Weekend update

REVIEW

The week stated at SPX 2819. After a higher open on Monday the market sold off to SPX 2798 by early afternoon. A gap up opening on Tuesday carried the SPX to 2826 by Wednesday morning. Then another pullback, aided by a gap down opening Thursday, took the SPX down to 2796 that morning. After that the SPX rallied for the rest of the week, hitting 28 on Friday. For the week the SPX/DOW gained 0.4%, and the NDX/NAZ gained 1.2%. Economic reports were plentiful and mixed. On the downtick: ISM manufacturing/services, monthly payrolls, auto sales, construction spending, plus the trade deficit and jobless claims increased. On the uptick: pending home sales, personal income/spending, Case-Shiller, Chicago PMI, consumer confidence, and factory orders. Next week’s reports will be highlighted by the CPI/PPI and consumer credit.

LONG TERM: uptrend

While the NDX/NAZ/R2K have been making new all-time highs each month since June. The SPX/DOW, and for that matter the NYSE/DJW as well, have not made a new all-time high since January. Negative divergence? We don’t think so. It looks more like a trade/tariff rotation out of cyclical into growth. Remember, at the first mention of tariffs in late-January the SPX sold off nearly 12%. Then growth stocks recovered more quickly than the cyclicals.

The Major wave 1 bull market count remains the same. Four Intermediate waves completed thus far: i and ii in the spring of 2016, and iii and iv in the spring of 2018. Int. ii a zigzag, alternated with Int. iv a flat. Plus Int. iii divided into five Minor waves: waves 1 and 2 ended in the fall of 2016, and waves 3 and 4 ended in the spring of 2017. A complex wave 2, alternated with a simple wave 4. Currently Int. wave v remains underway from that Int. iv early-April low.

MEDIUM TERM: uptrend

After a three month, three-trend, Intermediate wave iv flat correction, Intermediate wave v began in early-April. For the NDX/NAZ, it has been quite impulsive looking all along. Not so for the SPX/DOW. The first three rallies, April-June, all overlapped each other. The DOW looks like a leading wave one diagonal.

The SPX a choppy, somewhat overlapping, wave one. Nevertheless, they both appeared to put in a wave 2 low in late-June. Suggesting a wave 3 is now underway.

Since third waves cannot be corrective looking, or form diagonal triangles, we have been patiently waiting for the SPX to show signs of an impulsing rally. Thus far, that appears to be occurring. From the wave two low at SPX 2692 we currently have five waves up: 2743-2699-2848-2796 (flat)-2840 (thus far). A rally to SPX 2848 would confirm the advance has been impulsing, and the third wave is clearly underway.

SHORT TERM

With a third wave underway in this Intermediate wave v uptrend, we should be looking for a potential bull market top soon. Should. The SPX would reach the minimum for a bull market high at 2873, it’s all-time high. But the DOW, NYSE and DJW indices all need to make new highs before they complete their bull markets. Each of these indices are 4% to 6% from their January high. This suggests the SPX will rise a lot more than just 1% before its bull market completes. Four percent, five percent, possibly six percent higher. Our target remains SPX 3000+ by 2018+.

Short term support is at the 2835 and 2798 pivots, with resistance at the 2858 and 2884 pivots. Short term momentum ended the week overbought. Best to your trading!

FOREIGN MARKETS

Asian markets were nearly all lower on the week and lost 1.6%.

European markets were also nearly all lower and lost 0.5%.

The DJ World index lost 0.3%, but the NYSE gained 0.2%.

COMMODITIES

Bonds are downtrending but gained 0.2%.

Crude is in a downtrend and lost 0.3%.

Gold remains in a lengthy downtrend but ended flat.

The USD is in an uptrend and gained 0.5%.

NEXT WEEK

Tuesday: consumer credit. Thursday: weekly jobless claims, the PPI, and wholesale inventories. Friday: the CPI and the budget deficit. Best to your week!

