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. Sethu says:

    Please see today’s low support taken at 2468 as a trader one sees the probability and possibility only God can yu exact levels a good trader reads support and resistance properly learn from Tony such a fantastic analyst but I have not seen a single post demeaning others

  2. Tarun Varma says:

    Tony, in regards to you comment regarding Intl markets, I reviewed the KOSPI charts in your book. The confusing part was that the daily chart was listed as in an uptrend while the weekly was listed as in bear market. Assuming one of these is a mistake? Or is this somewhat related to your comment earlier “Just when nearly everyone is onboard with a bear market scenario it could be ending”?

  3. Dex T says:

    Bad day that portends well for the bear and poorly for the bulls if the old market sayings of first trading day dictates the year. A big gap down and a close in the red could mean a very volatile bear market

    • Dex T says:

      Only 2 days left of the “Santa Rally”. It’s been mixed results so far but Santa will be retired after Friday until next year.

    • Dex T says:

      Bulls coming in last few minutes to turn the dynamics in their favor. They just cannot stand a bearish omen.

      But no matter the truth is already out bear will be victorious for this year

  4. EL MATADOR says:

    Market action not looking health for counter rally continuation. Today’s close should provide that key. In meantime, I am hanging up my bull suit and slipping on my bear pants. 😉

  5. lml25 says:

    By the same token,the market not breaking up through 2520 is not the greatest signal for bulls.We’ve got our trading range.GL all.

  6. EXAS continues to chug higher.
    Now up +15% over the last 5 sessions since the $56 area.

  7. torehund says:

    Lee, and other; any chance oil could be starting a W-3 from bottom ?

  8. market continues to confound all. I find it amusing how every move is interpreted and re-interpreted less than a day later. Making money using any system is a waste of time. Transitional times like this it is impossible to use conventional methods. INTUITIVE understanding of current market behavior is a better tool. Like understanding a petulant spoiled child and how it will react in different situations. The next temper tantrum will be soon and more violent than anything yet seen. Common sense and keeping bias at bay. We are actually in the eye of the storm right now, from no winds to category 5 in no time. No One is making money on charts only by luck. Hope those lucky few stay charmed. Me, i knew the easy money would be gone and sit out most of this till I can see an actual reversal point and recognize a pattern developing.

    HINT: Since this drop started in early October all rebounds couldn’t last more than 7 trading days. This one is day 5. If this is truly an intermediate wave it will surely last much longer. This just on pattern recognition folks!

    • fionamargaret says:

      …easier just to go straight down to 1851…..

      • xEVAx says:

        I think up until Friday/Monday, then “Tarriff Man” comes into play along with Chuck and Nancy…. UNLESS Trump just keeps it shut down, lets Congress assemble, and makes mass arrests, military tribunals ect. =) Then DOW 20K hats and possibly OFF to THE MOON via “Space Force”, Bluebeam, ect LOL

      • Ask Tony to give you the next 3 month charts so you can know exactly when to buy options. Shorting for longer term just requires patience and sweating out the violent counter trend reversals. Till the Mueller report is disseminated I suspect any drop between now and then will be gobbled up. This in preparation for the crisis. Make no mistake, no amount of damning charges will allow the GOP to reverse course. Like FOX NEWS they have tried to prepare their audience but have failed. They have stopped posting on Twitter since November 8th (but) their TV cast is alive and well with the same old rhetoric.

        We need to see the showdown at the OK corral. Resolution of this fight will end the violent moves. The market knows its coming soon and with it more erratic behavior. Bias should be on the upside till the fight clears out the winners and losers.

        Short term: Expect a minimum of 6 to 7 days upside move. this is day 5. Thats as far as i can take it for now. If February is truly the rumored Mueller submission it will bring with it violent swings and some sort of bottom soon after (assuming there is no standoff on release of report to public).

  9. xEVAx says:

    DOW 60 minute

    • xEVAx says:

      The problem for Bulls is this rally started with three waves, 23250’sh looks like good ST support, below that though look out….

  10. phil1247 says:

    rogues
    2521 target coming up
    i would want to know where the exit door is now

  11. lml25 says:

    What has happened today:
    Futures were up nicely,reversed much lower –to make it look like another 2-3% down day.
    Market opens dismally,looks like 2-3% is more than possible.
    Reverses–now acts like it doesn’t want to sell off anymore.
    What happens when a market acts like it doesn’t want to drop anymore?
    GL all.

