Weekend update

REVIEW

The week started at SPX 2760. After a gap up opening on Monday, and higher open Tuesday, the SPX rallied to 2796. A gap down opening on Wednesday took the SPX to 2771. But the market gapped up on Thursday, hit SPX 2799, then moved over 2800 on Friday. For the week the SPX/DOW gained 1.9%, and the NDX/NAZ gained 2.05%. Economic reports for the week were mostly positive. On the downtick: import prices and consumer sentiment. On the uptick: consumer credit, the CPI/PPI, wholesale inventories, plus the budget deficit and jobless claims improved. Next week’s reports will be highlighted by the FED’s semi-annual report to congress, industrial production and housing. Best to your week!

LONG TERM: uptrend

The range bound activity in the SPX/DOW, since February’s decline, has kept most of us guessing what EW pattern was forming during all that choppiness. At times, after the April low, the market looked like it was ready to make new highs. Which the NDX/NAZ/R2K did. And at other times it looked like it was going to retest the February/April lows again. Which clearly has not happened. What has happened, as often does, the market eliminates one potential count after another until it settles into its final pattern. The latter occurred this week.

Longer term the 2016 Major wave 1 bull market continues. Four of the five Intermediate waves that create a Major wave bull market have already completed. Intermediate waves i and ii ending in the spring of 2016, and Intermediate waves iii and iv ending in the early-spring of 2018. Int. wave i was simple, and Int. iii subdivided into five Minor waves. Int. wave ii was an irregular zigzag, and Int. iv was a flat. A nice and clear pattern until the choppiness in recent months. Nonetheless, we’re still looking for SPX 3000+ by 2018+.

MEDIUM TERM: uptrend

After the April downtrend low at SPX 2554 the NDX/NAZ/R2K impulsed higher, but the SPX/DOW was nothing but choppy three wave movements higher. It looked more corrective than impulsive. After the uptrend seemed to have failed at SPX 2791 in early June, while the NDX/NAZ/R2K were already making new all-time highs, we settled on either an Int. wave iv triangular pattern or a complex flat pattern. Both patterns suggested retest of the February/April low, or near retest.

On the first trading day of July the market gapped down at the open, hit SPX 2699, and appeared ready to confirm a downtrend within days across all four major indices. A downtrend confirmation would have confirmed the triangular, or complex flat, Int. iv correction. But the market was not doing that kind of pattern and started to rally. When the downtrend did not occur we posted a potential impulsive pattern on the SPX hourly chart. Then by Wednesday of this week we noticed the NYSE had a clear leading diagonal triangular pattern from its April low.

This pattern would explain the choppiness in the SPX/DOW since the April low. Diagonal triangles are created by choppy three waves patterns forming five larger waves that create an even larger wedge formation. Supporting the LD pattern was the strength being displayed in market breadth since April.

SHORT TERM

To increase the probability of this LD scenario a few things had/have to occur. Continuation of the April SPX uptrend with a rally above 2791. This occurred on Tuesday. The rally needed to exceed SPX 2802 to eliminate the IV triangular scenario. This occurred on Friday. The rally from the recent SPX 2692 low to start looking impulsive. So far we have three waves up: 2743-2699-2805. And the market should started acting like a third wave, since Minor waves 1 and 2 should have already completed.

Should we get all the parameters noted above the SPX could hit 3000 before this uptrend ends. With Minor wave 1 equaling 237 points (2554-2791), and Minor 2 at 2692. If Minor waves 3 thru 5 are only 1.5 times Minor 1 we hit SPX 3048. Let’s see how the remaining parameters play out. Short term support is at the 2798 and 2780 pivots, with resistance at the 2835 and 2858 pivots. Short term momentum ended the week with a negative divergence. Best to your trading!

FOREIGN MARKETS

Asian markets were mostly higher for a gain of 1.9%.

European markets were also mostly higher for a gain of 0.7%.

The DJ World index gained 1.0%, and the NYSE gained 0.8%.

COMMODITIES

Bonds continue to uptrend but were flat on the week.

Crude is also in an uptrend but lost 3.8%.

Gold is in a downtrend and lost 1.2% on the week.

The USD is still in an uptrend and gained 0.9%.

NEXT WEEK

Monday: retail sales, the NY FED at 8:30, then business inventories at 10am. Tuesday: industrial production, the NAHB, and FED Powell congressional testimony. Wednesday: housing starts, building permits and the Beige book. Thursday: weekly jobless claims, the Philly FED, and leading indicators. Friday: options expiration.

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

About tony caldaro

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

459 Responses to Weekend update

  1. aahmichael says:

    Another up day, and another new daily low for the year in SPY volume. Price pays, but volume matters. Today’s volume was less than the volume on 7/3 which was a half-day holiday. Of the last 8 days of this rally, 6 of them are the 6 lowest volume days of the year. The one decent volume day was on 7/11, which was a down day. The higher it goes, the lower the volume. In addition, breadth still hasn’t been enough to raise the NYMO above the zero line. All of this occurring while people here are calling this a 3rd wave melt-up. I did nothing today other than double my short position. Average price now 2815. Still have a wide stop.

