Weekend update

REVIEW

The week started at SPX 2417. After a gap down opening on Monday’s half-session the SPX closed at a new downtrend low of 2351. Trading resumed with a gap up opening on Wednesday to SPX 2386, which was quickly sold off, and a new downtrend low was hit for the 7th day in a row: SPX 2347. After that the market abruptly reversed, and by the end of the day the DOW had gained a record 1000+ points. The SPX closed at 2468. A gap down opening started Thursday. The SPX hit 2398 in the afternoon, but ramped up into a SPX 2489 close. Two days of spectacular up moves. Friday had a gap up opening, hit SPX 2508 early, dropped to 2473, then hit 2520, before dropping to 2477, and closing at 2486. For the week the SPX/DOW gained 2.85%, and the NDX/NAZ gained 4.0%. Economic reports for the week were sparse and to the downside. On the downtick: consumer confidence, the Chicago PMI, and pending homes sales. On the uptick: weekly jobless claims improved. Next week’s holiday shortened week will be highlighted by monthly payrolls and ISM. Happy New Year!

LONG TERM: downtrend probable

Sometimes the advantage of applying OEW to the indices can keep one a step ahead of the crowd. During 2017 we noticed Germany and Spain could be completing bull markets. They are still going down. Then in Q1 2018 China, Hong Kong, Singapore and S. Korea were completing bull markets. They are still going down too. Now that most of the world is in a bear market pundits are trying to justify it with many things, but especially a slow down in global activity.

 

In Q1 2018 the US had the biggest correction of its bull market, about 12%. But we knew it had one more wave up to new all-time highs before its bull market was over. It was a struggle with most of the world’s indices already in bear markets. But it got it done in September/October, and then rolled over into its own bear market.

 

We mention this now because those six previously noted foreign markets all look like, if our counts are correct, they are in their last downtrend of their bear markets. Four have been declining since Q1 2018, and two have been declining since mid-late 2017. Look at Hong Kong’s abcA-B-abcC. This kind of pattern is normal for completing a bear market. Just when nearly everyone is onboard with a bear market scenario it could be ending.

MEDIUM TERM: downtrend

As for the US, the four major indices, SPX/DOW and NDX/NAZ, have had only one downtrend. It has been quite complex with many, many 60-100 SPX point waves. In fact, several times we labeled a tentative green Intermediate wave A low expecting an uptrend. All we got was a rally, and then lower lows. All along we felt the structure we had labeled was correct, but we were not quite sure about the wave degrees. This week’s activity, we think, gave us a hint.

If we look at some of the minor US indices from their bull market highs, we observe that they had a downtrend, an uptrend, and a downtrend. All while the four major indices have been in one downtrend. These indices are: R2K, SOX, TRAN, XLB, XLF, XLI, XLP, and XLV. Seems odd that the financials, industrials, transports, semi’s, and small caps all display the three trends, while the major four do not. Even the NYSE had three trends.

As a result of this weeks market activity, and the above noted observations, we are seriously considering that Intermediate waves A and B have already occurred. And Intermediate wave C has been underway since November. This count is posted on the DOW hourly and daily charts.

SHORT TERM

When considering everything previously noted. It is possible that the next selloff could not only end the bear markets internationally, but also in the US. At the beginning of the bear market we expected a short one of about 15%-20%. So far it has held within those parameters. We had thought that SPX 2400 would be the maximum downside. We got that wrong as the SPX has already hit 2347.

We see two potential support levels for the next, and maybe last, selloff. SPX 2310 C = 1.5 A, and SPX 2270 C = 1.62 A. The DOW C wave would have a 1.62 relationship to A around the SPX 2310. While is no pivot at SPX 2310, there is one at SPX 2321, 2286 and 2270. Also if the potentially last selloff is not too severe many positive divergences would be set up in the daily and weekly charts, with oversold monthly charts. These typically work to end downtrends and bear markets. We added some charts to the very end of stock charts to display how oversold the major indices really are. Here’s one.

The rally from the downtrend low at SPX 2347 looks corrective. We have observed three waves up (2414-2394-2468), three waves down (2414-2444-2398), then three waves up (2508-2473-2520). Notice the two rallies are nearly equal at 121/122 points. Symmetry. After the high the market setup a double negative divergence on the hourly chart and the SPX dropped to 2477. So the second set of three waves is complete. Will we get a third set next week? Or does the market head down from there? Short term support ended at the 2479 and 2456 pivots, with resistance at the 2525 and 2575 pivots. Short term momentum dropped to neutral after the double negative divergence. Best to your trading in the NY.

FOREIGN MARKETS

Asian markets were mixed on the week and lost 0.3%.

European markets were mostly lower and lost 0.6%.

The DJ World index gained 2.0%, and the NYSE gained 2.3%.

COMMODITIES

Bonds continue to uptrend and gained 0.3%.

Crude continues to downtrend and lost 0.6%.

Gold is still in an uptrend and gained 2.0%.

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

NEXT WEEK

Tuesday: holiday. Thursday: jobless claims, ISM, construction spending, and auto sales. Friday: monthly Payrolls, and unemployment rate. Happy New Year!

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

About tony caldaro

Investor
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471 Responses to Weekend update

  1. Tony- if and when bear ends…What is the confirmatory signal? Is it a certain level it has to clear and hold? Is it WROC? Will you be able to post quick market update when that day happens instead of wed. only. Sorry for the request, but highly respect your market call.

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  2. Thanks Tony

    SP & W5k have a broken TL with retest done

    https://invst.ly/9n9e0
    https://invst.ly/9n9g7

    COMPQ

    has a perfect channel still preserved
    target will be around 5k if TL is broken

    DJT & NYA are below MA200(W) but in both TL is still preserved

    https://invst.ly/9n9jc

    Happy New Year

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  3. Page says:

    Thanks Tony. Happy New Year!

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  4. Not into EW theory, but corresponds well with charts. Overhead supply will kick in 2550-75, support at 2348/2259. Need a VIX spike at 42 to clear the decks.

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  5. Lee x says:

    Thanks Tony and HNY you good looking son of a gun.
    I’ll try to actually contribute here next year.

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  6. stcoleridge says:

    Hi Tony,, thanks for the update. What do TMT and SCT on your daily SPX chart refer to, if you don’t mind me asking?

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  7. Tony, there will be no ABC at the end. We are doing wave 1 down, now in subwave 4 up (to 2585 probably).

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  8. Billy says:

    Thanks Tony and Happy New Year to everyone.
    https://imgur.com/KbtoSTW

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  9. elmer510 says:

    Thanks for the update and Happy New Year!

    If new significant lows are re-tested, does it mean this bear-market has to end as ‘a flat’, not a zig-zag ?

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  10. cj32 says:

    SPX projections by CBZ

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