    • tommyboys says:

      🤔…
      News just briefly interrupts trend.

    • lml25 says:

      I read a stock market analyst/historian over the weekend who compared this market to 2008-2009,saying,even in the 2008 slaughter of stocks,it had a great Xmas rally and into the first 4 trading days of January,when the bottom fell out again.Fractal?We’ll see.

    • M1 says:

      Someone powerful is squeezing the shorters

  12. Twosidedtape1 says:

    Smalls led to the upside today, also rolling over the fastest so far.

  13. stockop says:

    tick readings say the buy programs are on full throttle right now.

    per WSJ this morning “Anxiety about weak global growth, rising interest rates and tariffs stoke fears that consumption of some commodities and products could suffer”

    per me “Market pares losses as weak opening coincides with bullish investor intelligence survey numbers” . don’t know how smart it is to be fighting against these buy programs….

  14. torehund says:

    Oil squeezing in a c up from bottom, could go for a while then ?

  15. Watch /VX, traded to 50% support a few minutes ago and /ES tick in a range -1500 to -800. Lest see if what happens to /VX another test of 50% support to confirm?

  16. Good morning all

    /ES declined about 70 points from the overnight high to low. A counter trend rally started in the overnight session. Targets are …..
    1. 2475.75 a profit target (micro..first leg of CTR)
    2. 50% short at 2487
    3. A Phil 38 special at 2480
    4. One of Phil’s target in between based on his “rogue” analysis…LOL
    5. Above 2496 invalidates this analysis and the short term outlook reverses from bearish back to bullish.
    DH chart……..

    • Valerie wapiti says:

      Want something very simplistic? The VXX had a GF @ 48.8. Zappo. Gap got filled. Market began a steady climb back to the key 250 area. in long at GF, out at 250. Let Eur close and watch the market consolidate. Then back in long. I’m trading nvda instead of spy, qqq’s.

  17. travis01 says:

    Doc, good call on tightening BBs. I think part of this big move may be helped by China news for a short term drop. Held some (but not all) shorts overnight. Wishing had held all. Got your chart for the day? For you guys who watch the daily supports, futes look to be just above S3…does that tell you big drop or nothing at all until market opens?

  18. Sethu says:

    ES is 52 points down. see my levels already posted resisted at day t/f. There is no need to follow anything else. Just play with the levels and time frames. As you trade with my levels, you will gain experience and confidence.

    • micky says:

      You sound confident Sethu, do mind posting them daily and explain how you get them?

      • Sethu says:

        15 mts (S) 2495
        Hour (S) 2468
        Day ( R) 2542
        2542 was resisted for 2 days and hence a good area to sell on 31/12. For today, if support is held at 2468 spx can cross 2495 and may be 2542 in the coming days . Otherwise the probability of making a new low is high.

        • micky says:

          tks will watch em

        • mcgcapital says:

          ‘There is no need to watch anything else, only my levels’ lol. When did it print 2542? Didn’t get anywhere near

          • micky says:

            true, as support and resistance is the best way for me i am always looking out if someone might have anything better than the few tools i use, so will check him out
            ITMT 2 gave the bottom so far and 2 also gave the top at 2520 ish and 1 gave support area which we entered earlier today on IG.
            Hey the algo guys here’s one for you..

  19. fotis2 says:

    If the low of the 27th gets taken out today thats it for the Bull side I’m lending Tony’s 2310-2270 GL and Happy New Year

  20. Jack kendo says:

    As January goes, so goes the year.
    cheers!!

  21. purplember says:

    Hang Seng down 2.5% tonight on poor china manufacturing numbers for december

  22. Something blew up somewhere. Futures opened up + 15 hit a wall and declined to -15.75. A 30 point decline, doesn’t happen because of the release of bad economic reports coming out of China. I checked the Internet, found nothing. I guess we’ll find out later.

    • mcgcapital says:

      I’m pretty sure it is just Chinese data.. the markets have been super sensitive to China over the last few years as that’s where the systemic risk lies. What happens to China is more important for risk assets than what happens to the US economy in many respects

      • mcgcapital says:

        Well i say that, meaning that there’s nothing else come out to move it. Of course, the markets were going to move significantly anyway one way or another as it’s the first day back and they always do… it’s more that the trend is down and start of Jan continues the trend. That’s every year this decade now, both on up and down moves

    • As a follow up to last nights post……take your pick…

      1. Bad economic reports in China and in the EU
      2. China doesn’t r/o a military take over of Taiwan
      3. Italian bank halts trading, EU takes over
      4. No PPT this morning /sarcasm/
      5. Wave 4 is over, now in wave 5
      6. Combination of all of the above

  23. lunker1 says:

    Tony, 376 posts has it all been said?
    Up or down eh?

