Weekend Update

REVIEW

The week started at SPX 2532. After a small pullback to the SPX 2525 pivot early Monday it rallied to SPX 2580 early Tuesday. Then after a Tuesday pullback to SPX 2548 it rallied to SPX 2598 by Thursday. Friday was the second straight gap down opening, and just like Thursday it had minimal impact on the close. For the week the SPX/DOW gained 2.5%, and the NDX/NAZ gained 2.5%. Economic reports for the week were sparse due to the government shutdown. On the downtick: the CPI, ISM services and consumer credit. On the uptick: weekly jobless claims improved. Next week’s reports will be highlighted by industrial production, retail sales, and the NY/Philly FED. The ECRI has now declined to 2011 levels.

LONG TERM: downtrend probable

The foreign markets, as we noted on December 29th, have been displaying signs of improvement after entering what appears to be their last bear market downtrend. While Germany and Spain have rallied a little off their late December lows. The Asian markets are doing a lot better. Hong Kong and the Kospi both appear to be in an uptrend, and Singapore has already confirmed its uptrend. China has had a small rally off its January low. Elsewhere, Brazil continues to make new bull market highs.

On the home front. Nothing has changed in the long term count for the US major indices. A Primary I bull market ran from 2009-2015. Primary II lasted 9 months but did little damage ending in February 2016. Major 1 of Primary III rose from that low to September – October 2018. A Major 2 bear market, having dropped 20% already, has been underway since then. When it concludes, if it hasn’t already, an Intermediate I bull market will be underway. Intermediate I, of Major 3, of Primary III.

MEDIUM TERM: downtrend

After the bull market high in October 2018 at SPX 2941 the market headed into a bear market. The decline appeared ordinary until December. Then the market went into avalanche mode. Was it the POTUS I’m the Tariff Man tweet? The market dropped from SPX 2800 to SPX 2347 by Christmas, a 16.2% decline, for the worse December since the year 1931. After that the market reversed and changed characteristics. While nearly every rally was sold in December, nearly every decline is currently being bought. The SPX in 12 trading days has rallied from 2347 to 2598, a 10.7% gain. Was it the POTUS Stocks are Cheap tweet?

While all this was going on we were doing some research into historical market activity that is similar to this. We found five events, not much, since, and including the 1987 crash. In every one of the five instances the market rallied between 7.5% to 13% after the significant low. In four of the five instances, when the rally concluded, the market retested the lows. The one exception still had a 61.8% pullback, before moving higher. The pivots highlighted in green 2632 and 2656 are the 12% and 13% levels.

We also looked into momentum measures. This data is only available since the turn of this century. And there are only three instances. In each of the three instances momentum rose 20% to 25% before the market reversed and went back to retest the lows. It is currently up 17%. The chart for this is located on page 17 of the charts. Probabilities suggest a decline soon that mostly likely retests the lows.

SHORT TERM

During the bull market it was fairly easy to track the five wave movements as volatility was low and the rise was generally slow. With volatility still high it has been somewhat difficult to track the smaller waves with our normal approach. With this in mind we all have been working to quantify short term waves just on price alone.

There are a few potential counts floating around in our group. Nearly all are corrective. The approach I am using displays 5 impulsive waves up (SPX 2347-2520), a choppy pullback to SPX 2444, then 5 overlapping waves (possibly an expanding diagonal) to SPX 2598. Waiting to see how this unfolds in the days ahead. Short term support is at the 2594 and 2575 pivots, with resistance at the 2632 and 2656 pivots. Short term momentum ended the week above neutral. Best to your trading Opex week!

FOREIGN MARKETS

Asian markets were all higher on the week and gained 3.0%.

European markets were all higher and gained 1.9%.

The DJ World index gained 3.0%, and the NYSE gained 2.7%.

COMMODITIES

Bonds continue to uptrend but lost 0.3% on the week.

Crude continues to look like it is in an uptrend and gained 7.6% on the week.

Gold is in an uptrend and gained 0.3%.

The USD is in a downtrend and lost 0.5%

Bitcoin is in a downtrend and lost 2.8%.

NEXT WEEK

Tuesday: the PPI and NY FED. Wednesday: retail sales, export/import prices, business inventories and the NAHB. Thursday: jobless claims, housing starts, building permits, and the Philly FED. Options expiration Friday: industrial production, capacity utilization, and consumer sentiment. Best to your week!

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

About tony caldaro

Investor
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495 Responses to Weekend Update

  1. R D. says:

    Btw Cryptos seem to be impulsing down after a weak and short bounce. If it takes out the low and hits 2,000…will markets rally? I don’t think so. Leverage is a killer.

