Thursday update

SHORT TERM: gap up opening volatility continues, DOW +295

Overnight the Asian markets lost 1.5%. Europe opened lower but gained 0.2%. US index futures were higher overnight. At 8:30 weekly jobless claims were reported lower, and personal income/spending higher. The market opened at SPX 2624, then pulled back to 2610 by 10am. The SPX had closed at 2605 yesterday. At 9:45 the Chicago PMI was reported lower, and at 10am consumer sentiment was reported lower. The market then rallied to SPX 2641 by 11am. Then after a pullback to 2627 by noon, the market rallied to 2659 just past 3pm. Then to end the week, the expected afternoon pullback dropped the market to SPX 2642 where it closed.

For the day the SPX/DOW gained 1.35%, and the NDX/NAZ gained 1.75%. Bonds added 5 ticks, Crude rose 55 cents, Gold was flat, and the USD was flat. Medium term support rises to the 2632 and 2594 pivots, with resistance at the 2656 and 2731 pivots. Tomorrow is a national holiday.

Volatility continued this week. Every rally sold, every selloff bought. In fact, after hitting a high for the day just past 3pm (+54), the market was still being sold in the futures market after the close. For weeks the buying and selling has almost looked programmed. Not much to add on the short term count. Lots of choppiness this week with a market not quite ready to go anywhere other than sideways. Best to your extended weekend!

MEDIUM TERM: downtrend

LONG TERM: uptrend

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

About tony caldaro

Investor
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115 Responses to Thursday update

  1. Lots of talk these days about Yield Curve, inverted Curve,
    (the interest rate difference between 10 year and 2 year Treasury).
    Right now at .47 basis points (BP). Seems a lot of assumptions that it’s going straight down, negative very soon.
    But it didn’t do that in the 1990s. Took 4 years to go from 47 BP to negative,
    From 1995 to 2000 SPX went up (quite a bit), while the yield curve meandered below 75 BPs.
    On the chart below, that where the green shading eventually falls into the red shading.
    Stock prices, left hand Y axis.
    Yield Curve, right hand Y axis.
    That’s a long time to wait for a short to work out.

    I went long the SPX on this past Friday.
    Too many Positive Divergences to stay negative.
    Best to Tony and his health.
    GLTA

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    • tommyboys says:

      Agree Tom and been preaching the very same. Dunno why all the hysteria over a narrowing spread based on history.

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    • mjtplayer says:

      First of all, comparisons to historical instances of yield curve inversion are not in-line. This is the only instance in US history where we’re this far into a recovery yet the central banks are holding rates down below where they would be in recessionary times. Typically, by this stage of a recovery, short-term rates would be at least 5%, not 1.5% – so yield curve inversion is almost impossible.

      The justification for lower rates comes with lower (manipulated) inflation data. It’s in any governments interest to rig inflation data lower, it saves money on a variety of COLA programs and helps justify low short-term interest rates so to help fund their debts. The governments own data is currently showing 2.2% headline CPI, while Shadowstats shows headline CPI at 5.8% based upon how the government used to calculate inflation in 1990. The government has changed it’s inflation calculation over 20 times since inception and magically inflation is lower each time they “adjust” the calculation.

      You may or may not get an inverted curve in the months/years ahead, but if you’re waiting on that one indicator than you’ll probably be misinformed. That said, it makes a flattening yield curve that much more important. Given the artificially low short-term rates we still have, the fact the the yield curve is flattening should be a concern. 2/10 spread at 47bps is the flattest since Oct 2007.

      It’s not just the slope of the curve, but the absolute level of rates, LIBOR in particular. The pace in which LIBOR has risen over the past year, 3mo and even the past few weeks should be on everyones radar. At 2.31% 3mo LIBOR and 62bps spread over OIS, these are also the highest levels since 2008. The US banks are in good shape, flush with cash (reserves) and cleaned-up balance sheets; that is not the case in Europe. The next crisis will be European banks and it’s starting now, watch LIBOR, LIBOR spreads and the worst European bank: DB

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      • tommyboys says:

        I fundamentally disagree with all the paranoia talk of “Fed manipulation”. I think it’s crap as the bond market sets global rates and dwarfs the Fed.

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        • mjtplayer says:

          Long-term rates – yes. Short-term rates – no.

          Question: do you think the “market” is setting the rates in Europe at negative (NIRP)? I rest my case.

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      • NJT:
        Thanks for the credit market analysis but what I OIS?

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        • mjtplayer says:

          Overnight indexed swap – i.e. the overnight rate

          LIBOR/OIS is a very important measure of bank stress and confidence in one another. As the spread widens, it means banks are charging more to lend to other banks over 3mo vs the overnight rate. Naturally, leading 3mo vs overnight demands a higher rate, but it shouldn’t be 62bps more in this low rate environment.

