Weekend update

REVIEW

The week started at SPX 2767. After a lower open on Monday and a trade down to SPX 2749. The market gapped up on Tuesday, and then hit SPX 2817 midday Wednesday. A gap down opening on Thursday took the SPX down to 2755, where it was trading on Monday. Then a gap up opening on Friday rallied the SPX to 2798 early morning, which was sold off for the rest of the day. For the week the SPX/DOW gained 0.20%, and the NDX/NAZ lost 0.65%. Economic reports for the week were mostly positive. On the downtick: housing starts, building permits, existing home sales, and the Philly FED. On the uptick: leading indicators, the NAHB, industrial production, retail sales, the NY FED, business inventories, plus jobless claims and the federal budget improved. Next week’s reports will be highlighted by the beige book and Q3 GDP. Best to your week!

LONG TERM: downtrend probably underway

Despite a volatile week not much has changed from last weekend’s report. The market traded above last week’s SPX 2711 low, and well below the SPX 2941 all-time high. The range for the week was SPX: 2749-2817. And the SPX gained 1 point for the week.

The SPX weekly chart displays the Major wave 1 bull market count from February 2016 to October 2018. Notice the five wave rise from the Primary II bear market low at SPX 1810, to the Major wave 1 high at SPX 2941. Five Intermediate waves, with five Minor waves creating a subdividing Intermediate wave iii. Intermediate ii was an irregular zigzag, and Intermediate iv was a flat. Minor 2 was complex and Minor 4 was simple. Alternation on every level. Same can be said for the DOW, NDX and NAZ chart patterns. They all mimicked each other, while at times not completely in sync.

MEDIUM TERM: downtrend

While the last uptrend left a lot to be desired as for impulsivity. It was still tracked as Intermediate wave v, and expected to be the last uptrend of the bull market. We had noted months ago. If the uptrend surged it could pass SPX 3000 easily. If the uptrend struggled and took lots of time it would probably make only marginal new highs. The uptrend took six months, and exceeded the previous all-time high by only 2.4%. The DOW only exceeded its high by 1.2%.

Thus far the market has dropped from SPX 2941 to SPX 2711. We had thought that could be an important low, and so far it is holding as such. We labeled that low Minute wave A in dark green on the charts. The rally that followed has thus far risen to SPX 2817 for nearly a 50% retracement. We have labeled that with a tentative light green Minute B. So far the decline is moving along generally as expected.

SHORT TERM

With Minute A SPX 2941-2711 (230 points), and Minute B reaching SPX 2817 (106 points), we would now expect Minute C to decline either 0.618 Minute A (2675), or 1.0 Minute A (2587). There are pivots at 2656, 2632 and 2594. Once the market does hit one of those lows it should end this Minor wave A downtrend. Then we would expect a Minor B uptrend retracing 50% to 61.8% of the entire decline. After that we probably won’t be seeing those levels again for some time as the bear market begins to make itself more widely known. If things really get carried away. Which is possible considering the multiples. The FED will be forced to intervene: MM4ME.

Short term support is at the 2731 and 2656 pivots, with resistance at the 2780 and 2798 pivots. Short term momentum ended the week just above oversold. Best to your trading! It’s a day traders market.

FOREIGN MARKETS

Asian markets were mostly lower for the week for a net loss of 0.7%.

European markets were mixed and gained 0.3%.

The DJ World index lost 0.1%, and the NYSE gained 0.1%.

COMMODITIES

Bonds continue to downtrend and lost 0.2% on the week.

Crude appears to be in a downtrend and lost 3.7% on the week.

Gold remains in an uptrend and gained 0.6%.

The USD is also in an uptrend and gained 0.8%.

NEXT WEEK

Wednesday: new homes sales and the Beige book. Thursday: weekly jobless claims, durable goods, and pending home sales. Friday: Q3 GDP and consumer sentiment.

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

 

About tony caldaro

Investor
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625 Responses to Weekend update

  1. phil1247 says:

    kvilia .. cl 68.09 is next

  2. Anthony Saraniti says:

    Good morning all. /ES continued to decline in the overnight session. A counter trend rally up to a 61.8% micro SHORT was tested and defended…..so far. Higher probability is /ES filling today’s gap (dotted red line) and continuing to decline to test one/both profit targets of this measured move short. This analysis is invalidated if /ES trades above thin red line … 2781
    DH chart

    • chadthundercockthethird says:

      Thanks I appreciate these posts, please update as soon as validated/invalidated.

    • chadthundercockthethird says:

      When you and Phil say “ES” are you referring to ES1! or something else? I’m just wondering because ES1! ticked up to 2782.

      • The December futures…..I have 2781.50 as the high. Bad print?

        • chadthundercockthethird says:

          I gotcha, I think ES1! is a rolling future or something, kinda new to futures. I trade SPY puts.

        • chadthundercockthethird says:

          Yea I bet ES1! print at 2782.25 correlates to the dec contract at 2781.5. I trade SPY so there’s some back and forth I have to do.

        • chrisk44342 says:

          I personally don’t put any stock in price invalidating a fib by a tick or two, but to each his own.

          • floyd drummer says:

            agreed, ….trading just above and below is a great place for traps, ….both bull and bear.

          • chadthundercockthethird says:

            Thanks I was wondering that as well. I wonder what DH says

          • Higher probability is that if there is a break of the 61.8% level, by 1 full tick…it’s a break.

            IMHO, yes, there can be sloppy trading..the key is to see if there is a retest, does it test and defend the ORIGINAL 61.8% level. If yes, it was defended to the tick, the first break was sloppy trading (low volume?) and you should trade “as if” there was no break. . If the retest breaks then 61.8 level again, then the series broke and I would trade the break accordingly….but tha’t just me.

          • phil1247 says:

            agree chris
            rogue dictionary says give it 2 ticks … but no more
            even DH allows it but he flubs it quickly on the video thinking you dont see it
            like a magician 😉

    • retiree247 says:

      Hi asa, looking at your chart, I’m assuming the possible downside targets are 2759 and 2749.75, correct?

