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. aahmichael says:

    No change in my view. Trend remains down. I’m still counting it as 1/A,2/B,i,ii down from 2940. Need to break 2583 and accelerate to confirm wave iii of 3/C is in progress. For the first time since the week ending 3/4/16, SPX has closed below its 100wma. Unless there is a stick save next week, then 2350 becomes the next magnet, and 2600 will become the new ceiling. Transports closed at a new 2018 low. If/when the DOW does the same, then that will be a Dow Theory sell signal. For the last 9 consecutive days, which is every trading day in December, ES has sold off a minimum of 34 handles. December Op/Ex week is normally an up week, but that doesn’t mean it’s never been a down week. Bottom line, there is no sign of a turn around…yet.

    (P.S. I receive emails from Neely from time to time, and yesterday he sent out an alert which said that the decline should be over, and a strong rally should begin from current levels and continue through the end of January, at least up to 2900, where he then thinks the bull market will be over. I can’t tell you what his count is, because he uses his own formations which I think are nuts. As an example, he thinks this final formation is an “abcdefghi” Supposedly wave h has just completed and the last rally will be wave i.)

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    • aahmichael says:

      Correction: For the last 9 consecutive days, which is every trading day in December, ES has sold off a minimum of 34 handles from its daily high.

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    • Aah, agree totally. Your count of 3 of 3 (or C) is the best road map ahead. Interesting that no one here is talking about BLACK MONDAY?! I won’t be surprised to see 2480 on Monday by the close. No need to throw out the big “C” word (often refers to C-wave or the Crash-wave), but my cycle program points to a SIGNIFICANT low on Tuesday, lower than 2532 that is for sure.

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      • aahmichael says:

        The one thing that raises a potential red flag about the wave iii down count is that Friday had zero volatility. It was the quietest 50 handle decline I’ve ever seen. If it’s possible for a 50 handle decline to feel like watching paint dry, Friday was it. Market action like Friday frequently occur on up days, but almost never on down days.

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        • A gap down open around 2575 Monday morning will officially kick away the potential of a Big triangle w(b) from 2622. A couple of reasons for the gap-down scenario. (1), HSI & Shanghai will react forcefully to the slew of bad data in China late last week & Wall Street’s carnage; that will spill over back; (2), Brexit descends into more abysmal chaos, and Monday’s political drama in GB will throw Europe market into panic mood. (3), the lingering government shut-down here will keep any bullish sentiment on check. If 2584 goes, then the floodgate is open. The drip-drip lower over the past two sessions was not impulsive enough on the 5-min chart, but it is evident enough where it wants to go on the 60-min chart and daily chart. Of course, it needs to be accelerated to the bottom pretty soon, as the time window is running out. BTW, the FED needs a “shock & awe” big RED bar to fold entirely. That is why I prepare myself for a BLACK MONDAY.

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        • Is it possible that if we are in the middle of a 5 wave decline, actually now at 3 of 3.
          If so, this “3” should have extensions, and the most power of the entire correction is now,
          IMHO.

          Any thoughts, Michael, anyone else?? (limited to coherent responses please)

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        • M Wags says:

          Agreed.
          The entire decline has been most ORDERLY.

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    • Page says:

      Pay attention to what Neely is saying, a lot of bears will be caught off guard with a very strong Santa rally starting next week, I won’t be surprised if SPX opens with huge gap up Monday. Good luck guys, it is a wild wild wild market. 😀

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    • Billy says:

      Equity markets have been weak the last couple of months in most jurisdictions that is true. However I wouldn’t get too excited about a crash. No crash coming Monday or any time next week. I think Mr Caldaro has the situation in hand and agree the Int A. low is nearby. This rules out a wave 3 down (not to mention waves 4 and 5). This will also help confirm the action from 2940.91 is only corrective. When sentiment is truly in the tank sometime in 2019 at the bottom of Int. C it will help lay the platform for the next bull market. I thought a wave 3 down was certainly a possibility but Friday’s action was not convincing enough on Wall Street and elsewhere.