  2. alexh110 says:

    A small 5th wave triangle may have completed today. If so, would expect hourly RSI to pull back to oversold tomorrow.

  3. E says:

    Shorting if it drops through 2810. I see ending diagonals flashing on the daily, hourly and 2 mins. Put/call ratio has also dropped significantly.

  4. kinda of anti climatic to end at todays high. 1 more pump to 2825 ish then dump. expect the buy the close heard to step in

  5. cj32 says:

    Cr. to CBZ

  6. phil1247 says:

    CL

    once above 68.04
    this opens the door to 70.45 …
    if broken above…

    76.03 target can be hit

  7. torehund says:

    https://www.investing.com/indices/baltic-dry-chart

    Bdi reaching my 1800 target, may soon pause but if it really is a w3 from bottom the big juice rice is still ahead of us. Exciting, maybe the implmentation of trade war would cause hoarding, has to be some substrate for the potential W 3 lurking in the background🔝

  8. phil1247 says:

    Tony

    glad to see you are back posting intra day
    this tells me you are getting your mojo back

    i have to laugh
    because when i said wave 3 up a while ago
    i got howls galore….
    just like last year with ” melt up”

    your ” still in wave 3 ” today made me smile

    maybe when i said ndx 8000
    they thought i meant this week ?
    you didnt think it was coming this week did you? 😉

    • vivelaamo says:

      They probably howled because there was always a swoosh caveat. From memory the only people that stayed bullish throughout while others were calling for more downside were Freddy, Tommy and Tony.

      • mcgcapital says:

        Lol.. the first two of those never sell or take profits (based on their posts). If someone’s always bullish no matter what happens then their view on where it’s going is pretty much worthless for active trading as performance is just buy and hold if long 24/7. Last year was a freak year where actively trading the US markets was hard as there were no notable dips, I can’t see many similar ones in history and luckily volatility is back

        • vivelaamo says:

          I’m sure they will both turn bearish when the time is right to do that.

          • vivelaamo says:

            Right to do so*. It’s not easy staying bullish and continuing to buy when everyone is screaming crash! Nows the time to take SOME profit.

            My post was more about Phil blowing his own trumpet on his call as if he was the only one on the blog that stayed bullish. Respectfully of course. I think Phils superb at what he does.

          • mcgcapital says:

            I don’t think they will suddenly start shorting, just can’t see it because there have been several times it’s been obvious we’re at resistance but they don’t get out they just hold through the drawdowns and hope for the best. People who do that in trading if using leverage get found out eventually. I’m not talking about buy and hold investing as that’s different, and I don’t believe it can be timed on bigger timescales so people should always have some exposure to equities in pensions/ISAs/long term saving vehicles regardless of technicals. But I assume they’re trading rather than investing given they’re commenting on a trading blog… if investing buy and hold style then no thought or analysis is required, just diversification and averaging in/out over time depending on personal objectives, so commenting would be unnecessary

            • 7dayyss says:

              You’ve been on the blog long enough to know, Tommy’s more a stock picker buy and hold. It’s “old school”, but that’s where some real money can be made. He’s made a killing on a few small and micro caps he’s mentioned over the years.
              He might trade the indexes at times, or allocates five, ten percent, but I highly doubt he blindly just buys, buys ,buys!
              CF routinely makes buy calls on various world indexes and commodities. He’s had a few bad calls like everyone, but he’s by far ahead in the game!

    • micky says:

      Hahahaaaa Phil you are so funny man I also have to laugh …

  9. Avi gilburt has 2823 as a target for a possible 4 reversal. I will sell my long from today there and try a short. My opinion 2835 is the max this wave will travel before a pull back.Lary Kudlows talk about China tariffs still have me believing we could drop down to 2650. Hard to bet against tony though
    Good luck all

    • learnedmylesson25 says:

      Whenever Avi has a support level that needs to hold–for his bullish view on a trade to stay bullish–it never holds!!!!GLD just recently and GDX many times.We’ll see how good he does with resistance now.Thanks for the heads-up.

    • hunter says:

      Gilburt is a blind squirrel.

    • hunter says:

      While you are on there, might want to look at the Baysene signals, they are doing very well, -10-49% (MINUS) on each signal. ROFL. It’s so biased, the guy only has one direction, either long or short. He has been calling short oil when oil was USO= 10.25 and it went up to 15+, he still called “short”. He called UNG long when it was 27+ and he still called it long after it dropped and bounced and still dropping into the ICL. His paid subscribers are so lost that they did not even ask this elementary question. Last time Gilburt called we are due for a drop in two weeks, it took four months. LOL. I am keeping my eyes out for TVIX around 35.3 to hold but I will buy between that and 32.

      • Pretzel logic shows 2828 plus or minus as target. 2835 is the 2.618 of wave 1. so 2825-2835 popular place for at least a 30-45 point pull back, if not worse.

        good luck all

  10. Page says:

    Time to go long Oil stocks.

