession and a bear market? The market has risen 38% since the 2016 low, but it looks like it is time to get somewhat cautious in the weeks and months ahead. Best to your investing!


About tony caldaro

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178 Responses to Bull market headwinds

  1. travis01 says:

    Tend to like cont upswing to next pivot (2444ish) before drop. Short uvxy with 31 target

  2. vipulm555 says:

    Going long ES with 10 point stop after close

  3. vivelaamo says:

    Perfect close. Tomorrow we rally.

  4. Page says:

    Trump and first lady watching the eclipse right now, I bet he’s saying “Fake News”.

    • JK1987 says:

      0821 2017 Trump watching the eclipse

      he is quiet recently, observing if switching to the other side of the episode., just like the market has two sides of episode. maybe that will be a telling of the market?

    • aahmichael says:

      Does Trump realize that the scientists who have issued such dire warnings about global warming are the exact same scientists who told everyone exactly when and where the eclipse would occur?

      • JK1987 says:

        of the bipolar, do you know that during a manic episode, the person is very very brilliant, and think he can do anything, and compared himself to God. that’s the problem of all.
        but when switching to a depression episode, it’s the total opposite.
        look at his expression, gesture on the photo (it’s not high as usual), and recent activities. it starts to show a sign.

        market also is bipolar. when trending toward the other side, you don’t want to catch the falling knife, everything will not be right. you want to buy when the trend is up.

      • Page says:

        The ONLY way for Trump to believe Global warming is to Shutdown the air-condition in WH. 😀

      • EL MATADOR says:

        So are you saying that because they are correct about the eclipse that they absolute must be correct about their global warming hypothesis?…..and there is no chance that their hypothesis could be wrong about global warming?….global warming is not linear but it must be because the dust bowl period was create by humans, right got it.

  5. Bud Fox says:

    Yes one of my favorite SP charts. Take a good look, if you have not seen it before…

  6. gary61b says:

    gary61b says:
    August 21, 2017 at 11:14 am
    ES, I would like to see an abc push up from 2416 on the chart ending at or near 2430.5… Then one more down to fall on or near lower lows trend, with setups showing a green for lift off.
    ES Possible (a) to 2429. with (b) down to 2418.5, then up for (c) to 2430.5-31.5..that would finish the (d) leg of this ending diag.

  7. Richard Glackin says:

    How fitting for SPX to go from ‘0’ to positive at the turn 🙂

  8. Page says:

    If market crashes right now, nobody will notice it, everybody is out watching solar eclipse. I think the market’s fast moving action will begin tomorrow. So stop staring at charts and go out and watch eclipse like others.

  9. fotis2 says:

    This week did come with a headline warning from our generous host…. Bullmarket Headwinds…Thanks Mr Caldaro

  10. bfquant says:

    Pull up a chart of $RUO or the etf IWO (Russell 2000 Growth). One could make the argument that the move since 2016 is either corrective or terminal. Way too much overlap for probabilities to suggest an impulse.

  11. phil1247 says:



    in extension shorts again
    bottom should fall out when 47.38 gives way

    see ya !

  12. mcgcapital says:

    Just a bounce so far, this isn’t deep enough given the size of the overall topping pattern and weak breadth. Can’t seriously see it stopping here then printing 2500+. At least a test of 2400 to come and probably lower. Always looks better if the market reverses strongly off the low and this just looks a bit choppy. The right side of the market is down at the moment and that’s not going to change unless we take out 2450s here

    • vivelaamo says:

      Agree. Would have preferred to see some serious pain for bulls and then a sharp reversal. Been pretty flat today. Maybe sometime this week.

  13. JK1987 says:

    talk about NYMO
    very bad breadth, even worst than major 2 of 2011
    0821 2017 NYMO spx vs 2011
    where are we? look at the blue arrows.

    btw, Gann is dead. here JK is alive, lol 🙂

    • JK1987 says:

      if Gann would still alive, he would be pounding the table, bearish here.
      and as the way I know Gann’s method and cycle, it has already topped on Aug 8, 2017, everyone can tell now!
      Gann cycle has precisely topped on Aug 8, no question about it.
      dead with no proof, and incorrectly quoted with his name is not good.

        • JK1987 says:

          it can be easily solved.
          let’s compare note at end of this week to see which is the real Gann cycle.
          I, pounding the table, say, Aug 8, 2017 is the spx top, and spx will be lower than today’s low of 2417 at end of this week.
          and I have real money investing in this scenario. don’t know about you.

          for me, just don’t like to see Gann’s reputation into eclipse.

      • Jimmy Porter says:

        so you think you know about gann. from all your other amazing posts I would love for you to tell me the other part of the half truths that he told in his books. I’m sure since you have all the smart answers that you know his book only told half of the whole story. Otherwise, he wouldn’t have an edge on the few people believed him in his time even though he made 1mil in a month.

        Here’s a better question. What number in sp will the market need to close under to trigger a larger correction based on the knowledge you learned from gann?

    • vipulm555 says:

      Bears will remain bear

  14. scottycj1 says:

    Gann Timing point is here…..the current retrace was .886. If we move up from here
    that may be all the downside.

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