Weekend update

REVIEW

The week started at SPX 2659. After a gap up opening on Monday and run up to SPX 2707 the market sold off to 2604 in the last hour of trading. Then the market started to rally. On Tuesday it rallied to SPX 2674, pulled back to 2641, then gapped up on Wednesday to 2724. After a pullback to SPX 2709 it rallied to 2737 before the close. Another gap up opening on Thursday was sold off to SPX 2709. But the market rallied again and hit SPX 2757 on Friday. After that the market started to pullback. The decline took the SPX to 2700 before it bounced to 2723 to end the week. For the week the SPX/DOW gained 2.4%, and the NDX/NAZ gained 2.2%. Economic reports for the week were mostly higher. On the downtick: Case-Shiller, Chicago PMI, ISM, plus the trade deficit increased. On the uptick: personal income/spending, consumer confidence, the ADP, auto sales, factory orders, payrolls, plus jobless claims declined. Next week’s reports will be highlighted by the FOMC meeting and ISM. Best to your week!

LONG TERM: downtrend probable

This week S. Korea joined, Canada, China, Germany, and Spain in confirmed bear markets. Despite the volatility and large price drop the four major US indices have not confirmed bear markets yet. We may not see a bear market confirmation in the US until the bear market is nearly over. That’s what happened in 2016, and is part of the reason we were caught off guard at that low. But one lives and learns how markets respond to uptrend/downtrend confirmations.

We continue to count the five wave movement from the Feb 2016 SPX 1810 low to the Sept/Oct 2018 SPX 2940/41 high as a completed bull market. Major wave 1. Since then we have been expecting a Major 2 bear market to unfold. Typically they do not take long to unfold, a few months, and the decline is usually a modest 15% to 20%. We have tentatively labeled the SPX 2400 with a line, suggesting the maximum downside we’re expecting. Thus far the decline from SPX 2941 to 2604 might have ended the first downtrend, tentatively labeled A. And a potential wave B uptrend is now underway.

MEDIUM TERM: downtrend

We labeled the Wave A downtrend as an abc: 2711-2817-2604. The first decline, 230 points, was nearly equal to the second decline, 213 points. We noted last weekend we expected a drop to the OEW 2594 pivot, and then expected the market to reverse. The SPX fell to within 3 points of the pivot range on Monday, and then reversed.

If the market did complete the wave A downtrend at that SPX 2604 low, we expect the wave B to be an uptrend that retraces 50% to 61.8% of the entire decline: SPX 2773 – 2812. Since the previous B wave was at SPX 2817 it could move higher. Also, we’re beginning to believe that this first downtrend was indeed an Intermediate wave. It dropped further than we expected, nearly down to the spring lows, for it to be a Minor wave. Plus, the NAZ/NDX declined nearly 15%. If this works out, then we could have just ended Int. A, are rising in Int. B, and should see an Int. C decline to end the bear market by early next year.

SHORT TERM

As noted above the first downtrend, Int. A, dropped from SPX 2941 to 2604. The three retracement levels for an Int. B uptrend: 2712, 2773, and 2812. The market has already traded as high as SPX 2757 on Friday. Since Int. B is a counter-trend rally it should be quite choppy, and probably will take a good deal of time to unfold.

Thus far, in this first rally up from the SPX 2604 low we have: 2674-2641-2729-2709-2737-2709-2757. This looks like a simple zigzag: 2737-2709-2757. The normal downward retracements for this advance would be SPX: 2699, 2681 and 2662. On Friday the market sold off from SPX 2757 to 2700 before bouncing to 2728, and ending at 2723. The Friday low may have been all of the retracement as the hourly RSI is already oversold after the negative divergence at the SPX 2757 high. An equal rally from this 2700 low could push the SPX to 2853. Short term support is at the 2656 and 2632 pivots, with resistance at the 2731 and 2780 pivots. Best to your trading!

FOREIGN MARKETS

Asian markets were all higher and gained 4.3%.

European markets were mostly higher and gained 2.0%.

The DJ World index gained 3.2%, and the NYSE gained 2.9%.

COMMODITIES

Bonds continue to downtrend and lost 0.9%.

Crude is in a downtrend as well and lost 6.6%.