  3. Jack kendo says:

    As I read this Oct 20 Weekend update, it’s as bearish as it could be.
    All comments are one sided at least short term bearish.

    Some Perma Bulls, eg. CampFreddie, tommyboys, have sold most of longer term equity holdings, and saying could easily facilitate a crash scenario, and hold leveraged short position.

    oew has scaled out long term positions around the 2940 top, good call, so far. and plan to scale back in at 2500 (from comments section).

    oew and most posters are expecting a new low below SPX 2710, say, in the coming week of Oct 22 ~ 26..
    oew Minute C of Minor A to have a new low, 2675, or 2587 range.
    Some are saying wave 5 for new low.

    The sentiment is so low on the market.
    checked, the lowest since Feb 2016 bottom.

    All my analysis indicates SPX can easily make new high within one month.

    Most or all posters here are looking for new low below 2710, say in the coming week of Oct 22 ~ Oct 26.

    Am I the only MT (for the next 3 ~ 6 months) bull left?
    For the record, I am looking for SPX 2880 late of the coming week, Oct 25 or Oct 26.
    If SPX gets to 2880, I will take profits on my SPY calls. And then reload on short term retrace pull back. That’s for my trading position. For longer term positions, entered last week, will hold for 3 ~6 months till the price / pattern satisfied.

    cheers!

    CampFreddie says:
    October 19, 2018 at 3:46 am
    I have been a Perma Bull since mid 2010 and this Bull mkt has been very good to me, However I now now see Price technical conditions, Sentiment, Breadth etc that could easily facilitate a crash scenario. A sharp swoosh down to 2600 is the least I would expect, I have small leveraged short position, and have sold longer term equity holdings down to 50% during this week.

    tommyboys says:
    October 20, 2018 at 8:51 am
    Tony any rough idea on the length of the entire bear – 3, 6, 24 months(?)

    • tommyboys says:

      Jk. Not short this market but holding larger amount of cash. Wil put more longs if/when volatility settles. NYAD never diverged with index indicating correction and not bear yet the RUT A/D DID diverge for couple months and has been leading south. Thos may just be a test of the 200 for SPX and interesting we closed Friday right on it! P/C actually dropped a bit from 1.3-1.14 Friday indicating smarter money was covering short hedges. This week will be telling.

  4. maks12 says:

    .618 retrace would be 2250 area is that not expected because we are in a 3 so the drop is not as strong

  5. lunker1 says:

    Fiona you frequently mention ticker symbols with targets of your progressions. Can you show a couple examples of ones that went all the way to target? Honestly there are so many they are tough to track and I don’t remember hearing you celebrate the success of one doing so.

    • fionamargaret says:

      …it is somewhat difficult to celebrate when another jumps up to take the curtain calls…

      * I have had TVIX on the nose most of the time
      *** said 2609 the night before the market went to 2580, and the market at that time was around 2800…..not exact…but does that count…
      ** also in the previous call, called the VIX as it happened and we broke the VIX….
      * so far have been correct in oil except for once..at the moment, I have oil going to 83…oh no, will I be wrong for the second time…..
      **Bought oil down at 29, and suggested that was the low
      **Bought AAPL at around 80, and suggested it was a buy…
      * Maybe you don’t count the VIX which I call each time it goes into a sequence….
      * Numerous short calls for hedge funds…GE, GM, GS,, etc., etc. I have mentioned all on the blog
      **Spoke with Hunter as I had a bid in for UGAZ in the low fifties….it is now in the eighties..

      CHECK THE ARCHIVES

      ***No, you don’t need to show me all the spot-on calls you have made…….

      • lunker1 says:

        I would suggest a much more user-friendly format for your calls if you posted a running update here every time there’s a change because right now you post your calls almost every day and its tough to tell are they the same, or new or different calls, and I can’t tell when you’ve made or dropped a call. For instance:

        ticker date start target
        TVIX 9/12/18 28 72
        UGAZ new 12 30
        SPX 10/19/18 dropped

        Thank you

        • fionamargaret says:

          I forgot
          Short GLD to 950…
          All the shorts I have mentioned on the blog are/were being used by hedge funds.

          I don’t really need your approval, when I know all the time what is happening, and you have to watch someone else’s video each day to get your ideas (and find it necessary to deride Fotis, LML, Michael etc in the process).

          All the best in your “to the moon”…wait…what does the video say…..x

          • lunker1 says:

            Not approval, clarity.

            just trying to follow what you do to see how good it is.

            “ when I know all the time what is happening”…

            Are just posting for yourself?
            I’m not the only one trying to understand.

            kvilia says:
            October 20, 2018 at 3:27 pm

            I have to say I’m puzzled by Fiona’s numbers for quite a while as it almost always seems that progressions she uses are quite delayed, so the price action goes opposite way before reversing. I don’t know what I’m missing, though.

            • fionamargaret says:

              Read the above calls…I do not know what you do not understand…I called the 300 point drop the night before (February)….and the VIX as it happened.
              I call all my shorts when I see them, and they are given to the blog and hedge funds…
              They are professionals and know what to do with the information
              If Kvilia would like me to explain, she knows she can ask me….totally love her…and she knows her music.

              READ THE ARCHIVES….that is the answer to all your questions….and be careful with your number of posts (as mine are counted as replies)…xxx

          • lunker1 says:

            Funny you mention the video each day. Haven’t watched one and in at least six months I’d say because I think I understand the concepts enough to apply them. Isn’t that the same as to how you’ve learned sequences by reading books or other methods of studying like OEW? It’s just a different method of learning. Are you against learning?

      • Page says:

        Fiona.. I know you made some nice calls, no need to prove to anybody.

        • Absolutely no need. You’re input is spot on and valued. Goodness, it’s not like you’re trying to trick someone…..quite the opposite. Greatly appreciate your input, Fiona

          • fionamargaret says:

            Oil is tricky this time though…..

