Weekend update

REVIEW

Nastiest week of the bear market by far. The selling felt like it was on cruise control. The week started at SPX 2600. After a gap down opening on Monday the SPX made a new downtrend low at 2531. A gap up opening on Tuesday ended with a lower downtrend low at SPX 2529. Wednesday, FOMC day, had a steady rise to SPX 2585 just after the 25bps rate increase was announced. Then for the next hour, including a half-hour pressor with FED chairman Powell, the SPX dropped 100 points to a new downtrend low at 2489. Thursday’s gap down opening added to the selling, and another new downtrend low at SPX 2441. Friday had a quiet open, rallied some on NY FED Williams CNBC interview, then dropped 100 points to a new downtrend low at SPX 2409. New downtrend lows all five days. For the week the SPX/DOW lost 7.0%, and the NDX/NAZ lost 8.35%. Economic reports for the week were mostly positive. On the downtick: the NY/Philly FED, NAHB, plus weekly jobless claims rose. On the uptick: housing starts, building permits, existing home sales, leading indicators, durable goods, personal income/spending, consumer sentiment and Q3 GDP was finalized at 3.4%. The ECRI was unchanged at -3.9%. Next week’s reports will be highlighted by the Chicago PMI and housing. Merry Christmas!

LONG TERM: downtrend probable

If anyone was questioning this bear market, it certainly has made its presence known these past three weeks: -12.4%. In fact, CNBC has been touting this December as the worse one since 1931. We checked, that one was the DOW was down 17.0%. The DOW is currently down 12.1% for the month. Of the seven major US indices we track, excluding the SPX sectors, only the volatile R2K has confirmed a bear market. As of Friday it has already lost 26%. The other six are all close. The NYSE, which we carry as an international index, has also confirmed a bear market. It is down 19.2%. It joins Australia, Canada, China, France, Germany, Greece, Spain, and S. Korea. Which are also in confirmed bear markets.

The long term count posted on the weekly chart remains unchanged. A Primary I bull market from 2009 completed in 2015. Then a Primary II bear market ended in 2016. The recent bull market, 2016-2018, was Major wave 1 of Primary III. This bear market is Major wave 2. There are three Fibonacci retracement levels that should provide support for Major wave 2: (38.2%) 2509, (50.0%) 2376, and (61.8%) 2242. Obviously the first one did not hold. Our worse case support has been around SPX 2400, which is also close to the 50% retracement, and the 2385 pivot.

MEDIUM TERM: downtrend

We are still counting this downtrend as a large double zigzag. A Minor A zigzag from SPX 2941-2604. Then a Minor B rally to SPX 2815. Then a Minor C zigzag down to SPX 2409 thus far. At first we thought SPX 2478 could hold (C = A). But it failed on Thursday. The next two Fibonacci supports are SPX 2309 (C = 1.5A), and SPX 2270 (C = 1.62 A). Lots of Fibonacci support levels between the bull market retracement and the C wave relationship: 2376, 2309, 2270, and 2242.

Technically, most of the RSI and MACD indicators have not been very useful in this avalanche of selling. We had thought that the “Tariff Man” comment could lead to a mini-crash. Guess this week was it. Currently, the daily MACD/RSI are both extremely oversold. The weekly RSI has a positive divergence, which usually ends downtrends during bear markets. The monthly RSI is now as oversold as it was during the 2015/2016 bear market. When markets are this one-sided to the downside it usually takes an “event” to reverse them.

SHORT TERM

Trying to track the short term waves during this downtrend has been a nightmare. Fifty, sixty point rallies followed by one hundred point declines have occurred on a regular basis. We even had a 100 point decline this week that took only an hour after the FOMC statement. The SPX/DOW and NDX/NAZ have all wiped out their entire 2018 gains in just two months.

Nevertheless, there are additional potential supports at the previous downtrend lows of this bull market: SPX 2408 Minute ii, and SPX 2322 Minor 4. Add them in to the previous four potential supports and we have: 2408, 2376, 2322, 2309, 2270, and 2242. The market hit SPX 2409 on Friday. Best to your trading!

FOREIGN MARKETS

Asian markets were all lower and lost 1.8% for the week.

European markets were all lower and lost 3.7% for the week.

