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. mcgcapital says:

    I’m going to add my voice to the longer term bearish camp here. I’m not sure about this saeculum cycle to start with, but if I assume it broadly works I would place us as close to finishing the crisis phase with one more major crash to come before the growth phase. The post WW2 period was a time of rising living standards and narrowing inequality. Now living standards are stagnating for the many and wealth inequality is at a 100 year high. And that’s a function of low interest rates stoking asset price bubbles everywhere you look and low taxes favouring capital gains over income. Only going to get worse once Trump is done enacting his reforms. The whole system is fundamentally unbalanced, and the central banks seem to just try and kick the can with more stimulus everytime something goes wrong.

    So to me, the way I see it, the debt bubble bursts. Huge wave of corporate and personal defaults, governments either monetise their own debt or raise taxes significantly on the top 1% to pay for it. Then we start a new with more income equality. The poor spend their money rather than investing it so the imbalance of all that extra capital sloshing around look for a return would be removed and instead money would be flowing around the real economy. 3-5% GDP growth would be achievable at that point. That leads to higher yields, lower stock valuations etc. A painful readjustment for asset holders almost across the board.

    It’s so obvious to me that this is the way it goes I just can’t quite understand how euphoric some people are about this bull run. Twitter is literally going into overload with smug bulls lol. I think in our lifetime the economy keeps growing and the Dow keeps rising but until the debt situation is resolved it’s massively deflationary. Write off debt and see some redistribution of wealth and I would turn majorly bullish.

    We’re currently pushing on a string.. eventually this thing snaps and the process begins. However, the trend is still up until it does and it should be fairly obvious when it changes as volatility should pick up significantly near the top.

    The below is well worth a watch:

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    • tommyboys says:

      Hey Mc, responded to your post late Friday if you missed it – one page back. Good day all.

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      • mcgcapital says:

        Thanks Tommy. Respect your view but would expect you to disagree with me on this. I read the Barron’s article, sounds like puts were more in demand than calls (bullish). Not sure whether that was before or after the 2-3% rally we’ve just had. The points I’m making here are longer term than how people are currently positioned. The reflation viewpoint is currently winning out in the market but I see that failing at some point, just not sure when. Price will tell us if it’s weakening, no signs at all yet

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  2. NEWBIE says:

    2570 area is make it or break it for longs

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  3. NEWBIE says:

    Looks like big boys want one more wave up to 2580’s.

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  4. JK1987 says:

    Tony thanks,
    the Saeculum cycle numbers does not added up.
    should the cycle oew presented be called four-generational cycle of the Saeculum, or just oew cycle?
    or current crisis cycle is not finished yet, still has 8-13 years (oew full cycle), or 13-23 years (saeculum authors’ full cycle) to go? if true, we have a hell of crises coming up for a long long time.

    1. oew full cycle is missing 8-13 years for the oew listed 75-80 years full cycle.

    growth 17 years + protest 16 years + unraveling 18 years + crisis 16 years = 67 years

    2. oew’s full cycle of 75-80 years is much less than the saeculum authors’ 80-90 years full cycle.

    oew: “The Saeculum is a repetitive four-generational cycle lasting 75-80 years. 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).”

    Strauss and Howe: “Four turnings make up a full cycle of about 80 to 90 years,which the authors term a saeculum.”

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    • NEWBIE says:

      JK, start listening at 9 minute mark, listen from there for a few minutes. $1.5 trillion dollars (leveraged) short vix.

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    • tony caldaro says:

      JK
      OEW confirms the turnings.
      Approached Strauss and Howe in 2006, when they thought the year 2000 started the Crisis, to discuss how EW and the Saeculum align. One was in favor of the discussion, the other not, and nothing was done. Yes, in 2006 they both thought 2000 started the Crisis with the dotcom bust. Strauss died in 2007, and Howe changed the Crisis to 2008 later.
      Central bank intervention has probably shortened the cycles. The FED began in 1913.
      Studied the Saeculum over 20 years ago, and went back to the first dynasty in Egypt. 5000 years ago. Worked then, works now. Cycles vary. Some were over 100 years, others much shorter.

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      • JK1987 says:

        Tony,
        “Cycles vary. Some were over 100 years, others much shorter.”
        but don’t you think oew currently listed 67 years for the full cycle is too short for the saeculum full cycle?
        since you went back to the first dynasty in Egypt. 5000 years ago.
        can you list three cycles that is as short as 67 years cycle?

        cutting the cycle so much short is like cutting a person’s life span short.
        reduced from 90 years to 67 years, a 23 years reduction for a person’s life is too much, unless accident or major disaster, and that’s not normal.
        on the contary, i believe FED is prolong the coming Crisis cycle (i see we are not into the Crisis cycle yet). FED and worldwide Central banks created so much debts that never seen or heard in history, a huge price in human history will be paid for generations to come.

        “A saeculum is a length of time roughly equal to the potential lifetime of a person or the equivalent of the complete renewal of a human population. ”
        “A saeculum is not normally used for a fixed amount of time, in common usage it stands for about 90 years. It can be divided into four “seasons” of approximately 22 years each; these seasons represent youth, rising adulthood, midlife, and old age.”

        “Strauss and Howe thought year 2000 started the Crisis, and Howe changed the Crisis to 2008 later.” so there is a disagreement between them.
        imho, Strauss and Howe could have made huge mistakes as when the Crisis started!
        how?
        for example, we all agree that 1929 was the start of the previous Crisis cycle.
        but look, there was The Depression of 1920–21, and DJI plunged 47%.
        we don’t put The Depression of 1920–21 into the Crisis cycle.
        on the contrary, those years are part of the strongest DJI market performance of unraveling cycle (prior to Crisis cycle).
        then how can we have 2000 or 2008 as Crisis cycle? i see Strauss and Howe made mistakes as having either 2000 (DJI -38%), or 2008 (DJI -55%) as Crisis cycle.
        A crisis cycle should be like 1929 DJI crashed 90%. and my personal research is seeing the coming crash to match or greater than 90% DJI crashes.

