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. 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.

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  2. 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.

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    • 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

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      • 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.

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    • ttsden says:

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

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    • 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

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    • 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

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      • 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

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        • 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.

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          • 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.

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          • 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

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  3. 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.

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  4. 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.

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  5. Arthur Knopf says:

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

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  6. 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

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  7. 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.

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  8. 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…….

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  9. torehund says:

    .bleak outlook from Celente.

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  10. 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/

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