Weekend update

REVIEW

The week started at SPX 2840. After a flat opening on Monday the market rallied to a new uptrend high at SPX 2863 by Tuesday morning. After that the market went sideways for two days before heading lower late Thursday into Friday. For the week the SPX/DOW lost 0.45%, and the NDX/NAZ gained 0.30%. Economic reports for the week were light and mixed. On the downtick: consumer credit, plus the budget deficit widened. On the uptick: wholesale inventories, the CPI, plus jobless claims improved. Next week’s multitude of reports will be highlighted by industrial production, retail sales, and housing starts/building permits. Best to your week!

LONG TERM: uptrend

At the beginning of the new administration the US started working with our trade partners to re-write trade agreements. None of them have been too interested. This year the US has tried to get things moving along by enforcing tariffs on some imported goods. Still not much progress has been made on trade, except for countries initiating counter-tariffs. Our biggest trading partner, China, has been quick in initiating counter-tariffs. Also has refused to even discuss trade, and has been quite vocal in criticizing the US for even suggesting change. We decided to look further into this trade relationship to see why China is determined to fight any changes.

Internationally, China imported from around the globe in 2017 $1.841 trillion worth of goods. They exported globally in 2017 $2.272 trillion worth of goods. Simple math equates to a trade surplus of $431 billion in 2017. http://www.worldstopexports.com/chinas-top-10-imports/, and http://www.worldstopexports.com/chinas-top-10-exports/.

From 1985-2017 China has run a trade surplus with the US. This trade surplus has increased every year except for three: 2001, 2009, and 2016. All bear market years for equities. In 2017 China exported to the US $505.47 billion worth of goods. China imported from the US $129.89 worth of goods. Simple math equates to a trade surplus of $376 billion of goods with the US. https://www.census.gov/foreign-trade/balance/c5700.html. As you can clearly see nearly all of China’s worldwide trade surplus (88%) is with the US. It is no wonder they are absolutely unwilling to change anything. This trade dispute is likely to become front page news in the months ahead.

The long term count remains unchanged. A Major wave 1 bull market underway since early 2016. Bullish major waves divide into five Intermediate waves. Intermediate waves i and ii completed in the spring of 2016, and Intermediate waves iii and iv in the spring of 2018. Int. wave i was simple, and Int. wave iii subdivided into five Minor waves 5. Int. wave ii was an irregular zigzag, and Int. wave iv a flat. A classic Elliott wave pattern of extensions and alternation. Intermediate wave v has been underway since early April. Still expecting a bull market high of SPX 3000+ by 2018+.

MEDIUM TERM: uptrend

After four Intermediate waves, Intermediate wave v began with little fanfare in early April. The activity from the SPX 2554 low to mid-June’s SPX 2791 was a choppy five waves up that looked more correctional than impulsive. Other indices like the DOW and the NYSE, suggested that entire advance was a leading diagonal triangle. We have maintained that count on those charts, but decided on a more creative count for the SPX. Nevertheless, both counts imply the same thing: a Minor wave 1 up until mid-June, then a Minor 2 into late-June.

After the Minor 2 low at SPX 2692 we were looking for an impulsive Minor wave 3 to begin. We were not disappointed, as the early stages of Minor 3 rallied in five waves from SPX 2692-2863. At Tuesday’s SPX 2863 high there were negative divergences on the SPX hourly/daily charts, and we suspected a significant pullback was next. The market held up until late Thursday before heading lower into Friday. When this decline concludes the uptrend should make new highs, and the SPX new all-time highs.

SHORT TERM

After completing Minor wave 2 in late-June, the SPX rallied in five waves to 2863: 2743-2699-2848-2796-2863. This looks like it was just Minute wave i of Minor wave 3, and the recent decline is Minute wave ii. Significant pullbacks during this uptrend have been between 65 and 122 points. This would suggest a minimum decline into the SPX 2790’s is underway. SPX 2796-2798 was also the 4th wave of a lesser degree, and 2791 was the high of Minor wave 1. Technically there would appear to be, in addition to the 2798 pivot, lots of support in the SPX 2790’s.

Current short term support is at the 2798 and 2780 pivots, with resistance at the 2835 and 2858 pivots. Short term momentum ended the week oversold. Best to your trading!

