Weekend update

REVIEW

The market started this roller coaster week at SPX 2633. After the low open on Monday the market dropped to its lowest level of Intermediate wave A at SPX 2583. After that the market rallied strongly, went higher Tuesday, and even higher Wednesday to SPX 2685, before it started to pullback. The pullback was just as fast to the downside as the SPX hit 2594 Friday afternoon, before closing at 2600. Down 50, up 100, down 90. For the week the SPX/DOW lost 1.25%, and the NDX/NAZ lost 0.55%. On the economic front positive reports outpaced negatives ones. On the downtick: import prices, plus the budget deficit increased. On the uptick: the PPI, retail sales, industrial production, capacity utilization, business inventories, plus jobless claims improved. The ECRI ticked up a bit this week. Next week’s reports will be highlighted by the FOMC meeting and Q3 GDP.

LONG TERM: downtrend probable

It seems every time the market has made a low during this downtrend, with positive hourly/daily divergences and a weekly oversold RSI, we expected the downtrend to have ended. The market then rallied for a period of time, only to roll over and make lower lows soon thereafter. Such was nearly the case again on Monday at the recent SPX 2583 low. The medium term Intermediate wave A downtrend continues.

Long term not much has changed. Five Intermediate waves up from SPX 1810 to SPX 2941. Int. iii subdivided into five Minor waves. All corrections, alternated with their corresponding wave degrees. An EW normality that has been nearly absent in recent years. With Major wave 1 completed, a Major wave 2 bear market is probably underway.

MEDIUM TERM: downtrend continues

As noted, we had thought Monday’s low was finally the end of this first bear market downtrend. We had labeled a tentative Int. A at its low. But after a 100 -point rally the market dropped nearly back to that low again on Friday. It would appear, as of Friday, all four indices will need to make that lower low before this downtrend can conclude. We still think the SPX 2577 level should hold. If not SPX 2550.

The downtrend pattern remains the same: an a-b-c down A, an a-b-c up B, and now an a-b-c down C. The entire pattern appears to be a complex 3-3-3 taking the form of a flat. Thus far it looks somewhat similar to Primary 2, only shorter in duration. P2 had a 4-month downtrend, a 1-month uptrend, then another 4-month downtrend. This first downtrend is currently just 2-months.

SHORT TERM

After Monday’s low we tracked the advance from SPX 2583 to 2685 as 5 choppy waves up: 2674-2621-2660-2637-2685. The decline from that high has been 5 choppy waves down: 2650-2670-2637-2656-2594. Since the declines have recently been 7 choppy waves down. We expect a short 20-point rally soon and another low to end this wave. Then another attempt at Intermediate wave B?

Technically a small rally, then decline could setup another hourly positive divergence. The weekly RSI is already sitting at a positive divergence. Maybe the FED will be the catalyst to put in the final low, and get Int. wave B underway. Short term support is at the 2594 and 2575 pivots, with resistance at the 2632 and 2656 pivots. Short term momentum ended the week oversold. Best to your options expiration trading!

FOREIGN MARKETS

Asian markets were mostly lower on the week for a net 0.5% loss.

European markets were mixed and gained 0.3%.

The DJ World index lost 1.2%, and the NYSE lost 1.6%.

COMMODITIES

Bonds continue to uptrend but lost 0.3% on the week.

Crude remains in a downtrend and lost 2.7% on the week.

Gold remains in an uptrend but lost 0.9% on the week.

The USD continues to uptrend and gained 0.6% on the week.

NEXT WEEK

Monday: NY FED at 8:30 and NAHB at 10am. Tuesday: housing starts and building permits. Wednesday: existing home sales and FOMC statement. Thursday: jobless claims, leading indicators, and Philly FED. Friday: Q3 GDP, durable goods, personal income/spending, consumer sentiment, and options expiration.

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

About tony caldaro

Investor
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650 Responses to Weekend update

  1. lunker1 says:

    SPX closed outside its BB 2515 and VIX closed inside and with a lower close than yesterday. Tomorrow if SPX closes back inside the BB and VIX closes lower again both will issue SPX buy signals.