  24. phil1247 says:

    perspective

  25. Twosidedtape1 says:

    Had some time to think about it today and reviewed my charts of prior bears and major corrections. Am looking for an end to SPY minor a of Intermediate b sometime before the end of this week. Is possible it ended already, we should know tomorrow.. 50-61.8 retrace of minor a down to lows would make a good target for minor b, then move up to a modestly higher high, maybe 38.2 retrace of the entire bear for the top of Int. b. The real retest of lows after that. Just speculation of course, but it matches up with behavior of prior bear markets in the past half century. Retest of bear market lows within 6 weeks in this scenario.

  26. gary61b says:

    ES has some attractions lower to 2498 area for now. https://gyazo.com/f2f2fa42963b42c7a01322cc55660e9f

  27. micky says:

    Interesting where December traded from open , low and closed.

  28. phil1247 says:

    BOLLINGER band pinch on 3 hour es
    tightest since dec 3rd 30 point gap up

    big move ahead …….
    will it be 2548 or 2443 ?

    i dont really care
    but lets get it moving one way or the other

    • Phil…trying to understand your analysis. When I read your post yesterday, you were implying a 30 point ramp /ES on a tight Bollinger band (?). Agree a large move is coming. But I think your call of a ramp is really based upon /ES testing a 38% long that has a profit target at 2548. I know this is the rogue trader in you but what about this analysis below.

      It’s a DH chart as of Monday morning, before the open. There are 2 potential long set ups on the chart. But, the profit targets never traded and /ES did break the 61.8% long. So, I believe /ES is currently in no mans land in between a profit target and a 50% long at 2460….and SPX closed on a trend line which could have been the classic KISS back from underneath a trend line and then a collapse. All this from a DH/Atilla disciple..LOL
      Your thoughts?

      • phil1247 says:

        if you recall i told travis i lost interest in es monday morning
        because even tho my .38 retrace from friday at 10: 30 at 2472 held
        the smaller series up from there did not
        so there was no trade
        with the inside day on monday SPX direction should come tomorrow
        by breaking the high or low of monday
        i still favor 2540s as the 18 dsma will be there wed
        but not anxious to commit funds yet
        as there are easier places to make money

    • micky says:

      How do you guys only get the chart and not all that area around posted?

    • Theodore Lerts says:

      I like it phil. Up is my preferred direction right now.

  29. mcgcapital says:

    Happy New Year Tony and all.

    As I posted yesterday, every January this decade has started off in the direction of the prevailing trend. The first day of the year also usually sees a big move. So that would suggest downwards. However, I didn’t like that close yesterday from a bearish perspective and I see that Xi has been talking about co-operation with the US today. I’m not sure what that means for tomorrow.

    I’d also say that if we can’t rally in December with positive seasonality then that isn’t a good sign in general. I’m pretty confident there’s a January retest of the lows in store but I can’t work out whether we pop then drop, or just go straight down. There was more bad data out of Asia today with South Korea which is a key bellwether for manufacturing. I guess we find out what happens when the futures open.

    My observation on FTSE which has been in a bear market since May, so longer than the US, is that the rallies have all been limited to 300 or so points (4-5%). I’ve not seen anything on the FTSE chart to suggest that pattern is breaking, still looks pretty sloppy and not ideal for a sustainable base. Fade the rallies still looks like the thing to do

    • alexhartley1 says:

      Some people are showing EUR/USD trading at around the 115 level. If this is correct then would imply perhaps a futures pop?

    • “Fade the rallies”
      Given the death cross on the daily since mid-Dec, and the lack of rebound due to December seasonality, I agree. However, that doesn’t mean we don’t bounce and bounce big; maybe even higher than people expect. No Santa rally, but MLK rally?
      If the S&P recaptures 2700+, there’s a good chance that January will end with a confirmation that the death cross selloff is over, and the death cross is no more.

      The one thing that I’ve learned is that you don’t bet against the US market. It is the only game in town with lackluster Japan, Europe, and volatile China.

      Unless we have another 1929/GD (80% loss from high), the US market is a good bet. Needless to say, we have other safeguards today to bolster the markets from repeating that event.

    • mcgcapital says:

      Looks like the pop is done already and straight down in the morning

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