          By comparison, the Fed funds (overnight rate) is currently 1.50%; the 3mo T-Bill is 1.71% – a spread of 21bps

          For the record, I don’t think there’s an issue with the US banks, per my comments above; the issue will be with the European banks.

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  2. Jack kendo says:

    Is it so simply bullish? successful double bottom on SPX and NDX.
    also VIX always topped at 50 during all corrections.
    VIX high:
    2011: 48
    2015: 53
    2018: 50 high and indicates SPX bottom?
    https://gyazo.com/0381748fb2ff1aee58f88c5b7f178b43
    cheers!

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  3. fxaprendiz says:

    Bill Manscoe, I don’t have a chart of my count as it goes up to 14 degrees above the Primary Degree waves, and it literally goes back thousands and millions of years back. I have everything in a spreadsheet but even that way the info is overwhelming.
    What I can do is to post in here “only” the waves of the first 6 degrees above Primary level, and start “only” at the year 1453AD. I think it’ll suffice.
    There was a big reset of the waves of degree 6th down to 3rd degree around the middle of the XV century, and the count goes like this for those waves:
    6th degree (Z) wave C:3 1453AD-ongoing
    5th degree (Y) wave 1. 1453AD-ongoing
    4th degree (X) wave 1. 1453AD-ongoing
    3rd degree (GSC) w1. 1453-1720

    The degrees 4th and 5th you can find references to them in some websites, they usually call the wave of 4th degree the X wave, and the 5th degree is called the Y wave. I have not found references to the Z wave, I just called it that to follow the sequence. Actually I have renamed then but I’ll keep that proprietary for now, along with the waves going back millions of years 😉
    Now I have to explain something otherwise the rest of my count won’t make any sense. I subdivide the impulsive wave 3 in 3 waves instead of the traditional 5. The why goes beyond this post, but it has to do with the way the 6th degree waves work. Those waves are 24000 years long and it has to do with the Precession of the Equinox.
    So if you see something like the 6th degree wave C:3, it means that wave is of 6th degrees above the Primary Degree waves, and that is the wave after waves 1, 2, A:3, B:3
    I won’t go into details with the waves of 5th and 4th degree to not make this post extra long, so I’ll jump to the 3rd degree wave which is known as the Grand Super Cycle degree. The count down from 1453 goes like this:
    GSC w1 years 1453-1720
    GSC w2 years 1720-1784
    GSC w A:3 years 1784-ongoing

    Now, it’s said normally GSC waves are around 300 years but their real extension will depend on their position in the count, so GSC wave 1 is “only” 267 years long, while the GSC wave 3 we are in now, will last well beyond the 300 years mark, it will probably be closer to 500.

    Subdividing GSC wave A:3 gives us the next count of the 2nd degree or Super Cycle waves:
    SC A:1. 1784-1835
    SC B:1. 1835-1857
    SC C:1. 1857-1919
    SC 2. 1919-1932
    SC A:3. 1932- circa 2032-35

    And now we come down to what was probably your question when you asked for a long term count chart… The 1st degree wave or Cycle degree count. I’m sorry for the long essay above but I considered it necessary to have a chance at being understood regarding the next count, which goes like this:
    Cycle wave 1. 1932-1937
    Cycle wave 2. 1937-1942
    Cycle wave A:3. 1942-1966
    Cycle wave B:3. 1966-1974
    Cycle wave C:3. 1974-2000
    Cycle wave 4. 2000-2009
    Cycle wave 5. 2009-circa 2032-2035

    This has been my working count for the last 4 years and while it’s still a work in progress, the changes I have made to it have been mostly in the degrees of level 7th and up, so they have hardly affected the lower degree counts.
    Now you know why I dont expect anything major regarding crashes, depressions and the like for many more years to come.
    I only expect a “regular” or even mild recession circa year 2022, which in my count would be Primary wave B of 5, something like a 9 months to 1 year downtrend with a 25-30% drop. Really nothing compared to what you see circulating in the uber bear sites.

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    • Bill Manscoe says:

      fx: Thank you for your post. It is a more in depth way of looking at EW than I have seen. I will take so time this weekend to really study your post. I may have more questions later. I appreciate the fact that you went to the trouble to fully explain your ideas. Hope you have a Happy Easter.

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    • micky says:

      Fiona, do you have numbers on IXIC? Would be interesting!

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      • fionamargaret says:

        I tried looking for a symbol for a total Nasdaq ETF, but cannot seem to find one.
        If someone leaves a symbol, I shall tell you. where it is going (based on all criteria up-to-date)….
        I shall be back later…so far QQQ..141. VTI…125, QLD….65

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        • fionamargaret says:

          Success….the numbers for $COMPQ……6351
          …and I shall stick to my original numbers for oil…if it doesn’t go below 59, expect 72/74..
          make sure you take precautions….oil is a tricky beast and it hasn’t been in the 70’s for a while (and there is tons in storage, but I have to go with the numbers)…

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