    • phil1247 says:

      SPX 15 min buy was given in am lunker
      but crossed back to sell in pm
      loss of 20 points on the whipsaw
      thats why i only enter long with DH blessing …….
      which never came as you know

  2. stockop says:

    dow theory sell confirmation today… A=C hit for the Dow . Shot a little below but essentially closed right on the mark. rest of the indices need a little lower. I guess we’ll get some sort of bounce there? for the record in 2015 when we finally got the dow theory signal we saw a serious flush and the signal marked the lows of the entire decline in 2015-16 for the Dow

    • mcgcapital says:

      I can see some sort of rally now into year end. See if there’s follow through tomorrow or whether it starts rallying on the ‘the Fed doesn’t think things are that bad’ narrative

      • stockop says:

        i held my shorts overnight. really want to see some signs of capitulations (5.5B+ NYSE volume, 3B+ nasdaq volume and a vix that shows some panic, saw some signs today, but not what i would call full blown capitulation). i agree though that a rally is near. just hope its not tomorrow. it would have to be pretty sizable to make me unprofitable after today, but it would still suck. no CNBC markets in turmoil yet…

      • One guy on CNBC, who usually speaks cojerently, said this afternoon that many pension funds in the U.S. need to maintain a certain asset allocation. Meaning that they will be very big buyers of stock before year-end maybe starting tomorrow.
        Long term the same, but retest back to breakdown levels a certainty.

  3. gary61b says:

    ES I still have a Target at 2471, if 2538 isn’t broken…
    Fiona, you mentioned spx to 2250 for its regression, but you mention UPRO at 33 which is it.?

    • fionamargaret says:

      Gary, UPRO as of this time suggests 33….it is more volatile (subject to change) than the index which usually predicts 6 or so months out.
      The index ($SPX) suggested 2350 from when I mentioned it had changed ….it had 2609 as the top of the progression …going above there was superfluous until almost the high where the numbers suggested an inflection point (either a number higher or lower, predicting the six months out).

      Because of the volatility the index itself has changed to suggest 2131 as of tonight. This is extremely unusual, for the index regression numbers to change, but that is not important to you ….it just is if you are managing a hedge fund and need predictions that are usually 98% accurate 6 months out…..
      I don’t use any software, but am happy to answer any number questions…love them…like music composition.
      If it were me I would look at UPRO and the negative equivalent and see the interaction between the two.
      Off the top of my head, I cannot remember the opposite of UPRO. Give it to me and I will have an answer for you…..
      I like your work.

      • stockop says:

        have you noticed in the past when the numbers change like that after months of giving the same output if it means anything? you’ve had your targets stable as can be since february

        • fionamargaret says:

          ..and I totally expected 2350 to be it….it changed yesterday, and now today to 2131.
          I am going to try looking at the numbers from every angle and will find out where the answer lies and let you know….nice to see your writing stockop… x from me

      • gary61b says:

        Fiona, thanks for the explanation, I believe it to be SPXU. The 2350 regression would that coincide with a bottom within 6 months or near 6 months, or is time irrelevant?

        • fionamargaret says:

          Yes the index is approximately six months ..2131…in that timeframe .
          UPRO is down to 33. SPXU is up 51 (bullet catapult breakout on 17)……short term

          Unless I get my washout soon down to 2131 in one fell swoop…x

  4. chrisk44342 says:

    So phil, now i revisit the EXT from 2774. It hit our target at 2540, did not break it, and resumes down. 2490 next target. We hit 2490 and bounced and go from there.

  5. EL MATADOR says:

    Me looking for 24(85) for bounce significant bounce to commence.

    • thecustomer14 says:

      When El Matador speaks, I listen. Thanks hombre!

    • thecustomer14 says:

      Took a moderate position in SPXL at 33.33… had soulsurfer’s chart in the back of my mind – he’s a good one to listen to as well. 😉

    • fionamargaret says:

      Well Mat knows I totally love him.
      Fotis, HD, El Matador, and I had a little splinter working group…
      Mat, I do have us ($SPX) going down to 2131, which I would like as a complete washout to drain the excess, but that number is long range….we can have little rallies….but I think that is where we ware going….xxx to you…come visit with music…

  6. Jim B. says:

    2560 -hit
    2540-hit
    2520 -hit

    I think I pulled a month of DH profits in an hour.