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

About tony caldaro

Investor
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415 Responses to Weekend update

  1. maybe one last push up to 2850 no higher then that and we may be done now. wave 1 was 53 points 5 equals 1 at 2847. the fact that wave 5s are or have been the weakest suggest,this rally is close to rolling over,
    Im short. Good luck all

    Like

  2. phil1247 says:

    bulls still in charge
    but need a blast thru 2850 es target soon
    to push up out of the upper daily bollinger band
    and confirm extensions of extensions and upward acceleration
    ie wave 3 of 3 up

    otherwise its going to become a choporama

    Like

  3. gary61b says:

    ES, not saying it has to but I thinks we hit a setup by tues for mm( 2771/2752.5 or 2700.75/2665.5)?

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  4. phil1247 says:

    ES

    straight up or not at all

    still looking for 2887

    yellow flag below 2832 for bulls
    red flag below 2825

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    • floyd drummer says:

      mornin’ phil,

      why the traditional anchor at ES 2526? …and is there an extension from ES 2836, …the previous high before the late afternoon breakout, …to the early overnight session high at 2843? it would explain the overnight high target.

      thx

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      • phil1247 says:

        mornin’ floyd

        i use traditional as an early warning system
        since the extension failure is much lower
        it tells me how aggressive buyers are
        the nice bounce at 2835 tells me buyers are there
        if it completes the extension will keep being front run
        which means upside acceleration is in force

        there was an extension from 36 to 43 and it hit target
        but that is kaput now

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        • phil1247 says:

          also notice that once the short from highs breaks
          es loves to retest the .618 level of the short from above

          that may be all the pullback you get before it takes off again
          these are all clues to see how aggressive buyers are

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        • floyd drummer says:

          i use traditional as an early warning system
          since the extension failure is much lower

          nice…..

          the nice bounce at 2835 tells me buyers are there

          thought so…

          there was an extension from 36 to 43 and it hit target

          thought so, …again.

          europe is very tradeable, ….with futures of course!

          thx

          Like

  5. stockop says:

    China made me a big bear. looking like a perfect reversal on the hang seng with a wash out low. i don’t know how its possible, but this is very bullish for the US markets. if people are still bidding up the trash over there equities will see much higher levels globally. thought we had the canary based on my belief that China will be the next black swan. had the perfect chance for a W3 down and now god only knows where its headed. back to news highs??

    i see equity charts that are super bullish…yet the amount of charts screaming short continues to grow. the startup bubble is getting ridiculous. kids leaving cushy jobs at the big tech firms for mediocre ideas at best trying to get rich quick…really wish I was around in 1987. that is the kind of correction I envision though not 50% like was seen than. if anyone has any first hand knowledge of what it was like headed up to that I would be incredibly grateful.

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  6. mcgcapital says:

    No change to my FTSE analysis.. we eked our the weekly close in the 7670s for what’s the 8th week in a row. Range 7500-7800, elevated risk of a decline now as we rejected the top of the range last week following weeks of upward chop. 7700 pivot next objective on the upside, 7640-60 first support on the downside. That’s pretty much it for a few weeks on bullish catalysts as far as I can see, few more earnings reports but that’s it. Doesn’t look like trade talks are going anywhere based on Trump’s tweets. Seasonality negative too, let’s see how this plays out, missed the rally completely Thursday/Friday and got stopped out a couple of times on shorts

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  7. bouraq says:

    Chart of the weekend is #SILVER at http://www.tradingchannels.uk

    Like

  8. Mary773 says:

    In reading this blog and others, it is fascinating to see the prevalent pessimism. People look at this chart and say, “Man, that is soooo negative!”

    I am wondering which method of analysis is being used. Not Elliott. Not Gann. Not Steidlmayer. Not Dennis. Not De Mark. Not Edwards and Magee. Maybe Wishing and Hoping? Sure, the market could begin a severe decline at any time, but what is the rational basis for expecting it to happen now?

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    • fxaprendiz says:

      Personally not expecting anything severe, just a 13-14% decline from the 2875 high.
      Using EW, Harmonic Fibonacci patterns, and daily and weekly cycles, but you can call it all wishful thinking 😉 As long as my account keeps growing it’s all good.

      Like

    • Hi Mary,

      It is said of many wars. that the Generals fight the wars of the last generation.
      I think the same may be true of investors, they look back on the past.

      One hundred years ago >75% of American worked on farms.
      Now this is the reality.