FOREIGN MARKETS

Asian markets were mixed on the week but gained 1.1%.

European markets were all lower and lost 1.6%.

The DJ World index lost 0.8%, and the NYSE lost 0.8% as well.

COMMODITIES

Bonds appear to be in an uptrend and gained 0.6%.

Crude is in a downtrend and lost 1.3%.

Gold remains in a downtrend and lost 0.3%.

The USD is in an uptrend and gained 1.3%.

NEXT WEEK

Tuesday: export/import prices. Wednesday: retail sales, the NY FED, industrial production, capacity utilization, the NAHB and business inventories. Thursday: jobless claims, housing starts, building permits, and the Philly FED. Friday: consumer sentiment, leading indicators, and options expiration. Best to your week!

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

About tony caldaro

Investor
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427 Responses to Weekend update

  1. mcgcapital says:

    These rallies are gifts to sell into IMHO. Under 2800 the algos will switch the sell mode. That move is coming

  2. jobjas says:

    another chance for bears to exit

    • quickrick38 says:

      Let’s not overlook the fact that we failed to hit even the minimal 38.2% pullback at 2799. Therefore, possibility (after a ‘B’ wave up) that we have a deeper retrace.

  3. Two nice profits from the start of drop. Expected 2821 to hit and it did. Should have reentered as promised but decided to get out for a long walk. Tomorrow should NOT be a decidedly down start however. In fact we might go nowhere tomorrow or slightly down. not expecting big move. For Friday, Monday and Tuesday we should be all down. How far or deep?

    • vivelaamo says:

      Hey looks who’s back! Remember our bet?

      • YOU BET! Only 15 more days. EU gave trump the finger on Iran sanctions but trump so far silent on issue. I doubt trump stays silent for long give the Mueller pressure. Tony is most likely going to ban me anyway. As for the glorious uptrend someone should really consider that the slight miss on hitting highs in SP500 is a tad more important. In fact the downtrend I believe has already started and will last 2 or more months. the damage will be so decisive that TONY will have to redraw his assumptions. I was adamant that the new highs would not be reached before a deep decline.

        Next 4 days will determine the type of damage we will see over next 2 months. On a winning streak once again. Anyone thinking Turkey is a short term problem will be very surprised. Bigger than China trade wars and more immediate. EU will be sanctioned but maybe outside August deadline. oh well!

        Decade long bull market from here is ludicrous. that’s why I know the charts are wrong as I knew in early 2016. Np one answered me why it fit so well that a massive wave 5 peaked in 2016 with devastating long term consequences quickly turned into a glorious decade long bull market to da moon. Love when personal bias takes over. Obama to trump, century old pattern of a crash and burn event turned into a multiple decade rally? ALL IN ONE YEARS TIME! My long term macro conclusions have not changed for a very long time. As I dealt my whole life in relying on common sense and decent analytical skills I would be shocked and throw in the trading towel if we go beyond 2020. We are at last stages of glorious bull run. Wild ride ahead between now and 2020.

    • torehund says:

      Whys are lacking, expose your thinking in terms of technicals, Ellot wave theory and or acute fundamental macro economics. Feelings may be good too, but standing alone unsupported in an argument, not so. We all fall in this trap from time to time, no worries.

  4. scottycj1 says:

    Decent bet the decline is over

    • Ashley says:

      Looks to me like we need 1 more down for a 5,3,5, ABC, aside from retaking the 200 MA on the 60 minute chart with a good pos divergence, that daily chart MACD cross should be respected…..

    • travis01 says:

      I wrote down this morning my expectations on the day’s moves, and it worked somewhat. So it should park the night at 2824 and keep us in limbo on tomorrow. I sold shorts already. My issue is always getting out when I should.

    • fionamargaret says:

      Scotty, I know you like this stuff….I shall post it again with the usual…..
      http://timeandcycles.blogspot.com/

      • scottycj1 says:

        I used to be a contributor at that Forum….but Ian’s a jerk

        • fionamargaret says:

          …but maybe you made a difference to some people..don’t let “jerks” stop you from contributing…even think different venue ie Financial Times etc…more publications given at your request…

  5. H D says:

    Nice pivot Tony. I’m placing more emphasis on that and 2791.47. Some may wish to review the late January and early February updates. We were in a 3rd wave then too.