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    • Billy says:

      If the market was in wave 3 down and 3 = 1 x 1.618 then the target for the bottom of wave 3 would be 2255. Just can’t see this as a serious proposition. Sentiment has also(unsurprisingly) turned quite bearish with the CNN Fear & Greed Index currently sitting at just 8 (Extreme Fear). VIX, after being stuck at an extremely low level in 2017, is now considerably more elevated in the 20s. This means higher volatility and is exactly what we’re seeing. China’s economic growth will re-accelerate again at the start of 2020. This will be a key driver for the next bull market in global equities. Interest rates will rise, bond prices will go down and stocks will rise with rates.

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    • Excellent update aah, thanks for that.
      And you folks out there, when Michael talks of TA, counting, etc. you need to give him the respect deserves. He’s been doing this for many years.
      We are lucky to get his input.
      I’ve seen him make some amazing calls at turns.
      And although some people try to treat this blog like punch clock (punch in the trade // , punch out the trade), others here are a little too busy to do all that.

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    • E says:

      Thanks Aah. On the weekly I see a clear 7 wk cycle forming.
      Impulse Down: Sept 17-Oct 29
      Corrective Up: Oct 29-Dec 10
      Impulse Down: Possibly next 7 weeks, starting with this week’s decline.

      I have back traced on many time scales and the symmetry always holds true (as far as I can tell) with the corrective phase usually lasting 1 to 6 times as long as the impulse phase. However, the impulse/corrective cycle duration seems to stay at a 1:1 ratio until a full 5 waves has completed, then we get the longer corrections. I’m unsure why many ellioticians put heavy focus on price action and little attention to time geometry.

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  2. Page says:

    Thanks Tony. Great update.

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  3. lml25 says:

    Or…the weekly +div gets pounded through on the downside,negating it–and actually exacerbating the decline.We’ve seen +divs that don’t take hold be bear continuation signals.If the 2400 I mentioned as a PO from the H&S pattern(or failed “W” pattern–which should have been bullish,but wasn’t)of 2815 to 2620 takes hold,the +div will NOT work.But as I know from Feb 2016,there are other factors at work.GL all,thanks Mr C.

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  4. retiree247 says:

    Good afternoon all. A quote from CNBC’S Art Cashin the other day:

    Santa’s picture is now on the back of the milk carton.
    We may have to go out and find him, before we can see a Santa Claus rally take place.

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    • Valerie wapiti says:

      Art was on cnbs the first day of my first trade. What a fixture. A piece of the market will vanish when he finally throws in the towel.

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  5. 123 abc says:

    Thank you Tony, great OEW weekend update; some speculative thoughts…

    SPX : Intermediate-b completed at the 03-DEC high as a Flat, and Intermediate-c down underway since; projection likely invalidated if 2685 reclaimed to the upside:

    DOW : An interpretation of the popular traditional Elliott Wave models:

    BTC : Potential support zones (BITFINEX): 3270, 2650, 2150, 1650, 950

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    • elmer510 says:

      Your count looks just fine with one exception – the speed. Cause these intermediate waves are coming and going very fast. Just a few weeks for each is too little compared to historical experience. That’s why I go for Tony’s version, but we don’t know for sure what’s correct. Good luck!

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    • 123 abc says:

      Following scenario likely invalidated with a close above the 2594 pivot…

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  6. Jack Lad says:

    As with all things Elliott – its the thought that counts… I think this place is a privilege of the highest order. Thank you Mr Tony.
    Just checking the barometer:
    https://jsecharts.blogspot.com/2018/12/gold-usoz.html

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  7. kvilia says:

    Thanks, Tony.

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  8. lunker1 says:

    Tony is the lack of alternation give you pause that the count is off and are you able to reconcile it?

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  9. lunker1 says:

    Hi Tony
    Dow already has +D on 60min and SPX does as well but it’s tougher to see. The X axis time scale of the SPX chart includes a few more months of time so price is jammed together more.

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  10. ragnar5 says:

    Seasonality: Over several time horizons op-ex week in December has been the most bullish week of the year for the SPX. http://quantifiableedges.com/blog/

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