Weekend update

REVIEW

This volatile week started at SPX 2486. After a gap up opening Monday and rally to SPX 2509, the market went into chop mode ahead of the NY Day holiday. A gap down open started the action on Wednesday. After hitting SPX 2467 early the market rallied to SPX 2519. Thursday had another gap down opening. The market quickly dropped to SPX 2448, rallied to 2488, then dropped to 2444 just before the close. Friday a totally different story. After a gap up opening to SPX 2482 the market just kept on rising, hitting SPX 2538 before closing at SPX 2532. For the week the SPX/DOW gained 1.75%, and the NDX/NAZ gained 2.25%. Economic reports for the week were light and mixed. On the downtick: ISM manufacturing, plus both jobless claims and the unemployment rate rose. On the uptick: the ADP, monthly payrolls, and auto sales. Next week’s reports will be highlighted by the FOMC minutes, the CPI, and ISM services. Best to your week!

LONG TERM: downtrend probable

After the worse December since the year 1931 many of the market pundits capitulated and turned bearish. The SPX lost 9.2% on the month. It is probably best to describe 2018 as a bull sandwich: two three month corrections, with a six month uptrend in the middle. Net loss YoY 6.2%. Economically, the ECRI was making lower lows this week.

Last weekend we noted that just when many were turning bearish several foreign markets looked like they were in the last bear market downtrends: China, Germany, Hong Kong, Singapore, S. Korea, and Spain. This week China made a new bear market low, Hong Kong confirmed its last downtrend, S. Korea confirmed its last downtrend and made a new bear market low. S. Korea looks like it could be bottoming now.

An emerging market that is enjoying the fruits of its economic and political recovery is going mostly unnoticed. It just made new bull market highs in the first three days of this new year. The market: Brazil. After a market crash, along with nearly every other market, in 2008, the BVSP rose in a P1 bull market until 2010. Then economic/political trouble set in and a six year P2 bear market followed until the worldwide low in 2016. It has been rising in a P3 every since. Short term charts are on page 5 of the stock charts link below.

Nothing has changed on the long term count or the weekly chart. You can read last weekends update for more detail.

MEDIUM TERM: downtrend

Made some notes on the daily chart to prove a point. For those that think the POTUS and FED cannot move markets, think again. Note the four instances in December when the POTUS or FED did something market noteworthy. December 4th, Trumps tariff man morning tweet. The market was at SPX 2786. By December 26th the market had dropped to SPX 2347: -15.8%. Along the way Powell stated that rates and QT were on auto pilot during the rate hike pressor on December 19th. If you recall the SPX dropped 100 points between the time the FED raised rates and he finished his pressor one hour later. On December 24th the Presidents Working Group convened. Then on Christmas day, December 25th, Trump tweeted stocks are cheap. The SPX had closed at 2351 on the 24th, and has since rallied 8.0% at Friday’s high. Clearly Powell and Trump can move markets.

With the best surge in market breadth since the downtrend began it is possible Int. A ended at SPX 2347 and Int. B is currently underway. A 38.2% to 61.8% retracement would be normal for a B wave of this degree: SPX 2574 to 2714. It’s a large range but nothing this volatile market couldn’t handle in a couple of days.

We also see the possibility, as noted in the DOW charts, that Int. C is still underway. This was detailed in last weekends update. Either way we should be seeing a retest of the December lows before this bear market ends.

SHORT TERM

The pattern for this downtrend remains the same. An abc down to late October, a November B wave, then another abc down to late December. While the pattern has been unchanged, the wave degree has been a bit difficult to determine. Ideally, as noted last week, a drop to SPX 2310 would ideally fit the SPX and DOW.

Short term support is at the 2525 and 2479 pivots, with resistance at the 2575 and 2594 pivots. Short term momentum ended the week overbought. Best to your trading in the NY.

FOREIGN MARKETS

Asian markets were mostly lower and lost 0.8%.

European markets were all higher and gained 2.1%.

The DJ World index gained 1.5%, and the NYSE gained 2.2%.

COMMODITIES

Bonds continue to uptrend and gained 0.6%.

Crude appears to be trying to get an uptrend going and gained 5.8%.

Gold remains in an uptrend and gained 0.2%.

The USD is in a downtrend and lost 0.2%.

NEXT WEEK

Monday: ISM services and factory orders at 10am. Tuesday: consumer credit. Wednesday: the FOMC minutes. Thursday: weekly jobless claims and wholesale inventories. Friday: the CPI and the Budget deficit. Best to your week!

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

About tony caldaro

Investor
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759 Responses to Weekend update

  1. Harp Man says:

    BofAML uses a proprietary “Bull & Bear” indicator that gauges when inflows or outflows point to investors moving too far to either side. The current reading of 1.8 shows “extreme bear,” triggering the first buy sign for risk assets since June 2016 when the Brexit vote tanked the global markets, Michael Hartnett, BofAML’s chief investment strategist, said in a note titled “Time to Buy” on Friday
    The Bull & Bear indicator has proven its accuracy when it hits the “extreme bear” level — with the previous 15 buy signals since 2000, global stocks turned out to return 6.1 percent on average three months later, Hartnett pointed out.

