Weekend update

REVIEW

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.

SHORT TERM

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!

FOREIGN MARKETS

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%.

COMMODITIES

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%.

NEXT WEEK

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

Investor
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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.

  6. phil1247 says:

    lunker
    es 2666 is next ……………in extension longs

  7. time to roll over for b of B

  8. blubrd67 says:

    Fiona, Phil, CL like Natural gas has wild swings. I expect it will go to 62-63, before it heads down to 53-55… before reaches 70+ later this year.

  9. vivelaamo says:

    Seems like the majority on the blog are expecting downside. I horribly underestimated the size of the drop but I’m staying long and still think the bottom is in. New all time highs by the end of the month are in March at the latest.

    Look forward to Tony’s update.

  10. EL MATADOR says:

    IMO, we have a fractal to May-June 2010. we are in the chop chop consolidation zone that will break to the downside….Anticipating an approximately two month correction that should match the above mention fractal in Percentage terms (not points).

    GL and peace out and wishing Tony a healthy recovery.

  11. mjtplayer says:

    Gold has been toying with the $1,330 resistance area all day, we’ll see if it can push through or fail and reverse

  12. Vishal says:

    SPX – bounce looks similar

  13. phil1247 says:

    Lunker
    short traded at 53………..i did not take it…………
    getting on a plane tomorrow …..want to be out

  14. mjtplayer says:

    The rally off the lows in oil has been very weak, couldn’t recapture and hold $60 and now back below $59. Sell oil on rallies.

    https://www.tradingview.com/x/07Bk2hdu/

    • fionamargaret says:

      When Phil said oil was going higher, I suggested “by way of 50?”
      Oil is in a bias downward…to 55 or 53…

      • fionamargaret says:

        DWT

      • phil1247 says:

        review my discussions with Lee fiona
        after taking profits near 65 i havent traded oil
        discussed with Lee that below 66.23 …….
        …….. 10 dollar target would be back on the table
        you are entitled to your own opinion … but not your own facts
        you need to pay attention fiona

        also now its TLT to 89 ???? ..
        …what happened to all your TMF???
        looks like you are going to be way late
        and wrong again

        • fionamargaret says:

          Phil that was a sequence of 3 years ago…sequence numbers give direction and the price is determined by momentum as of the day suggested.

          • phil1247 says:

            maybe you need a new sequence
            your bond sequence doesnt seem to work very well

          • fionamargaret says:

            The bond vigilantes are taking bond yields higher…I think under the guise of the deficits.
            TBT and TLT will each have their days, but the bias is on TBT…and please no racial slurs.
            You can read the market and still be polite….almost Valentine’s Day x

            • phil1247 says:

              bond vigilantes??????
              you are hilarious fiona.
              its just more sellers than buyers ……….plain and simple
              and purely technical……..very technical…good trading
              racial slurs ??? when ?

            • and you are both my valentine Fiona and Phil. You both add so much to this forum and Friends Can Disagree. Never met a good trader without a good strong ego and that implies a certain attitude oftimes. Be my valentine[s] 🙂

          • fionamargaret says:

            I thought you were on about TLT to 165 again..the trade of 3 years ago..
            As I said TBT has a bias over TLT and gave the numbers for each (scroll back).
            Be polite to people…I have invited them to the blog…
            Stop with the ad hominem attacks and just let the good teacher shine….x

      • fionamargaret says:

  15. phil1247 says:

    Scotty……………

    we had 11 days in a row of sunny and 80 degrees until yesterday afternoon
    there was a sunset rain shower yesterday
    while we were at the beach taking pictures……….
    i want a refund !………………… ( just kidding )
    wednesday its back to siberia

    • scottycj1 says:

      Adios…….i’m going wild boar hunting today…….have a sfe trip back
      Vaya Con Dios

      • mjtplayer says:

        Mmmm, wild boar is yummy. An Italian restaurant down the street makes a pasta dish with wild boar, it’s good

        • scottycj1 says:

          Florida and Texas and a few other states are over run with Ferrel pigs…..they cause millions of damage to crops yearly…….using infra red tech we hunt them at night.
          Looking forward to some pork loins.

          • phil1247 says:

            we had new construction in a parcel near us that drove them to our preserve
            when we lived in hobe sound
            my lab was trying to get at one thru the fence .. her back hairs stood straight
            up ……….. she looked like a porcupine instead of a dog !

  16. floyd drummer says:

    Phil or Asa,
    ….or anyone else who can answer;

    how do you determine the location of the anchor of an extension?
    why is 2609 ES the location of the anchor of the current extension, …per DH?

    thx

    • phil1247 says:

      2530 to 2609 went thru target
      extensions are from 09 to highs

    • On vacation, don’t have charting software with me on this laptop. Short answer, the anchor is usually a technical high or low that algorithms have attached them to where a series of 50% long or shorts trade to the tick and the continuation of the original move continues. At times, the anchors draws are an art and a science….for example if a 61.8% micro long or short is violated but there is another set up just below or above from a “different technical high or low” that could be the one that trades. An example of this could be a news driven event, if there is a sudden rally or correction…algorithms will simply ignore that activity as noise and the normal 50% long or short will trade.

  17. floyd drummer says:

    thanks tony, ….the forum has been great, …hope you’re doing well!

  18. mcgcapital says:

    Still a buy to me notwithstanding some weakness ahead of tomorrow’s inflation data. There’s a lot of pessimism around it so a print in line with expectations probably means bonds and stocks rally, below they rally, above they sell off and maybe subsequently rally anyway. I’m not overly bullish in that I wouldn’t feel confident looking for new highs… but we’ve made a low, rallied, retested it and rallied hard again with decent breadth. Even if we’re going to go much much lower this year it takes time… 2011 and 2015 had much bigger countertrend rallies, if that plays out then expect it to go up over the rest of the week then see how the land lies

  19. fionamargaret says:

    Goldman tonight says 4 rate tightenings.
    I wonder if the short covering (bounce) from Friday afternoon is finished, and we resume the downtrend.
    If so 2532 is the first level, then 2465.75, and then 2340.
    DIA I have going to 217
    SPY to 237
    QQQ to 141
    If you have a favourite stock and want to know its numbers, write me a note.
    (Scroll back on Weekend Update to get my initial post to tell you where different stocks are going)

    Check your own charts, use stops….and let’s see how we do x

    • alexh110 says:

      I wasn’t very impressed with yesterday’s rally: any attempt to break out was immediately sold off. The whole move off the Friday low now looks very choppy and corrective to me.
      Am starting to think Int iv is ongoing, and am going overweight short today, looking for a low on Wednesday.

  20. Amit Tewary says:

    Namaste Tony,
    Namaste Everyone.
    Hope TC is doing well in health..One question..looking at the recent decline on SPX,what are the odds that Major wave 2 completed at 2500 lows..and this is a new bull underway..Just dont see a decline coming in the next few months..maybe pullbacks but no major corrections..

    Thanks for being there..

  21. fotis2 says:

    Triple Bottom EUR/USD small timeframes looking for 123.4

  22. stan911 says:

    Daily fx. Com has the number of traders net long on the Dow at the lowest since jan 28

  23. cj32 says:

    If you trade ES may check it out, he had posted them in real time.@coolbiz1

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