      That farm tractor probably costs over $250K, but it frees 100s of farm workers.
      Food on the table is now a given, not a game of chance,

      There are also investors who dislike the current political leadership.
      Those investors are convinced the current policies can’t work.
      They take the “under”

      Two sides to every trade.

      Like

    • mcgcapital says:

      The only ones wishing and hoping are those who are dependent on a perpetually rising market to make money because they don’t react to what’s happening in markets and have a fixed view. The people on this blog who have bearish inclinations tend to be highly flexible in their approach to markets and don’t just short all day, they play both sides or at least cover when the market is going up. There are way more people on the long side who just sit in trades come what may, if the market goes up then great, if it goes down then not so great. I know the standard retort to that would be ‘I’ll exit for a profit if it starts going down significantly’ but in practice I’d question when that would be if someone has sat through a 120, 70, 100 and 60 point drawdown already since buying the low in April. Clearly if we went down to 2700 they’d more than likely still be holding.. and if we lost 2700 it could get ugly more quickly with the lower low. I’ve not seen anyone provide an answer on where they’d exit their ‘buy and hold’ longs, and if they can’t answer that it means it’s been left to discretion so even less likely that they’d exit prior to most of the gains been given back.

      Would question what the rationale is for 3000+ on SPX other than bias that we’re in some sort of 5th wave up or blind faith in the strength of the economy/political direction. We’ve just had a barrage of good news on the earnings front and yet it’s still not made new highs, then now we head into a seasonally weak period for 2-3 months. Another couple of hundred points up from here would be a significant re-rating in valuation. Unless there’s some major breakthrough on trade about to come, how do we get there? If you look at how capital flows into markets, there’s a tendency for investors to buy in and front run when they see a reason for optimism on the table such as more QE coming, tax cuts, lowered expectations for interest rates, stronger earnings about to come through. I don’t remember a strong rally in the last 10 years that wasn’t underpinned by at least one of these factors. And now we have QT, tax cut bump done, interest rates rising steadily and strong earnings growth already priced in to such an extent that companies are getting severely punished if they miss or issue a weaker than expected outlook.

      Plus we have markets acting volatile and choppy all year with constant churn between equity regions, large and small cap, and sectors, with significant sized drawdowns along the way. It’s telling us there’s a possibility the long term trend is changing. It’s certainly not a buy and hold market, there’s way more points to be made actually trading than sitting this year. New highs are certainly possible.. after all we’re 1-1.5% away now, but struggling to see the catalyst to make the volatility disappear. Max flexibility is key and reacting, not hoping for big moves in either direction

      Like

    • aahmichael says:

      I ignore people who speak in extremes when it comes to market projections, but there is a very simple and still very valid EW count that says SPX will makes new lows for the year before it makes new highs for the year. Also, the monthly candlestick pattern so far this year is almost identical to the 2000 pattern in SPX. After hitting its March 2000 high, SPX drifted sideways to higher for the next 5 months, coming close to making new highs, but ultimately crashing just before those new highs were made. It’s now been going sideways to higher for 6 months since the Jan high, and while it’s close to new highs, they haven’t occurred yet.

      That being said, you can ask your question another way, in other words, “what looks so positive about the chart?” Has SPX, DJI, or NYA shown bullish strength since hitting the low on 2/9? The answer would be “certainly not.” In fact, that can be quantified. This year SPX dropped 11.8% from ATHs. Since 1950, there have been 14 times that the market declined by at least 11% from ATHs. 1 of the previous drops was 11.3% and that took 119 calendar days from its bottom to make new highs. 4 of the other previous drops were between 14.7% and 20.4%, and in each of those occasions the longest amount of time it took to reach new ATHs from their bottoms was 180 calendar days. The other 8 previous declines did not make a new ATH within 180 calendar days from their bottoms, and those declines ranged from between 21.5% to 57.7%, and the amount of time it took to reach new ATHs in those instances ranged from 200 calendar days to 2113 calendar days. This Wednesday will be 180 calendar days from the 2/9 low. Will we make a new ATH by Wednesday? Whether it does or not, the rally since 2/9 has been the weakest rally on record, since 1950, from a drop of similar magnitude. The real question to ask is, “why has the rally from 2/9 been so weak?”

