Weekend update

REVIEW

The week started off at SPX 2553. The market opened higher on Monday, nudged higher Tuesday, then hit a new high at SPX 2564 on Wednesday. On Thursday the market gapped down at the open to SPX 2548, but quickly recovered to close positive on the day. Then on Friday the market gapped up at the open and ended the week right at the OEW 2575 pivot. For the week the SPX/DOW gained 1.45%, and the NDX/NAZ gained 0.35%. Economic reports were mostly positive. On the downtick: housing starts, building permits, and the leading indicators. On the uptick: the NY/Philly FED, export/import prices, industrial production, capacity utilization, the NAHB, existing homes sales, plus weekly jobless claims hit a multi-decade low. Next week: the first report on Q3 GDP (est. +2.6%), durable goods, and more housing reports. Best to your week!

LONG TERM: uptrend

Saeculum, Secular and Cyclical. In past decades the latter two terms were used quite frequently in the financial markets. Nowadays, however, they seem all but forgotten. This week the market celebrated the 30-year anniversary of the 1987 stock market crash. When one looks around at the people involved in the markets these days, very few were even adults when that event occurred. Not surprising then, those terms, along with many others, have been forgotten.

The Saeculum is a repetitive four-generational cycle lasting 75-80 years. It unfolds in four turnings, phases, or as we term it in the financial markets, Secular cycles. A term derived from Saeculum. Each of the four Secular cycles last about 15-20 years, and unfold in a repetitive sequence. The Secular cycle sequence is termed: growth, protest, unraveling and crisis. The best times to own equities is during a growth or unraveling Secular cycle. The worse time to own equities, but the best to own commodities, is during a protest or crisis Secular cycle.

Recent historical examples. Secular crisis cycles (1929-1949 and 2000-2016). Secular protest cycle (1966-1982). Secular unraveling cycle (1982-2000). Secular growth cycles (1949-1966 and 2016-xxxx). This is where we believe the market is today. In the early stages of a Secular growth cycle that will last into the early 2030’s. Certainly there will be cyclical bull/bear markets along the way. Just as there are cyclical bull/bear markets within every Secular cycle. But the big gains in equities occur during the Secular bullish growth and unraveling cycles. Check the chart.

In OEW terms Secular bull cycles occur during Primary wave III. Primary waves I and II occur from mid-point to end of a Secular bear cycle. And Primary waves IV and V occur from the beginning to mid-point of the next Secular bear cycle. Primary wave III’s create the entire Secular bull cycle. This is how social cycles combine with economic cycles in quantifiable terms.

This Secular bull market, and Primary III, began at the Primary II low in February 2016 at SPX 1810. The current cyclical bull market is being labeled as Major wave 1 of Primary III. Major wave 1 should divide into five Intermediate waves. Intermediate waves i and ii completed in the spring of 2016. Intermediate wave iii then started to subdivide into five Minor waves. Minor waves 1 and 2 completed in the fall of 2016, and Minor waves 3 and 4 completed in the spring of 2017. Minor wave 5, of Int. iii, had been underway since the Minor 4 low in April.

MEDIUM TERM: uptrend

The current Minor 5 uptrend began in April at SPX 2329. It is by far the longest uptrend in this bull market, and the most complex. As an impulse uptrend it is dividing into five waves: Minute waves i thru v. Minute waves i and ii completed in June/July at SPX 2454 and 2408 respectively. Minute iii has been underway since then.

Minute i divided into five Micro waves 1 thru 5 (orange). Minute iii is naturally doing the same exact thing. Micro 1 of Minute iii topped at SPX 2491, and Micro 2 bottomed at SPX 2417 – both in August. Micro 3, of Minute iii, has been underway since then.

For the past two months we have been tracking the smaller waves that create Micro 3. This week, after many weeks of patience, Micro 3 looks like it could have competed, or be nearly completed, as it has now risen five waves from that SPX 2417 Micro 2 low. Micro 3 has also hit out OEW 2575 pivot target. And, there are negative RSI/MACD divergences on the daily chart. Let’s see what next week brings. Medium term support is at the 2525 and 2479 pivots, with resistance at the 2575 and 2594 pivots.

SHORT TERM

We tracked the waves for Micro 3 with the following completed, or nearly completed, pattern: 1) 2455, 2) 2428, 3) 2480-2447-2509-2488-2564, 4) 2548, and 5) 2575? A very nice 6% rally for a wave of such a small degree. But as noted above, negative divergences are beginning to setup on the daily charts. Similar to recent Micro wave highs. A Micro 4 pullback from current levels would not be a surprise.

When we compare Minute iii to Minute i. We find similar steep declines for Micro 2, but a shallow decline for Micro 4 during Minute i. We would therefore expect the upcoming Micro 4 to be also shallow, i.e. 20-30 points. Then Micro 5 should reach at least the OEW 2594 pivot before it concludes. Let’s see how this unfolds. Short term support is at SPX 2548 and the 2525 pivot, with resistance at the 2575 and 2594 pivots. Short term momentum ended the week quite overbought. Best to your trading!

FOREIGN MARKETS

Asian markets were mostly higher and gained 0.6%.

European markets were mixed and lost 0.2%.

The DJ World index gained 0.2%, while the NYSE gained 0.6%.

COMMODITIES

Bonds continue to downtrend and lost 0.8%.

Crude continues to uptrend and gained 0.8%.

Gold remains in a downtrend and lost 1.9%.

The USD remains in an uptrend and gained 0.2%.

NEXT WEEK

Friday night: a speech from FED chair Yellen: https://www.federalreserve.gov/newsevents/speech/yellen20171020a.htm. Wednesday: durable goods orders, and new home sales. Thursday: weekly jobless claims and pending home sales. Friday: Q3 GDP (est. 2.6%) and consumer sentiment. Best to your weekend and week!

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

About tony caldaro

Investor
This entry was posted in special report, weekend update and tagged , , , . Bookmark the permalink.

157 Responses to Weekend update

  1. Don Jenver says:

    Are corporate bonds also in a bear market?

  2. vivelaamo says:

    Market giving everyone a chance to buy a dip. Grasp it with both hands! Evening all.

  3. asaraniti says:

    Next 25 minutes could be the tell. Just 2 ticks away from breaking a 61.8% LONG at 2563.34. A break opens the door to testing /ES 2554.75. That would be over a 20 point pullback from the overnight session…confirming for me, that SPX is trading in MICRO 4 of MINUTE iii (assuming Tony C’s count is correct).

  4. Don Jenver says:

    What’s the relationship between utilities and treasuries?

  5. phil1247 says:

    Fotis… re EURO short pending

    BRICK wall was never really threatened on EURO thursday

    nice series down going now
    looking for any EURO spike up to add more EUO
    1.1767 must not be surpassed or full retrace squeeze possible

  6. Mary773 says:

    Closed out a long position in ES today. Thank you very much, Tony. As per your suggestion, I am showing my appreciation for your help by making a contribution to my favorite charity, St. Jude Children’s Research Hospital. Your generosity in sharing your extraordinary knowledge is much appreciated.

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