            • fionamargaret says:

              …and be careful, liquidity is poor…I was getting blank bid/ask spreads on Thursday/Friday.
              Flash Crash is not fun, nor is holding TVIX if you cannot sell…I know you all know that…x

            • ttsden says:

              FM Oil Used to be tricky . THen I put the whole 100 yards together from 1973 to date.
              Then took them all apart, sequence of 5 waves followed by 3 waves in alternation., according to EWT principles. Arrived at $77 Top , which then has to give way to short term bear to near previous 4th wave to bottom again short term. So part by part I can understand the nuances. Go always to the source or beginning and work progressively.
              Hope that helps. I know people think I been smoking cannabis tinted with rose oil, when I say it will revisit the beginning at $3 in 2026. Then DexT comes along and gives me the likely answer. Love the collective here Thanks Tony Caldaro you made it all happen.
              This OEW is the bestest of all communities , warts et al. Multo Grazie .
              E&OE

    • torehund says:

      Lunker at times there is posted charts of long time spans, and they might very well pan out within a 1 to 2 year period. Sure if you play them with options or another geared instrument they may end up worthless before the pattern has matured out. Going into smaller scale is very difficult and you see how many x-waves market intertwines to confound the counting, buying itself time causing investor despair. Well we can only Get better and more humble alongside shrinking portifolios, but if stocks was easy hey we would all be millionares. We all give and try with what we have got, cant Get any better than that😅

    • fionamargaret says:

      Maybe you should add TSLA to the list…picked up by the funds, and I hope by you too…x

      • fionamargaret says:

        Tore, this was for Lunker….but yes, I always hope you do well…

        • fionamargaret says:

          See below where I was talking with Asa.
          I had originally suggested he short GE to 12 (when it was in the 30’s), but now think 4…if it stays alive…and got on to talking TSLA + 70 or so…
          All my shorts are posted here…I was short China, US banks, etc..

          • fionamargaret says:

            …and once you get a bunch, cash in….not very technical, but works…bird in hand etc….
            I always give a suggested price, but don’t always hold to end…xx

  6. lunker1 says:

    es broke below the .618 retrace long from low
    so looks like a retest is coming

  7. J.Wenger says:

    Thanks Tony – Spot on analysis so far. Ready for the next bull, whenever it gets here.
    https://www.invest-safely.com/stock-market-outlook-2018-10-21.html

  8. fionamargaret says:



    Thanks Chris Kimble

    http://tradingdiary.incrediblecharts.com/
    Thanks Colin Twiggs

    https://raymondjames.bluematrix.com/docs/pdf/204fbb52-f3f4-42f3-acff-47839b8d6c3c.pdf
    Thanks Raymond James

    Thanks and love to Tony….and everyone xx

  9. fotis2 says:

    CL bearflag on daily/oversold weekly could work for 66
    https://invst.ly/8xmtd
    https://invst.ly/8xmtx

  10. bouraq says:

    All charts are FREE this weekend. Enjoy! https://tradingchannels.uk/weekend-post-14-charts-43/ #EURUSD #GBPUSD #AUDUSD #NZDUSD #SPX #DJIA #DOW #RUT #FTSE #DAX #OOTT #GOLD #SILVER #NATGAS #OIL

  11. phil1247 says:

    CLZ18…

    Kvilia…
    stuck in no mans land between 69.05 and 69.68
    TJ has five waves down … but what if the wave is not complete?

    DH method says stay away until one side wins

  12. phil1247 says:

    https://caldaro.wordpress.com/#jp-carousel-21775

    Tony .

    . the 13 and 34 day ema crossover ” sell signal ”
    worked nicely a couple of weeks ago
    ending the crossover ” buy signal ” back in early may

    you havent patented this yet … have you ? 😉

  13. lml25 says:

    AL Brooks:
    The monthly S&P500 Emini futures candlestick chart has a big bear bar so far for October. However, it followed a 6 bar bull micro channel. Furthermore, the double top with the January high only has 9 bars. That is probably too small to reverse the 2 year tight bull channel.

    Since the double top is small compared to the strong 2 year bull trend, this month’s selloff is probably a minor reversal. Therefore, a trading range or bull flag is more likely than a bear trend. The minimum 1st target is a test of the 20 month EMA at 2638. If the Emini gets there this year, it will also fall below the 2689.75 close of last year.

    Because the bear bar so far is surprisingly big and it followed a strong 6 month rally, traders are confused. Big Up, Big Down, creates Big Confusion. The only thing that traders believe is likely is that the next couple of months will not go far up or down. Traders will take quick profits and bet on reversals. This will probably result in at least a few more sideways months.

    If instead this month is a bear trap and the market quickly rallies to a new high, the high will probably be brief. The strong selling in February and again in October represent a market in transition. Instead of a strong bull trend, the monthly chart is evolving into a trading range. There will probably be sellers above the September high. This would create a small wedge top.

    In addition, there will be buyers below the February low. The result of buying low, selling high, and taking quick profits will be a trading range.

    The weekly S&P500 Emini futures candlestick chart formed a doji inside bar this week after last week’s big bear breakout.

    This week’s doji inside bar represents an absence of follow-through selling after last week’s bear Surprise Bar. Because there was no follow-through selling, traders will conclude that the selloff will probably be a bear leg in a trading range and not the start of a bear trend. However, the bottom of the range might be all the way down at the February low.

    This is what traders will discover over the next few weeks. If the bears get more big bear bars, and especially consecutive big bear bars, the odds will favor a test of the February low.

    Alternatively, if the Emini reverses up strongly next week or from below last year’s close, traders will conclude that last week’s selloff was a bear trap. Traders would conclude that the selling was caused by options selling firms having to hedge in a falling market (see last week’s post). This is in contrast to some fundamental change in the market, which would result in protracted selling over the next several months.

    But, the prospect over the next year is unchanged. This is more likely a trading range than the start of a bear trend. Therefore, even if the Emini falls to the February low, it will probably not fall much further. In addition, the odds still favor a move above 3,000, and possibly to the measured move targets around 3100 and 3200, before the weekly chart will enter a bear trend.