Gold is in an uptrend but lost 0.2%.

The USD may be starting a downtrend but gained 0.3%.

BITCOIN

We have been following this very volatile cryptocurrency since its bear market began in late 2017. It has crashed, as it normally does, from $20000 to just under $6000 during 2018. Currently there looks to be a nice wave pattern potentially completing near the lows. It could break either way out of that 6 month triangle. But usually, in this pattern, the breakout is to the upside. This is not a recommendation. Just an observation.

NEXT WEEK

Monday: ISM services at 10am. Tuesday: election day. Wednesday: consumer credit. Thursday: the FOMC statement, and weekly jobless claims. Friday: the PPI, consumer sentiment and wholesale inventories. Best to your week, and get out and vote!

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

About tony caldaro

Investor
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540 Responses to Weekend update

  1. chrisk44342 says:

    who says there isn’t correlation 🙂 https://invst.ly/94r7u

    Like

  2. lunker1 says:

    slight -D on 60min RSI 5 from that little pullback

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  3. Page says:

    Is TVIX heading to Zero? it certainly looks like it. May be another reverse split coming?

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    • travis01 says:

      Not even close. That’s how vix products work. But a novice look at a chart would tell you to short them to oblivion, yet you would lose via hard to borrow rate. Just short term hedges. I have a love/hate with vix but trade it a ton.

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  4. allen kimble says:

    MID TERM seasonality and the similar structure to 2014(the last mid term year)

    Mid term seasonality is usually very bullish once October is over with. Observe 2014 as an analog to what happen the past month, but instead of a Mid October bottom we now have a late October bottom. http://schrts.co/s1Lcee Nevertheless, we should see all time highs in the SPX by end of month and most likely 3000 by the first week of December. This will still be Tony’s “B” wave(as Tony will admit it can still go to all time highs) but why wait it out. Join the heard and buy today, while you still can.

    Cheers,

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    • Bill Manscoe says:

      Allen To expand on your comments about midterm year seasonality, this leads into the pre election year which is normally very bullish and tends to top out in the 2nd/3rd qtr of that year. Also the 9th year of the decennial cycle shows a tendency for a top in the 2nd/3rd qtr of that year with the next major low of that cycle coming after the turn of the decade. Lastly the 7 yr cycle has been more prominent in the last few repetitions (02,09,16,23?). If this plays out, the middle of 2019 would be the idealized top of this cycle which probably represents the Kitchin cycle. I believe that mid 2019 will be a major high with a major low coming in early 2023. Like everyone here I can & and probably will be wrong.

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  5. hohoho598 says:

    I am just waiting for this magical count to get “adjusted” yet again… LOL

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  6. scottycj1 says:

    Camp Freddie ????

    You’ve left me the Lone Bull here…I make the most money
    when I’m the only one on the other side.
    Higher to go…………..

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  7. tommyboys says:

    VIX really busting down today. Like to see it under 18. Good chance Holly’s “big move” never materializes. Just about all here calling a top right near this 2800 area. Could be – or maybe not – maybe down a little and sideways for a time? Positive seasonals are upon us…

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  8. quite the rally from last Monday ups over 200 points in 7.5 trading days, since i have not caught a lot of this rally im just going to add this. I would expect what goes up 200 points in 7.5 trading days will go down even faster. Also since bottoms usually occur around holidays. Would expect C down to end around 11-21 that’s 10 trading days. Last down was 6 down 4 up 8 down 18 days. C wave will take half that time, which means fed day tomorrow could, and should be huge down day.
    last drop was approx 230 down 106 up 213 down. 337 points. AT todays high call it 2802 That makes C equal to A at 2463. Im glad i closed my short yesterday, but im fully loaded again.
    Best of luck

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  9. Harp Man says:

    Murrey Math did show 2850’s recent bottom, then 2812 peak. If this is top of Int B, then Int C down to 2500. This area will also provide a 38% bull mkt Fib retracement, maybe the true weekly 4 down. If so, the 5 up could go as high as 3125. Looking at TZA for Int C down, and UBOT for weekly 5 up move.

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  10. lml25 says:

    GDX hanging at the 10 and 20d(19.37).Nothing new–SPX up,GDX lower.This is key support for the miners.Later all.

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