  11. jobjas says:

    In a massively indebted world, largely in US dollars, understanding dollar liquidity is critical.
    http://www.hoisingtonmgt.com/pdf/HIM2018Q2NP.pdf

    • Very informative but a known statistic. I have concluded this last stage of the upside move is from overseas money. The dollar should continue to rise as the other nations currencies fall and as trade wars put more pressure on them relative to us. Inflation has already been rearing its head and the trade war mania will spike that sucker a lot higher. This of course is unsustainable simply because debt pressure exceeds any ability for sustained expansion. We are witnessing the last great gasp. As for the velocity of money that also has been tumbling over a cliff since turn of century so I see no reason to use that formula simply because it hasn’t produced a major sustained market drop. I suspect there are other factors introduced since then that seems to counter the affect. The only thing I do know is that deflation pressures will win out and more debt and free-money thrown into the system is needed to sustain any upside momentum. In the end the saturation of world debt will be too much and we fall into a disinflation/deflation spiral. When? many people here in 2016 thought it was happening already. Now they follow the leader, the market, and conclude clear skies for decades to come. Granddaddy of all bear markets will be next. The trump administration has put us on a steroid diet of debt, displaced wealth, and complacency the likes of which has never been seen. I had thought we would not see the final highs till early 2020 but given the new environment it could very well start here and now.

      • mcgcapital says:

        Interesting, thanks guys. I agree on your bearish sentiments as it’s a case of when, not if, these problems will come to a head. Debt is getting completely out of control and demographics mean healthcare, pension and social care spending is going to go through the roof over the next 20 years. Basically means there has to be some sort of redistribution of wealth at some point whether it’s generational or from higher taxes on asset owners, and it’s probably not a positive recalibration for financial assets. Personally think the response to 2008 was wrong as it was the ideal time to address a lot of these issues but the problems have just been allowed to accumulate further.

        In terms of markets, these issues have been there the whole time and yet the market has still managed to quadruple in 9 years, so it goes to show you can’t trade on these views. But the main difference now vs any other time is that central banks are trying to tighten, liquidity is falling. 2016 we got the massive rally mainly because central banks loosened policy. All of the noises coming out of the fed suggest they will carry on with tightening this time but if growth weakens it might be too late.

        And all this has got little to do with Trump, it’s been this way for at least the last decade although he might be the catalyst to bring this all to a conclusion if he continues to shake the world up given how fragile the system is.

      • CLQ18 – a drop below 66.84 negates a strong rebound. if we can’t drop that far we should see a minimum move up to 79. So far we are holding up very well.

  12. mjtplayer says:

    Fresh lows in the 2/10 spread, down to 24bps this morning

    An inverted curve could happen sooner than we think…

  13. Dollar just broke out! Mortgage rates and gas prices also broke out. Home sales dropped badly. This on a trade war that hasn’t yet been fully implemented cause inflation much more headaches. Combine all this with anemic wage growth. Do the math! The GOP will not and can not change the course of geopolitical tensions and full out trade wars with China. EU will soon be there also.

    A market that is ripe for a fall. I still can’t see 2830 being breached especially since quarterly earnings season will wind down soon. All this without even considering how the Mueller indictments and report will affect our nation.

    The US markets today is out of sync with the earnings picture in 6 months. Estimates are above 20 percent for next 2 quarters. Good luck with that. Without low inflation, higher wages the odds of achieving a 10 year bull cycle is going to be very hard. The 2 trillion giveaway is not sustainable in terms of earnings. It went to the already wealthy and healthy group. trickle down?

  14. Is the pull back to 2788 enough for a wave 4 and now 5 up, or are we still in wave 3 up. awful shallow for a wave 4. 17 point ish. I would of expected a .23 at least or 24 points, but close enough I suppose. Just curious
    Thanks

  15. fxaprendiz says:


    SPX is already trading within the potential reversal zone marked by the yellow rectangle. From now on, SPX can reverse at any point between 2815 and 2035-40ish, and any time from not until about Friday.
    As SPX closed above 2800 I have raised my SL on my tactical longs to 2790. They average now 2780 (started averaging 2772 but added a bit on the way up) so I’m making sure at least I’ll get a little profit out of them were SPX to rollover down, right from current levels.
    My ideal scenario though, is for SPX to continue up for a few more days, to touch the 2835-40 area. Going short there would give a really good R:R ratio.

  16. vivelaamo says:

    The insults and ridicule directed towards one poster who is not even posting at the moment is not cool guys. Especially when all they ever did was post about the stock market.

    Now we have broken out of 2802 my target is at least 3000 based on the length of the second large correction from this point that failed to make a new low in April.

    Good luck all.

  17. purplember says:

    SPX showing negative divergences on both hourly and daily chart. bit concerning.

    • alexh110 says:

      There’s also a -D on the weekly chart.
      DJIA, NDX, NAZ, RUT also have -D’s on various timeframes.
      Some have -D’s on MACD and RSI.

Comments are closed.