    See ya!!

  7. thecustomer14 says:

    VIX looking like it’s gonna close flat or lower today despite all the crazy price action… somebody smarter than me can probably tell us that means something as well as what that something is.

    • fionamargaret says:

      Funds/banks buy a bunch forward running the market if they perceive a downturn…we are bag holders…..but if there is a real momentum move like Gundlach suggests, we should do quite well….
      They are nervous since we broke the VIX….

  8. CampFreddie says:

    Sincere Kudos to all the Bears here who nailed this whipsaw machine all the way down…..Bulls innings now very close imo 🙂

  9. Transports getting crushed, cyclicals getting crushed, and Powell sees growth next year as “strong”. The market clearly doesn’t believe him. LOL!

    Says we’ve arrived at the lower end of “neutral”. Says that growth next year of 2.0 – 2.5% is “strong” with overall expectations at 2.3% with unemployment at 3.5%

    But I don’t think that I’ve ever heard a more “hawkish” Q&A at this point in the economic cycle…. says the tariffs are insignificant, Brexit wont have an impact because our banks have had plenty of time to be prepared, they don’t get involved in the political chatter, nor does he and the FED concentrate on one single dominant market to formulate their policy.

    Trump’s head must be exploding right about now.

    C = A at 2478

    • He didn’t thread the needle at all.
      Nothing he said was really dovish even though he acknowledge lower growth for next year.

      He didn’t even sell the “we will continue to be data dependent” thing. No capitulation at all. Instead, what really came out loud and clear is that they have a PLAN that they are going to continue to adhere to in a most deliberate manner. They are literally “trapped” in their own guidance.

    • I am glad you mentioned the C=A level of 2478….low (so far) was around 2488 on the SPX…maybe Tony’s comment will address this. I feel we are over extended to the downside at this point, but lack conviction.

      • I’ve essentially held off any serious buying in my core stocks until I see 2478 where C=A. As you point out, we are awfully close.

        • Valerie wapiti says:

          I picked up some FDX at the close today. Everyone up and down my road is deep in the ho ho spirit and buying like crazy. Fed Ex and UPS have rented trucks and are hiring part timers to keep up with package delivery.

  10. travis01 says:

    85 pts in 65 minutes…nah nothing to it

  11. CampFreddie says:

    …… Just shakin’ the trees 🙂

    • travis01 says:

      watching TVIX action it has risen/declined $26 in 5 moves over 1.5 hrs; cant trade that but wow crazy

      • Valerie wapiti says:

        After watching lXIV melt into oblivion on one afternoon last year I do not touch the double long/short VXX’s. Look but no touch.

        • Valerie wapiti says:

          XIV

        • stockop says:

          no longer double fyi. the higher powers tried to “save us” by reducing them to 1.5x. i think its baloney personally. my favorite vehicle uvxy really used to be a blast to trade. muted
          quite a bit from what it used to be, but still has its moments.

  12. Lee x says:

    Dang Tony your EMA 34 on your SPX hourly was spooky good

  13. cj32 says:

    Here is what CBZ projects, have stops.

    • cj32 says:

      Meant to post this Tweet

  14. Dex T says:

    Interest rates on the rise. No surprise.

    Should be seeing 3% by 2020. Powell is doing a solid job!

    • purplember says:

      is the FED political ? the deep state is real.. pretty amazing FED goal was 6.5% unemployment w Bernanke. FED could of raised the last 4 years of Obama but didn’t. Now Trump in office and they raise rates consistently. HHHHmmmm….

      • Dex T says:

        Of course the Fed is political. But it seems that Powell has taken it back to a much more objective data driven entity than the past few previous chairman’s.

        The first increase was actually in December 2015 and they were discussing it since the end of QE in 2014 though Yellen sped up the process when Trump hit the campaign trail

        I do agree that the increases should have occurred during the Obama era but glad they are still going on.