    Daily S&P500 Emini futures candlestick chart:
    Emini October exhaustive sell climax should test 2017 close of 2689.75

  14. phil1247 says:

    SPX TARGET …… 3207

    Lunker
    ..you say that 2505 is not important to the bull market but look at the setup

    the 50 % support of the extension long is 2505
    but more interestingly if Tonys Major 1 is correct
    the 38% retrace is at ………………2505 also
    this would be the perfect launching pad for Major 3

    intiial target would be 3207

    with no recession on the horizon anytime soon
    launch could be sooner than most think
    i dont like using fundamentals but without a recession
    highly unlikely for spx to drop below 2417
    if it does 3000+ is kaput

    • lunker1 says:

      focusing Scotty on the most important number 2417

      • aahmichael says:

        2417 is meaningless. The number that matters is 2493, because if the market goes below that number, then that would completely invalidate Tony’s count. The EW principle of degrees means that smaller degree waves have to literally be smaller than the prior larger degree waves, and if the market were to go below 2493, then that would make Tony’s major 2 larger than his Primary 2, thereby invalidating the count.

  15. elmer510 says:

    Macro-economic outlook from OECD (All western countries):

    “08/10/2018 – Composite leading indicators (CLIs), designed to anticipate turning points in economic activity relative to trend six to nine months ahead, continue to point to easing growth momentum in the OECD area as a whole.

    Easing growth momentum remains the assessment for the euro area as a whole, including France and Italy, and for the United Kingdom,while in Germany the CLI now points to stabilising growth momentum.”

    Slower economic growth but stabilizing is the picture from China as well.

  16. Thanks Tony. My thoughts:

  17. STEPHEN BARTLETT says:

    Europe and Asia have been leading the declines. In Asia the HSI and HSCEI are now on good support. There are signs of life. Nikkei the same and the Dollar Yen which is generally risk off has a clear corrective abcxabc off the high rather than a impulsive decline. In Europe and around 2-3% lower it’s likely we see a rally. Dax is showing a head and shoulders top. It would be unusual if that pattern printed before next year. I don’t see a collapse until then. Another reason for not expecting a straight down move is that the S&P decline is not faster in price or time than than the January decline + there is probably more pain for hedge fund performance in 2018 if S&P finishes +8 for the year rather than flat.
    Knowing the difficulty in calling a ATH in anything another move up into 3050 makes most sense. The Jan correction to now will look like a continuation abc pattern with a weak wave c and everybody will either be long again or have limited short exposure.
    It is also possible we just chop with just a marginally higher bias until 2019 but I am struggling to see the impulsive wave down trade until next year especially into positive mid nov cycle.
    Next weak may be weak and Europe -2% or so and then I would get long to close out the trade into Jan.

  18. torehund says:

    https://en.m.wikipedia.org/wiki/Economy_of_Honduras

    Mass exodus and the pickture on the bridge of population leaving. As in the stock-market as in life when a strong collective force marches on, there is very little left to gain on the move. A succers rally, if you like. Bananas, coffe and agriculture could be very close to a turn. Better days for the 3 RD, world lets hope so. And close to a turn also n the middle east. Lets trust the universe.

    • fenster6 says:

      mass migration is all about poverty
      Do you think the rich came to the US and Canada and Australia from Europe by the Millions

      It was the starving landless poor

      • elmer510 says:

        Problem is when very poor countries are getting richer, more of the poor can afford traveling northwards. Pakistan and Philippines are not among the poorest nations, but they are big exporters of people around the globe. Africa south of Sahara is not a big exporter yet with a few exceptions. But this can change a lot in the future. Perhaps there will be more Trumps around – and walls.

      • kjb0 says:

        They came….but didn’t go on welfare, food stamps or government healthcare.
        They also came to this country within the parameters of our laws and they assimilated. Immigration without assimilation is invasion. Illegal immigration is also an invasion.

        • fenster6 says:

          hmmm… I do not recall the indigenous people of the US , Canada, Australia, NZ or South Africa or South America who had a 30,000 history inviting the Europeans to come. Can you?

          The Europeans have been in those countries for 250 years or less. We have to admit that it is a truth.

          As to your assertion about welfare and food stamps. Shocking but it is a lie

          The Illegal Immigration Reform and Immigrant Responsibility Act of 1996, or “IIRIRA.” Congress legislated that not only would undocumented immigrants not receive welfare, but legal immigrants wouldn’t get benefits such as food stamps,

          Here’s a listing of benefits undocumented immigrants expressly do not receive:

          Children’s Health Insurance (CHIP)

          Disability, aka Supplemental Security Income (SSI)

          Food stamps, aka The Supplemental Nutrition Assistance Program (SNAP)

          Health insurance, aka insurance via the Affordable Care Act (ACA)

          Medicaid

          Medicare

          Social Security

          Welfare

          • elmer510 says:

            Many years ago my grandpa was an illegal immigrant to US. His friend had a sailboat which 10 guys used for their trip from Europe to Long island outside NYC. No police were around. They sold the boat and went by train to Chicago where they worked in construction for 7 years.
            Then they travelled home again most of them, with dollars in their pockets. Easy come, easy go.

        • torehund says:

          Previously there were jobs in the West, but they were shipped to Asia. Now the West has a Service economy, clerks, bartenders and public support functions. Here in Norway immigrants need to bribe in order to even be considered for a job…Margins in the private sector has vanished due to rising taxes and exuberance in the public sector. The system needs a reset.

          • lml25 says:

            Comparing 2018 to the 1700s or 1920s is a ridiculous argument.Back then,when Europeans came to America,it was to explore.No laws were in place.”Wild wild west.”
            Expansion of Europe led to our country’s development.If that hadn’t happened,we would not have progressed to this place we are at now.The smartest and most adventurous survive and evolve.Darwin,anyone?
            In tbe 20s and 30s,again,the US,with still a relatively low population,didn’t prevent the influx of Europeans.It was to our benefit to have hard working people come in.
            At that time,the US population was 90-95% white.
            Today,it has changed.This is not your dads United States of America.Because of demographics,the political landscape is veering left.It can only continue.The drop in white population growth has caused a change in this country for the worse.As other races increase their percentages,the country devolves into groups wanting free money,food stamps,welfare.Why?The groups of people, who are coming in to replace whites, don’t measure up to the intelligence level required to push the economy higher.So Kamala Harris wants to give $500 a month to make up for the deficiency. Politics is huge in all of this.All I see on TV are white people saying,”White people need to step aside.”
            It’s insane.400 years ago,at least the Indians went down fighting.Today,as white people are being denounced everywhere(media,Hollywood,politics),for the purposes of being replaced,it looks like fighting back is the last thing we want to do.That attitude had better change soon.

