Wednesday update

SHORT TERM: rally continues, DOW +92

For the first three days of the week the Asian markets have gained 2.9%, and the European markets have gained 1.2%. The SPX started the week at 2532 and hit 2595 today for a 2.5% gain so far this week. When reviewing the charts of the SPX, DOW, NAZ and NDX we do not see them as choppy as we would have expected for a B wave rally. The SPX, DOW, and NDX look like three waves up, and the NAZ is one wave up thus far. Could be corrective, could be impulsive, too early to tell. With that in mind we did a bit of research.

Whenever the Presidents Working Group (PWG) gets involved in the markets through their Primary Dealers. The market generally rallies 10% to 13% before turning over and heading back down again. One time, 1990, it never did fully return to the recent lows. Was that the outlier? Or is that a possibility this time around too? The three levels to watch going forward actually fit with three OEW pivots. These are highlighted in green on the daily chart. SPX 2575, 2632 and 2656. The first is a 10% rally, which has already been achieved. The second a 12% rally, and the third a 13% rally. We would not expect a PWG B wave to exceed that third level. We are also watching market breadth, and have some parameters there too. Interesting juncture.

Short term support is at the 2575 and 2525 pivots, with resistance at the 2594 and 2632 pivots. Short term momentum displays a negative divergence at today’s high. Best to your trading!

After observing TESLA  for a few years we have determined it trades more like a commodity stock (abc’s) than a growth stock, and have dropped it from our charts. In its place we have added a few things. Fed-Ex (pg. 13), Intelsat (pg. 14), and GBTC (pg. 13) the pink sheet Bitcoin ETF. Under commodities on page 8 we have added to Gold and Crude, the CME Bitcoin index and Soybeans. Biotech remains on that page. The Housing index has been moved to page 15 with the housing stats. New Year improvement? Possible.

MEDIUM TERM: downtrend

LONG TERM: downtrend probable

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

About tony caldaro

Investor
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551 Responses to Wednesday update

  1. rd3777 says:

    Lot’s of topping candles and inside days left today. Plus today was the 27th day since the previous top December 3rd…. a wicked decline ahead for the next 12 days.

    • ttsden says:

      Tony TeoJanuary 12, 2019 at 2:30 AM
      Monday 14-01-19 Will resume upsurge in all US indices S&P targets 2721/2769 in 2 weeks The market has been talking. Listen up guys.
      Tony Two posted

      • ttsden says:

        Hi rd3777
        This was posted on TraderJoe’s ” studyofcycles blog” , But he may take mine off again.
        TJ has done it to me twice before. After all he is the guru and has the prerogative.

  2. Don’t know if you can open this link or not, but Colin Twiggs usually has something interesting to say. Love his “Twiggs Money Flow” indicator. http://tradingdiary.incrediblecharts.com/2019-01-11-markets-economy.php

  3. fxaprendiz says:

    No weekly summary of the blog’s activity by Wanderer today?
    Too bad, I was looking forward to his witty remarks…

    • Valerie wapiti says:

      with luck maybe this weekend. was a colorful cuss and discuss week on here.

      • Sethu N says:

        Please see the chart attached . I just followed the green line and did not worry about anything like news, EW count, etc. Hour is in momentum as it is above the red line. Day once it enters above the red line higher targets are possible. As Phil says it can be done by a GAP UP. Longs need to worry below the green line when it happens

  4. stockop says:

    any financial advisors on here? what are you recommending clients do?

    a good friend of mine whose still building his book out is telling me he’s had multiple people tell him their current FA is recommending “investing more because the market was down so could get in at a better price.” is this the consensus? I didn’t have this kind of access in 2015/2016, but were they/you recommending to buy stocks then? my memory is a little jaded from back than, but the world ending and to get out of stocks seems much more what i remember.

    • mcgcapital says:

      I used to advise institutional and here’s what I’d imagine their current advice to include the following:

      1. Investing in stocks is a long term thing, and time in the market is more important than timing the market. More damage is caused to portfolios by pulling out at the wrong points and not re-investing than by being invested through corrections/bear markets. Individuals should set objectives for their investments (e.g. saving for retirement, housing, kids education fees, pure wealth accumulation) then build their portfolio actions around these objectives, rather than focusing too much on what markets are doing.