  6. tony –

    $ bvsp , based on current situation what type of move would be typical on next wave ( 61-62 k ) ?
    or am I reading it wrong ? thanks

  7. schizo1688 says:

    Thanks fortis , on that Gold LT trend line at 1180

  8. Interesting…Dark pool money buying into this sell off. Control decline or rally tomorrow?

    https://pbs.twimg.com/media/DkpcTu3UcAUH47b.jpg:large

    • Page says:

      They should turn on the lights to see what they are buying.

    • ragnar5 says:

      Asa, Love your input on TC’s blog!
      What is the source of your dark pool money chart?

    • kingfrogcash says:

      schwab showed a dark pool print on the QQQ of 170, before 9am when QQQ was 181ish

    • mcgcapital says:

      I’d say there can’t be anything in this, I’ve never heard of such an indicator as by definition dark pools are transactions that are private, so not sure what the data is. Have to remember that for every transaction there’s a buyer and a seller, so it’s not like it’s showing there’s money buying in to the market as it also means there’s somebody on the other side of the trade selling.

      These private transactions are usually between two large institutions where they privately discuss the price to transact at. For large lines of stock they might move the price on the open market so it makes sense to do it this way if there’s someone wanting to take the other side of the trade. So it’s also not like you can say there’s a large participant buying whilst smaller ones sell, as smaller ones don’t use dark pools. Plus I don’t really buy into the view that participants trading size are any better in aggregate at calling direction than those doing smaller size…

      • Hi mcg….Not into conspiracies here….could it be there is one buyer (FOMC?) that wants a controlled decline? They will get their money back when/if they make a positive market moving statement? Just amazing how this analysis pans out… often.I would not be surprised to see a ramp starting in the overnight session….and no,I don’t trade off this. Simply an observation.

        • mcgcapital says:

          Just an opinion but I don’t think the fed cares whether SPX is 2800, 3000 or 2500 to be honest. They had wanted to boost asset prices from 2009-2016 to get growth going via the wealth effect, but that means they bought bonds to force a yield chase into stocks. Since policy began the normalisation process there’s less need for them to do that. Maybe if we get to the bottom of the range and it looked like markets were falling apart they might be more concerned, but why would they want to keep it 3% off the high.

          And also, my main point is under a dark pool it’s an off market transaction so what data is this and where is it from (and by that I mean where is the source getting it)

          • asaraniti says:

            Hi mcg…. This is where I have to respectfully disagree with you to a point. The Gov, treasury/ FOMC, never wants to see equities crash. I believe they step in and control the “crash” in an orderly decline.

            I believe you are correct in terms of the $USD, Bonds then equities that are the Gov priorities of saving to the point of intervention.

            Since the $USD and bonds are not an issue today I don’t see any problem in the Gov controlling the decline in an orderly fashion.

            I also don’t knows if, underscore if, this controlled move down was the gov in cooperation with banks.

    • tony caldaro says:

      interesting … thnks

  9. kvilia says:

    That’s why I love CL! Technical! Broke extensions short after hitting target, rising to HWB short 66.45.

  10. phil1247 says:

    es just peeked back at broken 2819 ( big deal if broken) and was rejected
    if support develops above 2809 on pullback
    good place to exit short

    • schizo1688 says:

      Thanks Phil !!

      • phil1247 says:

        welcome
        are you getting the hang of it now?
        i am waiting for you to tell me you dont need me any more
        and can do it on your own

        • phil1247 says:

          its a little tricky here with the new extension so this is what i am using now
          see ya tomorrow and good luck

        • schizo1688 says:

          I covered around 2807, this morning , just waiting if I should short again at this level 2813.. too risky just to make another 20 pt .. thanks phil

    • if phil is away from his computers…I’ll fill in although I just came back from running errands…trading computers aren’t on…not speaking for phil but that’s how this algorithm works….

      /ES traded below and broke a 61.8% micro support LONG a few minutes ago. That means the 61.8% SHORT that broke on that counter trade rally was just simply “sloppy trading” as the micro LONG broke.