  2. Silly reminder. September 17th Trump announced 200 billion tariff and it became the exact moment this drop started. WOW, talk about unconnected coincidences. I was just as silly to pound this event repeatedly as cause of next big drop. We all know EW technicians work hard to forecast the future and they proved once and for all that the all knowing EW saw the drop, just like the 2016 rally. I am so impressed with their ability to track our future I have decided to shut out all external noise on Trade Wars, Shutdowns, Treason and Impeachment talk.

    Since i have actual timestamped proof of my calls on major turning points I will stop pounding my point across. Seems I have proven one point and that is people do not change. those with an open mind have a much greater ability to sway with the wind while a majority prefer the stark feeling of biting wind across the face. I do wonder what the newly leaked implications are to our nations ability to sway with the wind. About to find out.

    The consensus on Trade War early on was that it had no affect on influencing market movement. Not many here ever confronted that was wrong. Instead they just pretend it was never brought up. Like the huge miss in early 2016 when i used common sense and actual fundamental data that clearly showed a much healthier consumer. Now when i bring up trump I no longer get ridiculed. Progress! Just stay away from any news source and all is well. When exactly did trump announce the 200 billion tariff on China? I believe it was September 17th. Ignore a country in crisis betting against the wind.

    I need unbiased targets and timeline for the start of the next big drop. That I have not gotten but some here seem to have come close. thank you for your help.

    • tony caldaro says:

      the market topped in October

      • Stand corrected. he implemented the 200 Billion on September 24th and we topped on? Yes there was quite a delay? Got it wrong again . thanks for correcting me. my bad. 2016 call, Trade War, and now talk of treason and impeachment. These are MY calls and ones that either happened fast or took some time. i must say my call on trump was way too early. So tell me what are the odds trump gets impeached soon and why will that have no affect on markets? perhaps I am over reacting? I certainly did 2 years ago. More importantly will the GOP continue to support a traitor. My bad, we don’t know that yet. I keep jumping the gun. MY LOGIC: counter intelligence since Comey firing. What transpired since then? lots. From multiple one on one private meetings to trying to set up a secret back channel to requesting cyber security jointly, to numerous secret meeting by trumps high level staff, to an actual lifting of sanctions last month. A big nothing burger? he outsmarted the intel community? OR like the other calls i made it was just a coincidence. Then again we have the separate Mueller investigation that leaked out treasonous behavior by his top people. Trade Wars have no bearing on profits. Treason or not who cares? Corporate world goes on with not a glitch.

        I know amoral behavior and apathy are at its apex, and we now tolerate daily lying, cruel policies, and a man that absolutely loves dictators. No crime is too big to maintain relationships with them. NONE. Is my logic and early conclusions so off? Not concerned?
        Market will ignore the process we go thru as Mueller reports? We already know crimes were committed by TRUMP himself. I am amazed at our ability to place blinders on and keep them on. My call is that markets will stay down as long as trump remains in office and drop strongly after report is submitted (IF) the GOP stay silent and don’t react immediately. I count on the logical conclusion that the GOP will stay silent or weakly defend him as long as they can.

        Will the market ignore Mueller? yes or no. Does this specific external report have any consequences in market movement? if so, for how long? Are you sticking with no external forces influence market behavior? This is my biggest problem with static systems. they predict the unpredictable events. nope, don’t buy it.

        • tony caldaro says:

          during the Nixon investigation the market tanked
          during the Clinton investigation the market rose
          take your pick, they have been investigating Trump since November 2016

          • And only someone that refused to learn the truth can ever compare the three. treason already by his campaign manager and his NSA head. Sink in please. head of foreign and domestic intelligence and counter-intelligence was called by a federal judge a despicable human and with treasonous behavior. Same judge that hates government over reach. FIVE one on one meetings with Putin with no evidence of what they spoke about. No other meeting with any other head of state had one on one private meeting. Trump denied and tried to thwart sanctions from the start. ONLY congress that pushed it thru. He JUST lifted sanctions on a Russian oligarch directly involved with tampering our elections. he is directly linked to Manafort. I can go on and on but obviously you refuse to hear. Mind boggling how someone can accept the president of the USA involved in sabotaging our nations welfare. We know for a fact he gave the Russians secrets from Israel on how they gather intel right after the firing of Comey. I can’t even start to debate this. Obtuse or perhaps someone that thinks our nation deserves to be sold out by the commander in chief. Trumps actions are undeniable even if you use Putin propaganda or FOX News an obvious arm of Russia misdirection. Can never change reality on the last 2 years. Incomprehensible that I am the ONLY one that sees this? really?