      2. This approach usually has a target end date e.g. retirement age. Investment strategy is linked to how far you are from the target date. The closer you are, the lower the risk in the portfolio e.g. less stocks more bonds. Young people should be almost fully invested in equities most of the time. Make regular contributions such that purchase price is cost averaged over a period of time which avoids the risk of ‘buying high’. Ensure investments are well diversified across a range of asset classes, regions, currencies and sectors. Limit exposure to any one individual stock.

      3. The above is your framework for building long term wealth in the markets. That being said, you can make tilts to the portfolio depending on what the macro view is. Most people won’t need to do this as 95% of people invested in the stock market don’t have a professional background in finance so it just adds an unnecessary complication to the investment process. Non professionals are better off sticking with points 1 and 2 exclusively, that should capture equity market beta over the long term.

      To add alpha, I’ve basically stopped making new contributions into my portfolio as of last spring, and the money I would otherwise be investing is sat in cash. In addition, I’ve raised my cash allocation in the portfolio to 20% from 0%, reduced the beta of the portfolio and ensured that its relatively closely aligned with benchmark weights via rebalancing. That means I was selling more US equities at the highs and switching it into other regions, and the US fell more since October, and was rebalancing back in in late December. I’ll re-start monthly purchases once markets have corrected a significant way (let’s say 1800 SPX) or are bottoming and the longer term moving averages are turning up, whichever comes earlier. I’ll raise my allocation to growth assets back towards 100% on the same triggers. So its worth noting I’m still 80% invested despite seeing a 50+% bear market. The risk is I’m wrong about the bigger bear and I’ll experience a cash drag on the monies not invested. But its a controlled risk, not an all or nothing approach. If markets fall as much as I think, I’ll be buying a lot more at the bottom (or lower prices at least).

      Other people will tell you that you shouldn’t be diversified and should just be all in when you’re confident on the view. That’s the approach favoured by the likes of Druckenmiller, Tudor Jones or Livermore and obviously leads to huge returns when right. But that’s too much risk for the average person, and shouldn’t be standard advice. As Bluehorse said earlier, its a market of stocks not a stock market, and its true that there are always stocks in uptrends when indices are going down. Personally I don’t bother with individual stocks, I focus my time and energy on global macro and the indices/general asset classes as that’s time consuming enough as it is. I’m sure there will be opportunities here in some stocks even if we’re dropping 50%, but its still a harder task to find good stocks when swimming against the general tide. You also need to invest significant time in analysing accounts, getting to know the companies etc.. its a different ball game to the indices and whether people go down that route depends on how they want to allocate their time.

      As an aside, I’ll be honest, most IFAs don’t have much of a clue. Their qualifications, training and experience vs institutional are flimsy in comparison. A lot of them are just salesman pushing something devised centrally to generate revenue and they don’t know a great deal about markets which is why you might get some of them saying oh its down 10% so obviously time to go all in without a grasp of the bigger picture.

      • stockop says:

        For real man thanks for always taking the time to answer my questions in detail. You have taught me a lot I don’t know how I would find out otherwise. I’m a little bit shocked you don’t look at individual equities. I feel like you’re missing out on an enormous amount of alpha potential. Just one apple or netflix over an investment life, not even assuming pyramiding, is huge. All about position sizing. You are more than capable. Your assessment of IFAs agrees with what I see.

        • mcgcapital says:

          There is a lot of potential.. but for every Apple there are thousands of stocks that go bust. Finding the next big thing is hard work and risky.. I just feel that if I started monitoring individual stocks it would increase the number of charts I need to look at 10 fold, and fundamentals can change quickly on those things too. Global macro is more interesting and doesn’t take up a ridiculous number of hours a week to keep on top of. It’s a decent work life balance but think if I added in the individual stuff you’d have to spend a lot longer in front of the screen

      • vivelaamo says:

        Great post mate. Thanks for that.