  19. torehund says:

    On Spx I am inclined to call the recent bottom a leser order w-2 following the primary 2 bottom in 2016. An X- ish hinge phenomenon before P – 3 starts in earnest.
    Bleakest period of the year too right now too, glare of summer is gone and still a long ways to go towards christmas.

  20. mcgcapital says:

    Fundamentals post

    Firstly I would say that this market is all about liquidity. You have to think about how far this market has come since 2009, and how much of those gains in the early years of this bull market were driven by multiple expansion because of TINA and the construct created by very low interest rates and QE, rather than the fundamentals being great. This means that there’s lots of good news already priced into valuations, and now we have rates moving higher and QT. So potentially you can have a situation where the economy seems to be doing well but the market struggles a bit which is counter intuitive, because multiples need to shrink.

    I’m firmly of the belief that liquidity and rising rates will be what ends this business cycle, as I just don’t think the economy can cope with it given the debt accumulation post 2009. Phil mentioned that rates don’t matter to stocks below 5-6%, but I think the tipping point could be much lower this time given this backdrop, and it could even be there already. So it’s worth watching what happens on that front.

    I’d also say China is a major point of vulnerability given what they’ve done over there in terms of debt financing. The trade war could have a significant negative impact on their economy and that will have a bad effect on the global economy.

    If there’s a recession there’s little chance this is a vanilla 15-20% correction. I can see imbalances everywhere and it just needs a catalyst to ignite them all, which a contracting economy would do. I think if you lose the 2018 lows on SPX you’re looking at 40-60% down by the time it’s finished.

    I should caveat my posts by saying that whilst I’ve done lots of research on historical market conditions in a professional capacity, I only started trading in 2011. So I’ve never traded an actual bear market before. So far I’ve seen nothing in 2018 that has been any different to corrective periods in 2011, 2015 and 2016 but I’m also aware that if things get ugly like 2008 it might be a bit more difficult to read. But will come to that if/when it happens.

    • chrisk44342 says:

      I commend you for your honesty in acknowledging your relative lack of experience in trading. Nothing wrong with that. It’s just time. What you fail to account for in your reasoning is that the bottom of Tony’s proposed M2 could also have catalysts. E.G. trade deal reached with China, Fed stops rate increases, or has to 180 and start easing again as Tony speculates. I’m not predicting those things will happen because no one knows what will happen. It’s pointless to even feign knowledge of the future. You’re a smart cookie- don’t wreck it by thinking you know something other people don’t, because none of us do. I have a friend who is always playing this game with me, trying to test me with his predictions based on macro events- it’s really laughable if you think about it

      • mcgcapital says:

        As I’ve said before Chris, I don’t believe in market timing from an investment perspective and trading is a game of set ups which makes view dependency redundant. But the end game on the macro front looks quite clear that eventually it will end with a nasty collapse… there are consequences to what central banks have done since the financial crisis.

        What we don’t know is when there will be a catalyst for something big to happen. I’m not saying it’s right now, but it’s a possibility. If it doesn’t happen now then it will happen in the future. I don’t see the OEW P3 (never more than a 20% drop) count as being viable unless you make the assumption that there’s nothing bad going to come up systemically and that any slowdowns in growth are quickly reversed. Both of those assumptions look unrealistic given the imbalances that have built up due to low rates/monetary easing.

    • ttsden says:

      MGCapital can we swap addresses? lemme know tonyteo8@gmail.com tks

    • Hi mcg..couldn’t agree with you more. This chart shows liquidity in SPX dried up late Friday morning ..the rest is history.

      https://gyazo.com/7e38fb9e9900aaf5bdfde195f0435dfa

    • Speaking of liquidity…if there is anything to this chart…something “not nice” is going to happen to GE. A negative announcement on Monday?… A bad earnings warning/report?…cut their dividend?

      https://gyazo.com/9e85de98f388354292bd796fb40e98a4

      • fionamargaret says:

        Thanks Asa…I had blank bid/ask intermittently as mentioned to Freddie, and as for GE I find my numbers are pre-emptive (before chart work) as they are based on permutations of at least five years of EOD pricing. Going to 4 seemed impossible at 30 (and it may not reach as far down as that, as folks tend to buy what they perceive as a bargain), but I am sure if you buy when I first mention, you would have made some good money.
        Remember my suggestion of shorting the banks, going short China (YANG) quite a few months ago.(before showing on the charts).

        GM now suggests 18,
        TLT suggests 89, while TBT suggests 51….I don’t think this will be precise, but it gives you the gist.
        Just for fun, I looked at CME….either it is a DT now, or going with the permutation, suggests up to 231.
        MMM is in a positive pattern going to 245….how can this be…
        If anyone has a particular stock, I shall tell you its future….not resident seer for nothing…xx

        • Anthony Saraniti says:

          Fiona
          Some of the talking heads on CNBC suggest it’s only a matter of time before GE cuts their dividend. Maybe the new CEO cuts the dividend the day they report earnings, print a capitulation bottom…and that maybe a entry or close to an entry. IMHO, GE can’t/won’t cancel the dividend as income ETF,s and mutual funds will be forced to sell their positions.

          • fionamargaret says:

            Thanks Asa…it took me a moment to recognize you in your other format.
            I had MMM as a short previously, so was surprised at it being bullish (though a feeble bullish), but the most interesting (read crazy) is TSLA suggesting 347….lots of short covering, bought out, or just leave at crazy… I feel I can voice this stuff as most can check the waves, and use stops…and more analysis is available from me if asked.

            I always like how you bottomline the parameters each morning…it is appreciated.

