Weekend update


This historic, volatile, week started at SPX 2762. After a gap down opening on Monday the market rallied back to unchanged in the first half-hour. Then the market resumed last week’s slide hitting SPX 2593 right after the gap down open on Tuesday. A rally back to SPX 2728 by Wednesday preceded more selling on Thursday/Friday when the SPX hit 2533 in early afternoon. Then the market rallied 106 SPX points (4%) in the next two hours before ending the week at 2620. For the week the SPX/DOW lost 5.2%, and the NDX/NAZ lost 5.1%. Economic reports were sparse and mixed. On the downtick: consumer credit, plus the trade deficit rose. On the uptick: ISM services, plus jobless claims declined. Next week’s reports will be highlighted by retail sales, the NY/Philly FED, and industrial production.

LONG TERM: uptrend

While many are talking about a new bear market underway, we just do not see that. The market is certainly acting like a bear market: declining prices with increasing volatility. Yet, the long term OEW wave structure does not support that scenario. It does appear some fund managers were leveraged by selling VIX – buying stocks. It has been a sound position, for the past year or so, with the VIX drifting lower and stocks rising. That is until a week ago Friday, when the market dropped below SPX 2800.

That drop signaled the largest market drop since 2016. After that those spreads started to unwind and the market became extremely volatile with a negative bias. Just look at the recent volatility. Daily range for the two weeks leading into the SPX 2873 all time high: 39, 29, 13, 12, 15, 12, 28, 18 and 26. Daily range for the two weeks since: 19, 19, 26, 23, 49, 125, 108, 46, 105 and 106.

We continue to count seven waves up in the SPX/DOW/NDX/NAZ from the 2016 bear market low. The seven waves up is now followed by an eight wave which is down. This suggests at least one more wave up, to new highs, to complete a Fibonacci nine wave sequence. The count remains unchanged. Int. i and ii ended in the spring of 2016. Minor waves 1 and 2 ended in the fall of 2016, Minor waves 3 and 4 in the spring of 2017, and Minor wave 5 and Int. iii ended in January. Intermediate wave iv is now underway.

MEDIUM TERM: downtrend

Last weekend we suspected, with the large Friday drop, an Int. iv downtrend was underway. That didn’t take long to get confirmed, as the SPX/DOW confirmed first. Then late in the week the NDX/NAZ confirmed. What we didn’t anticipate was the extent of the decline. We were expecting something like 5%, and the SPX has dropped nearly 12%. The recent decline is the largest since mid-2015. With Int. iv underway it is time to start looking for a low. As we are expecting an Int. v to new highs to follow.

Thus far the SPX has dropped 340 points, 11.8%, from the all-time high of 2873. This decline represents a near perfect 38.2% retracement of the entire Int. iii (1992-2873). It has also taken the shape of a simple zigzag: 2593-2728-2533. This alternates with the three trend irregular Int. ii correction in early 2016. At Friday’s SPX 2533 low the SPX displayed: a hourly +div, a daily +div and an oversold weekly RSI. Typically a good setup for a downtrend low. The DOW also had a hourly +div. And joined the NDX/NAZ with daily +div’s and an oversold weekly RSI’s. All four major indices are sitting on downtrend low setups. Medium term support is at 2594 and 2575, with resistance at 2632 and 2656.


The selloff for Int. iv is quite clear on the hourly charts. There was a decline to SPX 2593 for wave ‘a’, when the SPX/DOW confirmed downtrends, and the low was setup with a +div. A near 50% retracement rally to SPX 2728 for wave ‘b’. Then a decline to Friday’s SPX 2533 low for wave ‘c’, during which the NDX/NAZ confirmed downtrends. Now that low is displaying a plethora of positive divergences. Best to your trading!


Asian markets were all lower and lost 6.5%.

European markets were all lower as well and lost 4.1%.

The DJ World index lost 5.7%, and the NYSE lost 5.2%.


Bonds remain in a downtrend but gained 0.3%.

Crude is in a downtrend and lost 9.6%.

Gold appears to be in a downtrend and lost 1.6%.

The USD is still in a downtrend but gained 1.5%.


Monday: budget deficit at 2pm. Wednesday: the CPI, retail sales, and business inventories. Thursday: jobless claims, NY/Philly FED, industrial production, and the NAHB. Friday: housing starts, building permits, export/import prices, consumer sentiment and options expiration.

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

About tony caldaro

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405 Responses to Weekend update

  1. merovix says:

    My short term view on ES.
    ES has just broken the trend-line from the high of February 2.
    Daily and hourly stochastic are giving positive signals.
    As far as 2656 (Tony’s pivot) holds, I am positive on ES, especially if it closes above yesterday max 2671,5.
    And, ideally, beyond Gann level (quarterly: Jan – March): 2674, just above.
    At 2660.25 I closed (bought back) my last mini ES, notwithstanding I remain with ITM puts sold on several stocks (they were part of strangles sold before the start of the correction….),
    Best wishes to Tony for his health and good luck to all.


  2. mcgcapital says:

    Third day in a row SPX has made a higher low. Still looks bullish up to the 50 dma at 2710 then see, as long as nothing ridiculous happens with the inflation number tomorrow. Usually when we get these big sell offs it means heightened vol for a number of weeks. But we’ve retested the low already both Monday/Tuesday and Friday.. so that means another go at it probably won’t come for a number of weeks. If you’re swing trade bearish, let the market exhaust itself to the upside before selling.

    Lots of points on offer trading the FTSE 7170-7200 range, retested both sides at least a dozen times


    • Thats like playing gold and hitting the ball right down the fairway every time, then a iron to the green and 2 putt, what fun is that. I like to see the traps on the left the water on the right get my full moneys worth on the course. shooting 72 when i can shot 110 i feel i got my moneys worth. LOL
      Just kidding good advise. I also can see 2711 as a high as well. we may be in c of B.
      i will close my short if we close at the highs. good luck


  3. alexh110 says:

    Starting to think we may get a failed Int iv flat tomorrow, bottoming at c.2538.
    That could catch a lot of people out.
    It’s based on the inverse head & shoulders that seems to be forming. The sharp downward incline of the neckline suggests the right shoulder should be much lower than the left; but stop just short of the head.


  4. hohoho598 says:

    Love this volatility, finally some trading both ways.


  5. I haven’t posted here in a while.
    And certainly not trying to step on anybody’s toes.
    I just can’t help but notice that the media people are constantly ranting about “people shorting the vix” they drove the market down.
    Anecdotal, at best. Or more likely, the people shorting the $VIX (or shorting Puts) were just the easy road kill on the first leg down.

    The bond market has been flashing all kinds of ugly setups for quite some time.
    I am aware that many folks here think poorly of the old school Edwards and Magee type formations. I follow them, maybe they are just simple.

    This interpretation shows the $TNX in an upside reversal, crossed on Jan 29, 2018.
    The level is 2.70% on the ten year, that’s where it crossed.

    Here’s that same 10 year stacked up against the $SPX.
    On the day following Jan 29 (i.e. Jan 30), the SPX started it’s downtrend.

    Just something to think about.
    And I do think, as with many others here, there’s plenty of downside left.

    GL to all, and best of health to Tony.


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