        NEWBIE, nice found. last couple of days, i’ve consolidated all my positions to two, one of them is vix exposure, because i see what’s coming. i still don’t like GOLD, because GOLD bubble bursting is not done (need to decline at least 70%)
        Jason Burack sum it up on everything bubble.
        i believe, and posted many time, coming will be the biggest Debt Deflation, and Great Deflation worldwide, and could be worst than 1929, because we have much much more debts than 1929. believe or not, prior to 1929 crashes, US GDP is at firm 4%. where are we now?

        post #2
        cheers!

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        • tony caldaro says:

          US Crisis cycles start with a Major trigger event.
          Revolutionary War … Boston Tea Party
          Civil War … John Brown’s Raid
          WW II … stock market crash and depression
          War on Terror … 911, 911, 911

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          • H D says:

            Interesting debate. I’m still on the fence but have decided that it’s insignificant to equities this time. Crisis vs growth. If you remove equities and US politics it’s an even more interesting debate- globally. Regardless, crisis cycle saw an equities rally of over 50%. Part of which has been the last 8 year bull market, possibly overlapping the growth cycle, that has nearly equaled the entire equities rally of the previous growth cycle. History doesn’t repeat itself but often rhymes.
            This cycle is unique is my conclusion.

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          • H D says:

            FWIW, If the Crisis low mirrors the previous crisis low to WIII high in the growth cycle my math saws DJI 165,000 approximately. And then the market doubles again in the unraveling. Seems legit.

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          • H D says:

            This is not taking into account Trump’s nomination of Ron Paul as FED chief though.

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          • vivelaamo says:

            Time to hand out these I think.

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          • JK1987 says:

            none of Saeculum has such a short cycle of 67 years, that short cycle of 67 years violated the theory of Saeculum, simply not possble

            Reformation Saeculum (107) 1497 – 1594
            New World Saeculum (110) 1594 – 1704
            Revolutionary Saeculum (90) 1704 – 1794
            Civil War Saeculum (71) 1794 – 1865
            Great Power Saeculum (81) 1865 – 1946
            Millennial Saeculum (age 74) 1946 – present: 4th Turning: Crisis: Great Recession/War on Terror/Sustainability 2008 – present

            with averaging 20-22 for the 4th Turning Crisis, the current Crisis cycle will last into 2028-2030

            my personal researches believe and see, 100% certainty, spx will be below 1800 a lot in a not too distant future, hence there will be no doubt that we are into the Crisis cycle. and i see Crisis cycle starts 2017, not 2008 or 2000. that mans Crisis into 2037-2039

            market, economy, deflation (not inflation) will speak for the truth shortly as what should be correct.

            post #3, done for posting

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  5. asaraniti says:

    Don’t like trading this tape. NQ dove straight down to it’s 50% LONG to the tick and is defending …so far. YM (DOW) doesn’t want to go down in sympathy with NQ and /ES and /ES filled the GAP and is dancing around it. Looks like it also wants to test it’s 50% LONG at 2566.00 but is getting support via YM and NQ.. If/ES trades below it’s 61.8% LONG @2563.34 things get interesting in terms of SPX completing micro 3

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  6. Good mornig traders. /ES trading in no mans land. The high was a 6 ticks above the profit target…right on the threshold between the 2 analyses I posted last night. After the high last night, /ES had a small pullback and now retesting last night’s high, that’s BULLISH. There is a gap that usually fills 70% of the time, that fights /ES from rallying to it’s profit target. Need more data to make the call but the higher probability favors a Gap fill and a rally to the profit target at /ES2582.56, not necessarily in that order..

    Updated chart, siince last nights posts…

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  7. fotis2 says:

    Kimble on GOLD

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  8. learnedmylesson25 says:


    Elroy’s gdx forecast

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    • allen kimble says:

      No way…The Yen is about to collapse\…..No bounce for the metals complex until New Year. Until then, Metals are in trouble here. Elroy needs to look at the YEN

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      • $USD test it’s 50% LONG @113.61 against the YEN in the overnight session….That’s bullish for the $USD and BEARISH for GOLD. The profit target of the $USD rally is 114.31
        which should be additional downside activity for GOLD.

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        • allen kimble says:

          Strong resistance right around the $114 range like you have suggested taking profits. But I think this time it breaks through within the next few weeks and then $119 will be seen on fresh breakout buying and short covering. This should be a very swift up move coming soon.

          Sadly for the metals it will be the typical sell-off into the the Christmas season. When will they ever break away from the Yen? That is the question.

          Full disclosure-I took a small loss in Gold that I purchased from last week. The Yen was the determining factor here. On top of all that, the Fed raising rates will be positive for the dollar. The obvious inverse h and s on the dollar. Seasonality etc…..’

          Cheers

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    • fionamargaret says:

      Bought NUGT, UWT….

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  9. Chart #2 assumes that /ES rallies over the profit target by 4-6 ticks. I will relabel the high anchor to low anchor, the high anchor is the overnight high and then, I would expect a pullback into the 50% EXTENSION LONG. This is potentially more bullish than analysis #1, and thus NANO 5 has further room to rally, before it completes. I only dew the 50% LONGS, if the 61.8% longs break then I expect /ES to test the original 50% micro LONG at /ES 2563.25

    Chart…https://gyazo.com/636abf763ff9761235271cdf70afd4db

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