            • fionamargaret says:

              TSLA suggesting 347…see above…and it was up 33.19 today…I did not check to know why, but if you bought it along with me, I do not want to hold into earnings…..x

  21. Jack Lad says:

    When what is going up is said to be simultaneously going down then there is reason to scratch one’s head, but only in a conventional sense…
    https://wavecount.blogspot.com/2018/10/swiss-index-smi.html
    Did someone say “we shall see”? ,,,no? … must have been me.

  22. mcgcapital says:

    Market technicals post

    I think with the market at this juncture there are so many possible permutations over the next 6 months that you literally have to take it one trade and one set up at a time rather than make big predictions. I still think a bear market is the most likely outcome here and that the highs for this cycle have already been seen, but that also doesn’t mean that we’re imminently going to fall off a cliff either.

    When you have price acting in such a choppy fashion, I always make the assumption that it will retest the lows as usually when a market bottoms it doesn’t give you much time to get on the rally and we move quickly and decisively off the lows. That hasn’t happened and so far this move has more in common with aug/sept 2015, jan/feb 2016 and feb/march 2018 than it does with oct 2014 when we didn’t get a retest of the lows. Would also say that the first 3 of those the retest was very close to the initial level so it’s probably a fair assumption to make that we will get quite close to 2709 on a retest. So the trade set ups for me at the moment are to keep selling into rallies and more than likely switch long if that retest comes. I’m not sure I see it breaking 2700 any time soon, but if it does then it can go much lower.

    When I look at Europe, it’s been dropping lower for months. FTSE has dropped from 7900 to 6900 with a few 300 point bounces along the way and we’re now back near the lows from Q1. The way it’s acting to me, I think we’re due a stronger countertrend rally sometime soon. Likewise with the Dax. But again this is all subject to us being able to use the October lows to trade against as below there it can go into free fall.

    Timing wise I’d prefer the retest to come this week then rally into month end. Quite often when things get volatile the month end sees a fade of the moves that have been happening. Once you get into November there are a few catalysts that the market could focus on which could be bullish such as mid term elections, the Trump/Xi trade meeting and Santa rally seasonality. I also think there probably aren’t many examples of markets that have traded up 10% through September and then closed the year in the red. Tops are a process, and I think the market would set up a much worse fall if it keeps attempting to rally and failing below the highs. That way we’re more likely to give way in a major fashion eventually and I think that move is coming at some point.

    If I had to guess on what’s going to happen between now and the end of the year I’d go with a low retest this week, then a rally for a few weeks through November maybe even as far back as the 2875-2900 area, then possibly another bout of volatility late November/early December ahead of the fed meeting then a low volume pop mid-late December, and sell off again last few days of the year. So I’m expecting some range bound trading with some nice volatility. If that happens then it kind of would have a similar feel to late 2015 which traded in a 5% or so range below the highs and was followed by a very bearish start to 2016. I think that’s the most likely outcome here rather than a direct collapse as sentiment at the moment seems very subdued and the fin twit people all seem to now be turning bearish and they’re usually wrong. So the parameters here really are to watch the 2700 area, and then watch the strength of the rally off it if it comes.

  23. Arthur Knopf says:

    SENTIMENT UPDATE: End of the Wealth Effect
    http://sentimentsignals.blogspot.com

  24. kvilia says:

    Tony, appreciate your feedback. Is 76.90 on your WTIC chart supposed to be labeled as green a? And do you think 68.53 recent low looks like a green b after 5 wave structure down?

    Thank you in advance.
    kvi

  25. kvilia says:

    Tony, thank you for your important updates. And I have to say that quality of the blog has skyrocketed immensely thanks to Phil, lunker, Tommy, Tore, Tom, gto, Fiona and I know I’m missing lots of names here. Thank you, all, for your contributions.
    I have to say I’m puzzled by Fiona’s numbers for quite a while as it almost always seems that progressions she uses are quite delayed, so the price action goes opposite way before reversing. I don’t know what I’m missing, though.

  26. searchme2017 says:

    Thanks for your expertise….as always, Tony.

    An interesting “fib” developing on the DOW since that’s no longer lagging…and where much foreign money seems to be settling in.

    ATH 10/3/18 @ 26951.81 (Major 1, Primary 3, Cycle 1 of Super Cycle 3). 10/11/18 @ 24899.77 (intra day figures) for initial “A” wave down = 2052.04 DOW points.

    10/16/18 @ 25817.68 minus 24899.77 for (perhaps “a” wave up) = 917.91 DOW points. No “fib” relationship (yet) to initial “A” wave down.

    10/18/18 @ 25817.68 minus 25236.01 for (perhaps “b” wave down) = 581.67 DOW points. 63% of “a”. Close, but no cigar.

    Here’s where it gets interesting. If we are now to begin a “c” wave up to complete “B” wave up then a .618% (X “a”) won’t work. Too small…. but a 1.00% relationship to the “a” wave brings it to….(25236.01 + 917.91) = 26153.92. This is 61.1% of wave “A” down from ATH on 10/3/18 to complete “B” wave of new downtrend.

    1254.15 DOW points from “A” wave bottom on 10/11/18 is 1254.15 divided by 2052.04 = 61%.
    Tentative target for retrace is 26153.92 to complete “B” wave.

    Whew!!!! I’m finished…….

  27. torehund says:

    .bleak outlook from Celente.

  28. gtoptions says:

    Thanks Tony
    SPX ~ 13/34cci Pattern still in play, But I also see some symmetry with a LL possible, then the chop continues or NATH. ~ https://www.tradingview.com/x/vYh4sHbR/

    SPX~ Bull Correction 13WRSI > 40 ~ https://www.tradingview.com/x/XHBRgoxV/

  29. torehund says:

    Thanks Tony.
    I keep commodities in focus, firstly due to colder weather mixed by supply destruction caused by low prices. Arab spring doesnt seem to end soon and may spread to Saudi and Iran before all is said and done. Mass events erupt spontaneously “out of nowhere” when a certain boiling point has been reached. Black swans looming all around working towards reverting prices to where sustainable supply is once more satisfied. Still Bullish longer term on shipping, energy and commodities. Waiting for the monster squeeze to appear😜🔝

  30. Great write up Tony!

    I like the enthusiasm here.
    There are a lot of components for a continued roaring bull market, but …
    The bond market may have a say in this.