  5. Scott J says:

    I m somewhat new here. Love the analysis, however the bantering reminds me of a recent article I read: https://www.npr.org/2019/01/09/683177489/virginia-study-finds-increased-school-bullying-in-areas-that-voted-for-trump

  6. FYI -….I do like SLV right here. Maybe, it is because, no one here is writing about the advance in SLC shares…going to be fun…

    • Bud, Phil’s been talking about SLV all week. Even posted a Hi Ho Silver clip. I’m not sure what SLC has to do with SLV though.

      • xEVAx says:

        Cant find a quote on SLC? but SLV looks kinda scary along with gold/GDX, $$$ down would help i bet…. Ive been beaten down there for a long time…. Recently everyone hated it and all I had was hope, yea you know what thats worth…. Im with you but Im not expecting much :/

        • fionamargaret says:

          Eva..think SLV is down to 13.5, and maybe even 11/12.
          Nice to work with you…let’s see how we can make money on Monday, and if there is anything you would like me to look at, just say and we can compare notes.
          Oil is in equilibrium…no defined pattern short or long…and TLT is in a positive pattern, so no TBT unless the numbers change……
          Have a nice weekend….x

          • xEVAx says:

            You know Im NOT even in stocks except for guns and gold .) It wont break my heart either way if we break out here but my gut said BEAR all year last year…. I recently switched to looking at the bull case and yes there are very bullish charts I have but nobody really knows…. Demographics, fundamentals and lately even sentiment have swung me back to the bear side.) That’s VT, Vanguard total world stock ETF for my GDOW critic .)

            • xEVAx says:

              Just checking this out and this ETF has 8063 holdings, the top 60 reads like The USA indexes but Id say it’s about as “international” as anything…..

        • SLC….. Seattle Liquor Centre…… Bud refreshes there from time to time.😆😂

  7. Dex T says:

    Tomorrow Trump will set the record for the longest shutdown in U.S. history. Quite a feat!

  8. Calm before storm? Rolling over? I see zero candlestick patterns on 1 minute to 1 day chart this trading day. Extreme complacency or waiting for next weeks earnings perhaps? My visual chart recognition looks like we can get a small move higher to perhaps 2615 BUT I would be very surprised if it manages any move above that. Last month earnings forecast was dropped. A low bar to hit seems to indicate that by itself will not drive the market either way. Events perhaps? Not many here agree with me on this but as i stated 2 years ago once impeachment is on the horizon more dangerous actions will take place. Emergency funds and government closure is only the beginning. Funny how all this is happening in condensed fashion. he had 2 years to demand these things with a complete GOP sweep. Desperate times, desperate person.

    Can the market sustain any long period rally in this environment? You know my answer.

    • Last time we had 4 weeks in a row gains? Next week will makes it 4

      Mnuchin defended lifting Russian sanctions to congress. All trump voters must agree as Pompeo rips Obama defending Trumps policy. Seems we ARE leaving Syria. When will treasonous behavior end? After Mueller report? Doubt it. My real question is are we no longer part of the alliance? when did we switch sides? Sad, so sad. More importantly will the American people accept this change as the Russian people have. in their excuse they never knew democracy. Whats ours?

      Living in one of the most darkest period of our democracy and many still don’t understand this. Love the silence from my responses. Not a single person seems to support my wild views on democracy. To do so go against Tony. Destroying our democracy from within. “We don’t know what we missed till it’s gone”.

      I suggest most here ignore the Mueller report and it’s conclusion. I already know what it will say. Call me clairvoyant. Let the games begin! next week should be interesting. Will we hit 4 weeks in a row? Will the PPT defend the market at all costs here?

  9. xEVAx says:

    Dollar to $84???

  10. phil1247 says:

    Brick wall at 2595

    tonys pivot
    previous extension long target

    looks like they will have to gap over it
    next week since they cant go thru

    have a great weekend tony
    and all

  11. micky says:

    Various reasons for this stall,one is found on my trading for dummies daily chart, the stuff Phil doesn’t like….the daily 1 SD

  12. The rally’s reached the point where everyone’s looking around at each other and saying “you first.”

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