      In English, if the analysis prevails, /ES will be trading lower.

  11. emuntrader says:

    Today’s low was a near perfect a=c MM down. (42.6,40.6). Daily Stoch still looks ugly. hoping this rally up will gives us a bit more clarity of whether or not we are impulsing to the downside. Currently looking for the the LOD to hold and the rally to continue into tomorrow. Still watching here hoping for a better pattern to develop that will once again give more clarity to levels. Expecting another short term top tomorrow followed by more downside into early next week.
    Bearish till end of Month. Expect September to give us the 3rd wave we have all been looking for.
    Best of Luck.

  12. 40 point decline
    .50 retrace is 2823
    .618 is 2828

  13. fxaprendiz says:

    Guys I hate to play the devil’s advocate but a bullish harmonic pattern completed in the 1hr charts, of about the same size as the previous bearish one.
    While this pattern is no match for the combined forces of the 3 bearish harmonics posted before, it may cause some headwinds in SPX for the next few days. I guess this will be the bulls last fight before going down 2800.
    P.S. If SPX bounces high enough another bearish pattern will complete by next week. I don’t want to jinx it, but (hint) I still have my 2850 sell order standing…

  14. torehund says:

    El slammo in commodities, feak of further dollar strength ?

  15. mcgcapital says:

    This has nowhere near bottomed IMHO, it’s only just getting going.

    FTSE smashing through support and not much there now back to the lows as we went straight up on the way there. 7300 and 7100 the obvious pivots inbetween.

    Dax just about holding 12100 the June low, but under there nothing until 11700.

    Just saying as people who only care about the US markets might be thinking we hold 2790-800. But we’ve just smashed through months of consolidation to the downside in Europe and the regions don’t usually diverge to the extent that Europe can crash while the US rallies

    • aahmichael says:

      The US has been the safe haven this year, most notably FAANG, but EFA and EEM are now at new lows YTD. I agree that gravity usually wins with divergences like that.

      • Reiterating the following: 10 year note broke above resistance twice suggesting yields will go to 3.31% a stock market killer. The dollar smashed thru its final highs set at 96.05.
        International calamity is going to be here for months to come before any calm is seen. that puts extreme pressure on yields and the dollar as our stock market catches the contagion. Still looking for today to rebound to 2821 area. If it does I reenter puts.

      • mcgcapital says:

        https://imgur.com/gallery/BTsuuso

        The odds of this chart being a bottom are almost zero. Failed multiple times at 7800 and broke down now through 7500. Fairly conclusive.

        Expecting SPX to follow, I get that it’s outperformed since May but one side has to win here and it’s fairly obvious looking at ex-US charts which side that is

  16. kvilia says:

    Long CL at short target :). Let’s see what happens when and if we hit extension@65.14.

    • phil1247 says:

      i was using clu8 for 64.70 target
      on CL continuous that target is at 64.16 and was not hit yet
      another reason i dont really like CL with its changing contracts every month

      • kvilia says:

        Agree. Usually its a selloff into new contract. Next week is the rollover, lets see if this selloff is earlier in the cycle. In any case I’d like to see Thu/Fri run into hwb short. And I would not want to be a short seller now.

  17. emuntrader says:

    Looking for a some exhaustion in the $DAX. The $DAX will be printing a TD 9-13 today. Price action of the H&S has all most completed a MM from the neckline.

  18. Ashley says:

    Short here with a stop at 2816 (50 MA 60 minute chart) might work down to 2780-2762 =) I gotta go somewhere (of course on the day it finally sells =(

  19. Page says:

    WOW … I wasn’t expecting this disaster in August, this was suppose to happen in Sep/Oct but looks like it started early so imagine what is coming in Sep/Oct/Nov???

    • I believe this first drop will be gobbled up mid-week of next and the real fireworks start mid-September. Don’t count on reaching the all-time highs anytime soon. Going against Tony on this and usually that’s not good odds. BUT if the pattern changes so will I. Next Tuesday should be the lows of this current drop.

      • Page says:

        Of course there will be oversold bounces but the overall trend will down from now on, buy the dip sell the rip is back for next few months.

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