    I posted this longer term pic 2 weeks ago, of 30 year T-Bond

    bookmark of that post roughly here:
    https://caldaro.wordpress.com/2018/10/06/weekend-update-672/comment-page-1/#comment-365340

    Update on 30 year T-bond, daily chart: rates now moving higher again, after spikey move of 2 weeks ago.

    Although the common wisdom seems to be that higher rates don’t matter,
    (and most of this is from market people who have never seen rates move higher),
    I remain unconvinced that higher rates don’t matter, going forward.
    Room for disagreement here.

    But one fact that we can agree on is that higher rates mattered this past January, where 10 year Treasuries went about 2.70% on a closing basis. And now we are 49 basis points higher than that.

    GLTA

    • where 10 year Treasuries went about 2.70%
      should be “where 10 year Treasuries went above 2.70%”

      • phil1247 says:

        at these levels

        rates do not matter re stocks
        ….chart from EWI

        see Tonys treatise on rates below 6 % dont matter

        • All your chart tells me is that equity prices are roughly the same as they were 8 months ago, but interest rates are higher. Considering that the FED promises to continue raising rates, and the SPX dividend (today at 1.87%) is lower by 40 basis points than the 13 week T-bill (today at 2.27%), that’s not a very compelling case to buy more stocks.
          But maybe that’s just me. .

          For the vast majority of the current bull market (up until only a couple months ago) short-term interest rates have been below the dividend yield of the S&P 500. Since the FOMC began hiking rates over two years ago, short-term UST rates have risen. This year, they rose above the S&P 500 dividend yield; a key inflection point creating talk that the higher yield on cash makes UST more attractive than equities.

          Source: Seeking Alpha
          Sep. 25, 2018

          • phil1247 says:

            tom
            dont get me wrong

            i love 3 yr t notes at 3% and continue to gobble them up when they
            poke over the daily bollinger band

            the fed promises to raise rates in the future
            will disappear if told to stop by the market
            remember …………… fed follows rates ………… they do not lead

            stocks are just a trading vehicle to me
            i buy /sell when ms market says buy /sell
            without any regard to rates… earnings ….news or anything else

            my best advice to anyone is from ira epstein……

            cover up the name of the chart
            and trade it as if you know nothing about it
            bias is eliminated that way

            good luck tom

            • Realistically, I think the view from 30K feet is that sovereign governments are selling U.S. Treasuries (esp China). That’s what is driving rates higher. China certainly needs the cash, and obliquely it’s a giant “middle finger” to President Trump’s trade policies, all completely legal.
              If that’s correct, very little the FED can do to stop that, short of a 180 degree reverse in policy.
              Good luck to you also Phil.

              • phil1247 says:

                as i mentioned 95% of my portfolio is fixed income
                so let china keep selling
                i would love …3 to 4 yr notes at 4 or 5 %
                keep em coming 🙂

    • aahmichael says:

      Tom, I agree with you that rates matter. Since the stock market lows in 2009, people have gotten extremely leveraged by utilizing security backed loans. These types of variable rate loans (tied to the 30-day Libor) were a no-brainer because the cost of borrowing was so low and the return on equities has been high, however, those rates have increased by 225bps in the last 2 years and are only going to continue to increase even more each quarter. In addition, if stocks start to drop for real, then margin calls are going to be hitting huge amounts of people, not to mention the higher costs that they’re already getting hit with. It easily has the potential to be a major bubble bursting.

      • aah – My sister in law is an Managing Director at GS.
        Back in the 2008 crash, she had co-workers who had used GS 144 stock to secure second home mortgages (e.g. Lake Placid type stuff). When it was all said and done, those people lost their second homes. And these are people who are considered experts in risk management.
        True story.

  31. keepitsimple says:

    Thank you again Tony. Spot on analysis… your record speaks for itself.

  32. phil1247 says:

    SPX monthly

    3040 target still on track
    while above 2687….
    otherwise

    look for a similar scenario to 2015/2016 extension long resolution …
    only a break of 2417 puts the kibosh on 3000+ target

    thanks Tony !

    • schizo1688 says:

      Thanks phil

    • scottycj1 says:

      Phil
      You have 2963 as your high anchor….it never traded that high.
      2505 never traded either. ????

      • lunker1 says:

        Scotty 2963 is the upper BB

        And he said 2505 was front run meaning it didn’t trade that low because of an aggressive bid

      • phil1247 says:

        hi scotty
        2963 is the location of the upper boll band not the high
        2530 to 2941 is the traditional long with bull above 2687( .618 )

        it is the same situation as during the 15 min time frame
        we front ran the extension 2505 level ( 50% support ) at 2531
        then we broke above the high but did not hit 3040 target
        therefore your risk is all the way back to the bottom of the extension

        at 2417 if the long from lows traditional fails at 2687 ( bull above )

        let me know if that makes sense to you

        • scottycj1 says:

          I cant put a lot of faith in something
          based on prices that never traded. Im also not one
          to put too much faith in BB’s

          • lunker1 says:

            You’re focusing on the wrong numbers. BB’s are an indicator for guidance and 2505 isn’t a very important number for the bull to continue but 2417 and it’s based on Fibonacci retraces of numbers that did trade

          • aahmichael says:

            Why anyone would put any faith on long term market calls based on monthly charts from a guy who only scalps the market based on 5 min and 15 min charts is beyond me. Honestly, charts like that are nothing more than mental masturbation and totally useless. They are untradable, even for position traders.

  33. M1 says:

    US Dollar loosing steam ?? Should we see a rally in precious metals

  34. rxman4121 says:

    Thanks for another great update. (1) the significance of the thick 2400 green line? (2) given that you expect a 6 month correction, the market should be much higher 2 years from now?