      Like

      • csonkabull39 says:

        All I see are higher highs and higher lows since April 2nd, for the Dow, S&P, Nasdaq, and Russell. In 2000, the markets looked quite different than they do today. In 2000, the S&P was rejected in September at the 89% retracement. In 2018, the S&P has surpassed the 89% retracement, which was 2835. New highs are coming.

        Like

      • Mary773 says:

        *That being said, you can ask your question another way, in other words, “what looks so positive about the chart?”*

        What looks so positive about a secular bull market consisting of higher highs and higher lows in which stocks repeatedly advance and consolidate prior to making new highs. I must admit never anticipating that question. Lemme think on it.

        *The real question to ask is, “why has the rally from 2/9 been so weak?”*

        SPX has advanced more than eleven percent in six months during a consolidation that follows a 58% rally from 2016-2018. The index is now less than one percent from the all time high. Naz made an ATH on 7/25. All time highs do not generally exude weakness. A better question would be “Why has the rally in Bitcoin since November been so weak?” Now there is a weak “rally”. And the answer is…because Bitcoin is in a bear market.

        I am interested to know why Freddie is short. If he explained, I missed it. He has been an outstanding analyst going all the way back to the days when he was partnered with Dean Martin.

        Like

        • vivelaamo says:

          I think Aah has been scarred by the financial crisis. Whilst great analysis if you read his posts over the years he will pretty much always lean towards to a bearish bias. I find his posts fascinating.

          Like

        • aahmichael says:

          *SPX has advanced more than eleven percent in six months during a consolidation that follows a 58% rally from 2016-2018. The index is now less than one percent from the all time high. Naz made an ATH on 7/25. All time highs do not generally exude weakness. A better question would be “Why has the rally in Bitcoin since November been so weak?” Now there is a weak “rally”. And the answer is…because Bitcoin is in a bear market.*

          You posted a chart of SPX and asked for comments about that chart. Whatever NAZ/NDX or Bitcoin has done is irrelevant. What I pointed out is that if you compare apples to apples, which I did in my response to your original post, the SPX rally from the 2/9 low is the weakest in the last 68 years, following a decline from ATHs of more than 11% but less than 20.5%. It might even be the weakest in all of history, but the data that I use for these kinds of studies only goes back to 1950.

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          • Mary773 says:

            The weakest rally of the last 68 years? By which metric?

            Is this also the weakest nine year bull market of the last 68 years? And if so, so what? Shorting “weak markets” that keep making new all time highs is the beeline to poverty.

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          • aahmichael says:

            *The weakest rally of the last 68 years? By which metric?*

            Do you not read what I write in my posts? I described the metric in detail in my first response, and summarized it again in my second response.

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          • mcgcapital says:

            Not sure why you keep posting these long term charts as we all know we’ve had a very strong bull market since 2009. What we’re debating is where it goes next.. can you build a bull case to counter the bear ones which doesn’t just involve simply extrapolating out the prior move? That works fine when in a trend but is terrible on the turns

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          • Mary773 says:

            SPX bottomed on a nine year cycle and subsequently completed a five point reversal in a powerful bull market. It is now making higher highs and higher lows. Short the hell out of it.

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          • tony caldaro says:

            my tidbit contribution
            the MSM likes to call corrections 10% declines, and bear markets 20% declines
            2011 had a 22% decline, but the MSM still calls this a 9-year bull market (2009-2018)
            how can that be using their own definition
            as you know we think we’re in a not so rip roaring at the moment 2 year bull market

            Like

          • phil1247 says:

            Tony

            ” tidbit contribution ” lol

            you are quite the comedian…
            are you here all week?

            Like

          • aahmichael says:

            Tony, the “media” only uses closing prices, so they report the 2011 decline as 19.24%.

            Like

          • phil1247 says:

            ps tony

            if we push thru 2850 and especially 2853.5

            this could become more “rip roaring” than you expect 😉

            Like

          • tony caldaro says:

            thx aah, did not know that

            Like

      • the monthly candlestick pattern so far this year is almost identical to the 2000 pattern in SPX

        In candlesticks maybe today’s chart looks like 2000, but looking a little deeper (MACD and SMAs), not the same, at all..