The DJ World index lost 5.2%, and the NYSE lost 6.1%.

COMMODITIES

Bonds remain in an uptrend and gained 0.5% on the week.

Crude remains in a downtrend and lost 12.0% this week.

Gold is still in an uptrend and gained 1.4%.

The USD is now in a downtrend and lost 0.5%.

NEXT WEEK

Tuesday: Christmas holiday. Wednesday: Case-Shiller. Thursday: jobless claims, consumer confidence, and new home sales. Friday: the Chicago PMI and pending home sales. Best to your week!

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

About tony caldaro

Investor
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854 Responses to Weekend update

  1. cj32 says:

    CBZ updates and tracks a few times a week. May follow him on Twitter.
    Have a very Merry Christmas you all.

    Like

    • travis01 says:

      I saw Fri on his tweet where he showed a screenshot of his daily wins. Wasn’t he showing that 75% of his ytd gains were all on Friday? If so, makes me wonder how great his calls supposedly were all year. Might be wrong just curious.

      Like

  2. Everyone pounding their chests with majority extremely bullish for years to come right before October hit. Even thru October most saw a BUY opportunity. Only way to prove point instead of pounding your chests is by posting real bets. Most refuse to consider that because it would prove their skills at timing is terrible even if they get the actual direction correct. The ONLY one doing intra-day bets on an unverified way is Phil. Useless clutter and proof that these systems are useless in times of transition. Now that majority sees the sky turning red and about to fall seems to me EMOTIONAL play is here. What happens at times like this in the past?

    Me, i moved on and post my bets on investorshub. You can’t hide or pretend anything. Exposed is the ONLY way to gather a flock of cheerleaders. I do my best when EXPOSED. It proves us all human but some have better skills than others. Seems most here only care about their EGO and perception.

    Like

    • I find this so amusing. My post is being “moderated”. Post, don’t post. i don’t care. just a reminder from way back that “I TOLD YA SO”. No real skin in the game and this site is USELESS! Made good money since I left here. Got flustered over last 2 days move. Most of which i missed but lost little. Political turmoil is extending this drop folks. Just like the phantom worry over trade war. it is real and here today!

      Like

    • kjb0 says:

      Gary…….are you from a communist country like CHINA or North Korea or California?

      Like

  3. fotis2 says:

    Unbiased look at the monthly price action only discounting the TL next solid support would be 2130-2200 level
    https://invst.ly/9ll9x

    Like

  4. Dex T says:

    https://www.msn.com/en-us/news/politics/shutdown-day-1-trump-warns-it-could-be-a-‘long-stay’-amid-impasse-over-border-wall/ar-BBRiMZZ?ocid=ientp

    BREAKING NEWS: Shutdown to stretch on until at least Thursday as Senate adjourns with no deal.

    The Washington Post
    Shutdown to stretch on until at least Thursday as Senate adjourns with no deal over budget, Trump’s border wall

    “BREAKING: Senate Majority Leader Mitch McConnell (R-Ky.) announced Saturday afternoon that the Senate would shutter for legislative business until Thursday, leaving many federal agencies closed until later next week at the earliest. The decision came after President Trump had a lunch with conservative Republicans and dispatched Vice President Pence to the Capitol to make the latest offer to Senate Minority Leader Charles E. Schumer (D-N.Y.), a meeting that is ongoing.”

    Like

  5. phil1247 says:

    Tom Fisher
    i think the reason we disagree on bonds
    is because we are looking at different time frames

    lets look a little longer term…. years
    for months i warned of the coming short squeeze
    when money managers thought being short bonds was a ” no brainer”
    this rally may have a lot greater potential now that the extension short has failed

    we could retrace half the decline from the all time peak
    i pay no attention to fundamentals
    so saying huge debt will sink bonds may make sense………..
    but it doesnt make money……….
    only the chart will help you there

    again …….. 123…….. is abc … until it isnt

    Like

    • aahmichael says:

      It was a no-brainer to get short both bonds and gold in Sept 2017. I warned in mid- August 2018 that that no-brainer trade could be coming to an end, and by the beginning of November 2018, it did. Shorting the 10yr at 2.10 and covering at 3.20 worked out well. The gold trade worked out well too. Of course, these are time frames that are beyond your grasp.