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    • mcgcapital says:

      It does seem like a lot of the banks want to get people in and buying.. bulls have just had a 10% rally in 7 days, so I don’t know why they didn’t say this 2 weeks ago when we were at 2315. Most people I follow with a perma bull bias are now giving the all clear to buy… ‘look at the 10-1 breadth up day etc’. Maybe we carry on rallying a bit more, but it’s likely they get hit hard again soon when it rolls back over. People can’t fight the fundamentals for long

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      • fotis2 says:

        Vast majority is always too late partly due to the fact we are a gregarious,safety in the herd kinda animal

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      • Mcg,,,, I think that it really depends on your time horizon, what you are trading, and how much capital you have AT RISK.

        I’ve seen far too many people get “trapped” labeling themselves as Bull or Bear…. and missing out on massive moves or stubbornly clinging to their “label” while the market runs against them…. up or down.

        I’m a pretty “active” trader that primarily trades oil stocks and medical diagnostic and life science names. I really couldn’t care less about whether or not an analyst at a Bank is 6 days “late” off of the 2346 low when he pens a research note entitled “Time to Buy”.

        What matters is your time frame and whether or not you are positioned in the right direction.

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        • mcgcapital says:

          I guess it depends what happens next… if its a bear market rally of 8-12% then the note is ill timed. If its a bull market which goes much higher then its fine. I suspect it was written prior to the big ramp on Friday when we were much closer to the lows

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    • CampFreddie says:

      Harpo -good post and agree.

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  2. STEPHEN BARTLETT says:

    As I said in my last comment here. No other country cares about the stock market like U.S policy makers and it gets worse every year. Friday just another in a long list of examples. I understand the reasons why but it doesn’t make it any more easier to swallow if you are a bear or try and follow traditional methods of market analysis. It’s why hedge funds can’t make money anymore.
    Tony mentioned HK. I like HK China HSCEI as well here with a small stop. Europe is also interesting now with what looks like a 5th wave failure into the lows in STOXX. My bet on the S&P is that we will end up below 1900 within 18 months but it will be done so quickly and then when it’s happening nobody will be involved so why bother thinking about it. Stick to the 15 minute charts and come in every morning with a open mind.

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  3. Ho Ho says:

    I barely come here any more but it’s just staggering, how the sheeple here think they have some sort of an edge with this useless methodology. Ask yourselves, if this actually worked would the power players let you get away with it. Same goes for DH or whatever, bogus. The only successful systems are the ones you never hear about, let alone all these experts have time to post about, including those subscription seeking “gurooos”.
    But hey whatever floats your boat.

    Oh and of course, so that the universe is happy with me, I must end by saying GL all.

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    • Philippe V says:

      Bad Ho Ho ! On the contrary, you should be thrilled to know that after a 20% drop the downtrend is still “probable” and that the forecast is that we can either go up to 2714 or go down to 2270. And you should always conclude any comment by the ritual phrase “Thank you Tony for this awesome update that you so kindly give us for free” 🙂

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  4. jobjas says:

    need another wave down to complete A of wave 4

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  5. Menachem Uzan says:

    One thing I remember Tony said back in 2009 when he correctly called the bull market. He said something along the lines “In bull markets the surprises tend to be to the upside, in bear markets to the downside.” This rang very true over the past 8 or 9 years. Since, we entered a bear market, it would surprise me if we went up from here. Sharp thrust we just experienced on Friday, as mentioned last week, occurred at the end of a corrective pattern to the upside in an overall bear market. Bear markets are notorous for there sharp moves up. With political turmoil, government turmoil and higher interest rates there does not appear to be a reason to be invested just yet. Remember we have earnings. IMVHO if Apple is any indication of what we are to expect than keep your powder dry and wait for dust to settle.

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  6. Thanks Tony

    so far the sequence of candles looks similar to 2007(just an observation)
    trendline is broken(???)
    W5000,DJI,COMPQ,DJT,NYA trendlines are still preserved
    https://invst.ly/9p8er

    SSEC
    broken trendline,sma200 working as support
    https://invst.ly/9p8n9

    CL
    december closing below 48,that was not good
    https://invst.ly/9pa8-

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    • ttsden says:

      The anticipated failure in Gold’s recent rebounds has been vindicted.
      ( # embedded charts did not trasmit.)

      Make no mistake this is Not a corrective wave
      It is the beginning of her Bear Trend.

      # (1) 4 hourly cash XAUUSD Cash chart printed H 1,298.67 – made a clean
      break down to (iv ) at 1276.69, bounced to close C 1,284,90
      but remaining below the underbelly of this broken channel.
      # (2) Daily chart
      It will initially gravitate to its mean @$1220;
      Then to retest $1184 then $1161 on its downward journey to below $1000.