        2000 top

        Current Market

        Everybody is entitled to their own opinion, and my opinion is that as TA indicators, candles are one of the most unreliable techniques around, esp. longer term. Probably much of the reason is that it is often easy for one side of the market to get a certain print (the candle pattern), But it is completely different story, and much more difficult, to supply the power to make that pattern become a forecast. And that is what shows up in the MACD, and SMAs.
        IMHO

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        • mcgcapital says:

          Nice charts, and you’re right they don’t look very similar to me. But what I’d say is the 2017-18 period looks largely unprecedented with firstly the huge corporation tax cut followed by withdrawal of liquidity by the fed. I think last year shows how difficult it is for markets to go down when there’s a stimulus carrot in from of them, and this year shows it’s difficult for them to rally when it’s been taken away.

          In terms of the MAs, you’ve got the 10 period on the monthly there which is basically the 200 dma. At the current time, the parabolic move between September and January is still included.. by the end of October it will have dropped out of the calculation and that line will be a lot flatter (if not flat) if we haven’t broken out by then.

          What I’d also note is that non-US markets, which haven’t had a tax cut and their central banks aren’t reducing their balance sheets, look much worse than those charts and much more like textbook topping patterns. Dax and Nikkei haven’t made new highs since Jan and are some way off doing so. FTSE made a new high in May but the candlesticks show repeated attempts at sustaining trade above 7800 are failing. It shouldn’t come as a surprise if any of those markets were to sell off strongly.

          So overall on the US indices, there’s some positives but I’m unsure how much of it is temporary factors and how much is tax related and in the rear view mirror. All I know is there’s no need to overcommit one way or the other and to stay flexible, especially as the parameters are pretty clear with new highs around 40 points away on SPX and losing 2800 support being a similar distance away. What I’d say is some of the momentum indicators won’t look so good if a breakout doesn’t come soon, and I’ve been making the case to say short term there doesn’t seem to be a catalyst in the works for it.

          Like

        • aahmichael says:

          You can always find things that are different from one period to another. For example, this year, NAZ/NDX have continued to make new highs, but didn’t in 2000. NYA continued to make new highs in 2000, but is lagging badly this year. Since Mary asked about the SPX chart that she posted, then I focused on answering about that specific chart.

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    • I have noticed, after observing comments here and in other places, that more often than not various traders, speculators, and observers conclude in their minds that the markets are headed for an imminent crash. This probably has a lot to do with human evolution. The instinct is to hold on to what you have. All of the visceral reactions and rationalizing about why markets are headed downward becomes problematic when you realize that they (at least equity markets) have an upward bias.

      Like

      • tommyboys says:

        Mary concur 100% with your sentiment analysis. This however is the chronic “wall of worry” keeping the bull intact. After a crisis decade like the ’00s this is exactly what you’d expect sentiment to look like the following decade early in an “awakening” period. Lots of fuel to run way higher than most conceive – and this is why it will.

        Triple Water – agree 100% on the human nature observations. Memory is fickle and 2009 wasn’t THAT long ago…

        Like

    • torehund says:

      Mary thats bullish🤔

      Like

    • Bud Fox says:

      Great analysis. Ref Bull market declines, form all the time. Within the confines,
      of a larger Bull market. We appear to still be in the later.. Now the chart above
      still reflects, a higher SPX market, Taking out, a potential double top, yet to be done.
      Should confirm a much higher index price, in the coming months.

      Like

  9. fxaprendiz says:

    This post for RedDragon… Regarding your flat down to finish this correction around November… As mentioned I had it as an alternative to my view of a zigzag down, but after reviewing my charts this weekend I think the flat is now a low probability event. There’s not enough time for SPX to trace out a flat and end it by November, unless it’s a raging move like the flat of Feb-March, but the usual alternation calls for a more orderly selloff this time.
    I think we will either have a zigzag, which could drag on until the end of the year, or if SPX wants to end this soon, then an impulse wave ending by late Oct/early Nov.

    Either wave formation would take SPX a little below 2530 to lure the uber-bears… and you know your Skynet loves to trap traders on both sides 😉

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