      Like

    • Not sure what you are trying to say Phil.
      I think we have covered all the… I think this, & … I think that

      Here’s the chart I have posted before (a least once before).

      Two Nested H&S, Two necklines.
      Current touchback to Neckline 1
      Not sure how somebody can invalidate the whole H&S bottom formation for a touchback to neckline 1.

      And I am kind of surprised now by guys on TV agreeing with this chart.
      Jeffrey Gundlach, He’s one of those guys who runs “syndicate books” when bonds are offered. He probably has the whole U.S. Treasury bond ladder memorized.
      hmmm.

      Like

      • phil1247 says:

        i see your chart as a failed breakout until proven otherwise
        i have already taken profits on notes bought near 3.1 %
        now i wait for the next move
        you could be correct about higher rates coming from here
        but i dont see any proof of that
        so i just sit in t bills for now

        Like

  6. fxaprendiz says:

    I’m using my third post of the day to wish everyone a Merry Christmas.
    Tony, mcg, aah thanks for all the learning and thought provoking posts. Fiona and Tom Fischer, always a pleasure to read you. Asa and Phil keep up the good work. Jobjas keep the charts coming. And everyone who in one way or another helped me or taught me something during this year, a big big THANKS!!

    Like

  7. fxaprendiz says:

    This modified count and chart will probably be disliked by most perma-bears and people expecting the current sell-off to continue for another week. Consider it as only one of many possibilities.

    I have always maintained this correction would be a complex one; only that I thought it would start easy with a flat for wave w and then a furious zigzag for wave y. It turns out wave w was the furious one and took the shape of a double zigzag. So back to the drawing board.
    While double zigzags are not uncommon, triple zz are rare, so maybe the worst is already over, and we’ll have a more sideways shape for wave y now. It can be a triangle, a flat or a combination. I’m going with a flat in the above chart. The lengths of the swings up and down are only illustrative, they may be smaller than depicted.
    If this count pans out then we are either already done with the double zigzag or will print a marginal new low next week then wave x up should start. Later on, Mid 2300s would be seen at the bottom of wave a of the flat, and a final low in the upper 2200 would be printed with wave c.

    Some people may be wondering why I insist on this correction to be relatively “shallow” compared to the prognosis of +30% now being talked about. Well it has to do with my bigger picture count, in which this correction is still of Intermediate degree. And as long as that count doesn’t change, I’m not expecting more than 22-23% of total downside.
    A drop of more than 20% is considered technically a bear market, but then I ask, why isn’t the year 2011 considered a bear market by +90% of analysts out there? That was a drop of +21%. Same will be with this one, it will go a bit over 20% but it won’t be a true “bear”. True bears are of the Primary and up degree, and they usually start at +25% drops. As a remainder, a repost of my table on that.

    Observe that there’s a gap of 5% between waves degrees and their % down. That’s the leeway between degrees,and it usually fills to be upside. So while an Intermediate degree correction is usually 15-20%, there’s room for it to be up to around 24%. It seems this Int correction will stretch just like the one in yr 2011 did.

    That’s the main reason for me not expecting anything above 25% neither a recession to be triggered this time. Both a drop of Primary degree and its accompanying recession are scheduled by not sooner than 2022 imho. Then I’m expecting something on the upper side of its drop range, probably 30-35%.

    Obviously, if SPX keeps dropping at this pace and cuts through 200-300 more points down in no time, then this is not an Intermediate degree wave but something more serious. We’ll find out soon enough.

    Like

    • chadthundercockthethird says:

      Dude your counts have been wrong AF why do you keep posting this stuff?

      Like

      • fxaprendiz says:

        And your alternative is…?
        If you’re just going to criticize then you better give an alternate count or reasoning, otherwise you’re just trolling.