      # (3) Weekly chart
      In Theory the decline could go back to it’s source $ 200.00
      That is a long way down.

      IS THAT PROBABLE POSSIBLE LIKELY OVER TIME ?
      WHO KNOWS – ONLY GOD KNOWS !

      Take care.

      Best
      Tony

      Like

  7. M Wags says:

    This seems to be the typical juncture for Elliott Wave where there is very little confidence in the wave count. Could be that (A) has been completed. Or… the market is still in a wave (C).

    How are you suppose to confirm either of those totally opposite scenarios from here?

    It would appear that real-time confirmation is nearly impossible.

    And even looking back at this week’s price action in an “after-the-fact” manner fails to shine much of a light of confidence/certainty.

    Not sure how EW can be of significant value in a volatile market such as this one, as one’s primary tool for making money. One’s stop loss points would certainly incur big losses, given the range of outcomes for two very different counts.

    What does one need to see happen in order for “C” to still be intact?
    Or wave “A” to be complete?

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    • xEVAx says:

      Everyone says that….. But do you have anything better??? I mean to me 2016 looked like a wave 4, oil getting cheap just in time with Hitlery “looming” but really was just a joke all along setting the table .) I knew Trump would be elected too, wasn’t hard to see after Obama and BTW the 08 crash wasn’t hard to see either, first Bush then Obama, LOL WTF??? You better sell it… Never the less even Lilly lipped 0 said “stocks are cheap at “666” and hell yes that was FUN 😉 Trumpo however looked like a Trojan Horse from day one and that hasn’t changed here a bit, managed (professional NBS actor) UNIPARTY opposition…. My charts can go either way though pure wave analysis to me says up soon… My charts look great as a matter of fact for the bull case (such is the bears dilemma….) But my GUT says we’re done…. SO we try, because we are WAVE junkies LOL

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    • Valerie wapiti says:

      You echo exactly my thoughts after reading the wkend update. Totally opposite scenarios. Cool. Complete kudos to Tony for being honest. The S/R levels often are close to being right on and those I pay attention to.
      ~V~

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    • xEVAx says:

      Wave A can be impulsive (5 waves) or correcting (3 waves), 3 cant be the shortest, 2 cant go lower than 1, impulse waves can and should subdivide…. A and C are impulse waves, 5,3.5 is a corrective pattern of 3 waves, ABC…. SO when A equals or exceeds C you have to consider the other waves and use Fibonacci to determine thew likely count… a 2 can and will retrace 78.6% of one but usually no less than 62% and a 4 rarely deeper than 50%…. The whole leading and expanding diagonal thing I believe came from Frost and Precter, yea I know….. Any isight on “B” “X” and other complex EW things is always welcome in my mind….

      C in this case has a sloppy 5 waves down from major B and wave A was 5 and 3 depending on the index, it did overlap 1/4 already on COMPQ and Im expecting confirmation on the other indexes with a negative divergence on RSI and MACD at or near overlap… Overlap and a sharp reversal would confirm the ED for me and Id be getting ready to trade at the low (or high in another situation)….. Bottom line is A an C are usually impulsive waves in a larger corrective pattern…. So C in a 5,3,5 or a 3,3,5 needs 5 waves whether its cycle or minute degree waves…. A good count seems to work on auto pilot while a bad one usually happens at critical points…. Gauging sentiment, trend lines and LONG cycle work seem to help my trading and just about ALL the other crap and noise including fundamentals usually all considered can give an early warning… How early??? Too early for many usually but there is more to trying early “retirement” than a good swing trade…

      Sometimes even if just for sanity it’s best to step away …. There are other things to do with $$$ aside from “markets” .) Been 10 1/2 years now living off “investments” and trading =) GL .)

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    • chrisk44342 says:

      That is why (IMO) it can not be one’s primary tool for making money. Just because it’s not my solitary tool (is there such a thing?) doesn’t mean it lacks value. It just means you still think there is a solitary tool that you can profit from. No offense, but the problem is you, not the tool.

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  8. 123 abc says:

    Thank you Tony, a great OEW weekend update.

    Q: If the DOW count is correct, then why would you expect another wave down to complete the bear market? The count on the DOW suggests three Intermediate waves down, where legs A and C consist of two Minor waves each. This appears like a completed structure of seven waves, so curious as to why you’d expect the DOW count to develop a further wave lower…?

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  9. Thanks, Tony great map and I noticed you have extended your pivots to a higher level and I still feel odds of closing gaps especially on the SPX is good. I enjoy this blog,but some of these people blab way too much and basically need so many words to explain themselves. The reason I like TA is that the price follows some rules like EWT and OEW so I use other technical indicators that help me see better. Political crap and long essays I skim over. Some of you guys need to get to the BOTTOM LINE…

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  10. arthurk says:

    SENTIMENT UPDATE: Was AAPLs Guidance a Warning?
    http://sentimentsignals.blogspot.com

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