    • tony caldaro says:

      max downside
      yes agree

      • Anne Day says:

        Wow! You just predicated another 4 years of presidency for Trump 🙂

        • tony caldaro says:

          surprised?
          the last two presidents that kicked off Primary III’s were republicans and lasted 8 years:
          Eisenhower, and Reagan.

        • dwr51 says:

          This is for Tommyboys- democratic socialism has worked and continues to work in a number of countries ( your northern neighbor, most of northern europe and others, check out their standard of living, their education standards, their overall happiness etc. then try to tell the world it doesn’t work.
          Dave

          • Depends on what you call socialism. Remember, they call NKorea the Democratic People’s Republic of Korea. The only reason why it worked (if you want to give blind credit) for Nordic countries is, up until a few years ago, they were monolithic cultures. Ask the Swedes how that’s working for them now. Venezuela has done well, huh? How about that bastion of economic growth called Cuba? Put people to work with good jobs, privatize, and regulate only where necessary The world will not be able to spend other people’s money forever, as Maggie Thatcher lamented truthfully about socialism. Let freedom ring, regulation die, and individual rights reign.

            • dwr51 says:

              Tim
              Socialism is socialism. I give you that Sweden has problems but so does every other country in the world, however to compare the countries of northern Europe to N.Korea,Venezuela or Cuba is preposterous, these countries can call themselves anything they want but it does not change what they are.They are much more closely aligned with Communism than Socialism.
              I must apologize to Tony I usually refrain from entering the political discussions on this blog and for this one indiscretion I beg his forgiveness.
              Dave

          • mcgcapital says:

            As a UK citizen I have to agree with this. It’s clear to me that the best system out there is capitalism despite it’s obvious flaws, as you need people to be incentivised to work hard and that only happens if they are working for themselves and not for the benefit of the collective. But you can still be a capitalist who believes in profit maximisation and still be pragmatic about certain social issues. If you look at the bigger picture and not just the numbers on a micro level, there are huge advantages to society of the state providing key services like healthcare and education for example. It’s like the idea of everyone having ‘free’ (tax payer funded) healthcare and education is considered by some Americans to make you a communist or if it’s not the American way it’s the same as Venezuela. But if you look at the stats, the US system as it stands is far inferior to the rest of the industrialised world as it’s more expensive and less efficient.

            The economy functions best if the workforce is healthy (and therefore more productive) and well educated. When you have healthcare that’s free at the point of use, people don’t delay going to see a doctor and its often cheaper (and has better prognosis) to treat someone early than to do it late when they finally decide they can’t put it off any longer on the basis of cost. Plus if you treat poor people for free when they’re ill, they have a chance at contributing something positive to the economy which they otherwise wouldn’t be able to do. So if you have universal coverage, financially it often works out cheaper to provide overall given there are lots of second order benefits to it that are hard to quantify. But the US spends double what other countries spend as a % of GDP and the system doesn’t work. That alone should make people think it should change. Plus, if you nationalised healthcare you’d save on the profit element, but that doesn’t mean that healthcare professionals have to be badly paid. Over here they still get paid handsomely with most experienced doctors earning between 3 and 10 times the national average salary depending on role/experience.

            Then on education, its imperative to social mobility that its easily accessible and not prohibitively expensive. It shouldn’t matter how rich your dad is. Ultimately the beauty of a capitalist society is that someone should be able to start from nothing and work their way up and become something through hard work. That’s the aim of it all. But you need education to do that… it’s not capitalist to deny people opportunity. So I think that you need some sort of state involvement in key sectors to make sure the system as a whole runs efficiently and in a way that maximises the benefits to society. You can’t just have unregulated capitalism in every sector and expect the overall economy to function at it’s optimum. There needs to be a change in mindset by some so that they think of the bigger picture and not just the individual level.

            • aahmichael says:

              It’s been my experience that most people who are Trump supporters see the world in black and white. It’s either one extreme or the other for them. They see nothing in shades of grey. There is nothing in the middle for them.

              This country was built on capitalism with a conscience. However, since Trump is a sociopath (among other things,) he has no conscience, and neither do his supporters. That’s why the Trump administration now supports ruthless, murderous, authoritarian dictators, who are allowed to do anything they want to do, and torture and murder anyone they want, as long as they buy stuff from the US, and/or do business with Trump personally. The only thing that matters to these people is money.

      • Mike Hoffman says:

        What S&P level do you change your bearish stance? Remembering 2016’s bear market expected drop to 1100 S&P, and 1/2 site abandoning readership.

          • Mike Hoffman says:

            After New Highs, what’s next S&P target? Is Mild Bear deferred for short period or long time frame?

            • tony caldaro says:

              that would mean Int. v is subdividing, and we would be in Minor 3 of V

              • Mike Hoffman says:

                Tony, thank you. Grateful for your write ups and comments. And worry when posts don’t appear at scheduled times. Following up, do you think today’s wave count is similar to the structure in aug 2015 to Dec 2015? Being cautious as 2016’s false breakdown cost me money and had a high opportunity cost.

              • tony caldaro says:

                2015 had a weak topping diagonal triangle formation in the SPX/DOW
                While the NDX/NAZ scattered their tops through the year.
                The 2007 tops were all around the same time.
                But yes it still looks like 2015

  35. tommyboys says:

    Tony any rough idea on the length of the entire bear – 3, 6, 24 months(?)

  36. hugh jazole says:

    How much further do emerging markets have to the downside? Will they bottom before the US?

  37. Lee x says:

    Appreciate it sir
    Anyone have a count on CME stock ?
    Thx

  38. M1 says:

    Tony. It looks like the corrective wave may have not ended. I won’t be surprised if I see the dow trying to reach 26,000 for a 50% retracement of the first wave down (27k to 24.9K).

  39. chairman67 says:

    Thanks Tony.

  40. floyd drummer says:

    tony,

    any ideas on the nature of this wave down? … simple or complex, …zigzag or irregular.

    what might be early signs indicating the nature of this wave?

    thx

  41. floyd drummer says:

    thanks tony

  42. Good morning TC. What’s the MM4ME that you refer to. And do you think the Fed might lower short term interest rates at that time?

  43. micky says:

    Super stuff !! much thanks Tony.

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