        Like

    • xEVAx says:

      Our gracious host mentioned “PPT”…. Well It does count very nice as an ABC and it’s due for a bounce I guess with all the extreme bearish sentiment going into year end so ‘they” could and WOULD have to ramp the hell out of it here…. As much as Id love to see it crash here and loving the action in gold and ST bonds I think 2021 or possibly even 2024 could be targets for THE END if we don’t do it like right now…. So PPT, I think the market is calling your hand here…

      Here’s a potential bullish count, note the black trend lines, the one it’s on goes back to the 1921 bear =) Now accuracy is a problem with a T/L that long LOL but it does also meet it at the one from 09…. The white lines are FIB time…. The purple lines show a potential expanding ED should the PPT “pull it” here and regret it then do QE or some other BS sending it TO THE MOON…. Thats pretty much it in my mind scam it up higher or it dies here and now…… I do expect a bounce and I wouldn’t be surprised if they grind it on and on up in another ED from here all the way to 2021…. We see where it opens on the futures soon…..

      Liked by 1 person

      • xEVAx says:

        101 years….

        Like

      • stockop says:

        that bullish count seems so outrageous. sentiment is at levels where it could be realistic…
        was looking at the numbers and some of the current internal readings strongly mirror march 2007 and september 1998. the 1998 comparison is incredibly interesting. looks like an H&S breakdown to me… 20 years ago exactly. would be perfect for them to pump it right into election 2020 and sell regardless who wins. also keep seeing march 2008 and october 2008. all had rallies at a minimum.

        would fit the sentiment profile of a wave 4. The talking heads think we’re in a bear market. Isn’t that one of the signs? I don’t think the average investor would believe the market could go down again if the PPT jumped in. it doesn’t even seem possible at this point to stop some of these charts bleeding.

        Like

    • Lot’s of hard work, but thank you…Bud

      Liked by 1 person

  8. Dex T says:

    Curious but does anyone think that money managers will take personal responsibility for their poor investment decisions and failure to ignore the warnings sings of a bear market?

    Or will they just look for a scapegoat and point the finger at someone else?

    Like

    • Dex, you seem like a real nice likeable guy,
      but I bet you were never worked in Securities.
      Like Tarzan said to Cheetah … “It’s a jungle out there”.
      The part of the herd who under-perform in this bear will get thinned.

      Like

      • Dex T says:

        As a matter of fact I did. In Manhattan…the belly of the beast.

        Have been out for a number of years (thankfully) but saw and did a lot.

        Some of my posts are made sarcastically but I’ve seen a lot of negative/ illegal stuff from different securities firms/Wall street and have known a ton of disreputable characters so I always question some of the reasons/explanations when things don’t work out

        Seeing Wall street jump on Powell Wednesday for maintaining a justified rate increase is one of those times

        Like

        • I was with Dean Witter Reynolds. ser. 7 and other stuff.
          It was kind of like “Goodfellas” without all the guns. 🙂 🙂
          Where did you work?

          Like

          • Dex T says:

            Most of my career was at boutique investment firms. I worked twice directly on Wall Street (the actual street) not the exchange. One was a real estate investment firm. The other was an investment firm that mainly specialized in lending to small business but also had a minor trading operation.

            “Goodfellas” without all the guns

            That’s what I’m referring to. The money attracts a lot of characters -some of them real professionals and a lot of questionable people looking to make a quick dollar at anyone’s expense.

            Like

          • Fortunately for me there was a career after the career.
            Seems the same for you.
            All he best of the Holiday Season !!

            Like

          • Dex T says:

            Thanks! Happy holidays to you too!

            Like

        • Wall Street didn’t jump on Jerome Powell for the much anticipated rate increase.
          That’s a totally false statement.

          They jumped on him and the Fed for being trapped to the Phillips Curve and their obsession with the rate of inflation…. as global weakness has accelerated, homebuilder confidence is at 3 year lows, auto sales in the crapper, and a Goldman Sachs Commodity Index (SPGSCI) that is down 24.6% from October 3rd… never mind that the FED has undershot their inflation target for 7 straight years.

          Like

          • Dex T says:

            It’s not a false statement.

            They anticipated it but don’t like it and were hoping to receive a Fed chairman much more susceptible to manipulation who would back down. Powell intends to follows the course charted by the Fed

            The market just made new highs this past September when rates were hiked and Wall street had little say. They shrugged off rates hikes all of last year.

            The Fed may turn out to be wrong but they should stick to their methodology.

            Like

    • aahmichael says:

      In the retail world on the sell side, as long as their client losses are in line with the losses suffered by the majority, then it will not be looked upon as poor investment decisions It will be seen as just the normal course of the ups and downs of buy and hold investing.

      Like

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