      • Dex T says:

        I don’t think it’s “Deep state” as much as it is that Powell is simply an old fashioned economist who’s been reviewing the data and realize that rates have been kept artificially depressed for far too long.

        Also, the rate increases began under Yellen and Wall street has been notified well in advance. Anyone oblivious or in denial cannot be helped.

    • Yeah, he is.
      Richard Fisher said on 12:00 show the FED is focused on “Main Street” economy, not “Wall Street” economy. Added, that’s where the job creation comes from small bus.

      • Dex T says:

        Absolutely and that’s what the chairman should be. Unbiased and focused on the economic data.

        I realize that it’s unpopular with Wall Street. But the economic ramifications of artificially low interest rates can be much worse long term.

        • +100
          Jim Cramer can go suck eggs.

        • mcgcapital says:

          We’re way beyond that.. this isn’t Powell’s fault, he’s caught between a rock and a hard place. He either normalises and the market bubble bursts as it can’t handle higher rates. Or he lets it run hot, sees inflation come through and is forced to crash the economy with rapid tightening. He can’t win. The fault lies with Bernanke and Yellen for holding emergency rates for far too long. It’s impacted investor behaviour, corporate behaviour, individual behaviour, and it’s been exported globally as the thing to do. Basically we’re completely f*cked… a major event is unavoidable at this point

          • +100
            Did you notice that Richard Fischer (wx-FED president Dallas, TX) said the direction of interest rates is up? Ovbiously not today, but soon.
            What a clusterF*** that’s gonna be.

            • mcgcapital says:

              Yeah.. It’s not the short end that I think will be a problem. Can’t see them raising again next year if this volatility continues. Its the long end, those term premium will rise. The Fed stepping away from buying bonds at the same time the government runs a massive budget deficit means you have a natural oversupply of longer dated bonds. Need higher yields to attract capital

          • Dex T says:

            I agree but what can be done at this point?? For many of us bears it’s a “see I told you so” moment.

            The bulls had their fun but the bill has finally come due.

            I do think that we are in a better position now than if tightening had not occurred. As bad as a recession may be it would have been worse if nothing had been done up this point.

            • mcgcapital says:

              I don’t know how this plays out, but there are basically two ways forward. The first one is to try and carry on with the post 2008 solution of QE, low rates etc. The fact that QT hasn’t been discussed for a reduction suggests we’re some way off QE4. I hope they don’t go down that route as it might hold things together again for a time, but the problems remain.

              Second one is debt writedowns, higher interest rates.. very bad for financial assets. But on the other side of it we’d be in a much better place. The money is out there to solve these problems, it’s just that it’s unevenly distributed. The wealthy have got much richer over the last 30 years with falling rates. The natural outcome next if there’s no intervention is for rates to rise, debtholders to go broke, asset holders to lose money. No easy solution

  15. Credit Expansion vs SP actually earnings growth rate.. printing of money supply.. Santa Rally ?

    Crazy uncertain markets for equities !

  16. The FED expects growth at 3.0% this year and 2.3% in 2019. With unemployment at 3.5% and inflation at 2.0% next year.

    Actual policy will be adjusted as new data comes in order to keep the expansion on track and inflation at 2.0^

    Time for the Q&A.

    • stockop says:

      thank you for the quick updates on the Fed! got the fed rate hike update from you first. by chance do you mean telling me your source for such quick access? personally i think they pretty much said the worse thing they could in the realm of realistic possibilities

  17. fotis2 says:

    2350s coming up fotis2 says:
    December 10, 2018 at 11:24 pm

    2350s?Lines up perfectly with TL
    fotis2 says:
    December 10, 2018 at 10:55 am

    Monthly close will determine this doesn’t look too good for the Bulls but I’l stick to it maybe too simplistic for you guys?
    https://invst.ly/9h63t

  18. lml25 says:

    Answer Mr.Trebek?What is TLT rides the upper bb and beyond.

  19. Lee x says:

    See yas at today’s update
    This is an old school reaction

Comments are closed.