            • mcgcapital says:

              Political risk is elevated and a large part of that is because of who is in the White House and the unpredictability of it. But there are literally thousands of possible outcomes with all this stuff, and to be quite frank its not that interesting. Markets can only price in things that they know how to price (i.e. when they can quantify an impact on earnings or a change in risk premium). They can’t price in a thousand different political scenarios at once. So there’s not much point speculating on it, just react if it happens. Its also perfectly possible nothing bad happens politically

            • tony caldaro says:

              a biased mind knows no truth, only opinion

  3. J.Wenger says:

    Thanks Tony. Agree that we retest the lows at some point…maybe that’s when we’ll see a bunch of “good news” (china trade deal, end of the govt shutdown, no hikes in 2019)…
    https://www.invest-safely.com/stock-market-outlook-2019-01-13.html

  4. xEVAx says:

    Have any of you read Tonys excellent Weekend Update??? Thanks Tony and I hope you’re feeling better =)
    Id love to know where it is this group is seeing no recession it sight, sounds nice LOL
    Id also like a poll of who here is actually short stocks in any way or looking to short in a big way???

  5. Most logical count to me is this is a of B. Finishing up around 2615. Then drop to 2500 then c of B around 2656 before a retest of the lows or slightly lower. Had been expecting 2280 area for the ultimate low. We shall see.
    Expect Monday to be up. Then rest of week down. Good luck all

  6. phil1247 says:

    http://fat-pitch.blogspot.com/2019/01/weekly-market-summary_12.html#more

    good probability the low is in for spx
    now looking for confirmation that 3 of 3 to the upside is in force

    bears continue to be ” rope a doped ” ie…
    .
    shorting into drops to extension long supports
    that continue to hold and grind upwards

    the GRINDER could be the bears worst nightmare

      • fotis2 says:

        Even better probability the Big Drop around the corner now expecting swooooosh down South Mon-Tues catch all the Bulls unawares 2620s /HWB/Daily ma etc.etc

      • xEVAx says:

        Oh come on, for squeeze to happen Bears would have to actually be short .) We are seeing a squeeze yes but I also think we are seeing real selling…. Bears are in gold and bonds and perhaps moving out of US bonds into gold and oil, hard commodities…. Dollar down, yields up, stagflation up….
        I think people underestimate the damage done by Tariff Man and complete leftist takeover and that we are finally starting to see it in earnings and economic stats world wide…. It’s no coincidence the gov is shut down and holding back economic stats, they are likely terrible…. See Trump and Powell and the bizarre Mnuchin PPT invocation…..
        Bullish sentiment is gathering steam right as we’re about to hit the even stronger resistance on negative divergence it appears…. When huge firms like Vanguard ban shorting and leveraged ETF’s that should be a huge red flag and not taken as lightly as I see so many doing…. The action in corporate bonds and stocks has shown volatility and extreme oversold conditions…. Likely due to the inevitable consequence of the FEDs actions in trying to REACT to the results of criminal share buybacks on cheap debt at bubble valuations….. And thats just the USA, it’s worldwide and it appears much worse everywhere…. It’s almost like an orchestrated take down decades in the making….
        My forecast, down a bit then one more try UP that will fail and reverse hard going straight to the lows for the “retest” of the PPT, I’ll worry about the numbers when the futures open, GL

        • bluehorseshow says:

          Vanguard did not ban shorting.

          • xEVAx says:

            If you have a retirement account and you are worried about the way things look…. You can buy a bear fund or a short etf, you can short nearly anything with ETF and ETN’s…. BUT unless you are opening a brokerage somewhere else, you will not be able to trade these with Vanguard…. Retail Moms and Pops are being set up here it seems to me anyway….
            Something smells rotten underneath all the BS here and cracks appearing in credit and economic stats…. Everyone forgets the Bubble blow off we were in about a year ago LOL
            Yellen “retired” and I believe it was -666 on the DOW that day LOL VIX was bottomed out and we flash crashed when the complex short volatility scam blew up….. The first intervention was on the way to the 2553 low as shown by falling on positive divergence…. That low seemed so controlled at the time followed immediately by an oversold bounce and continued forced action up making a leading diagonal on the Bubble indexes that did 5 forced waves into an ending diagonal at the Bubble highs…. It wasn’t enough for the DOW propaganda index so we had several more interventions and ending diagonals everywhere with most failing to make new highs….

            DOW/NYSE ect can be counted as an ABC as shown in Tonys count with a tentative “int A” and we’re in B or we need one more down to complete C and possibly the bear market…. Or it can be the end of 5 waves and we are in wave two, never mind the degree…. Another possibility is we’re in wave 4 of 1 and coordinated action is taken to continue the bubble that started in 1974…. In this case we can have another blow off to end it all or a nightmare scenario of a 1 1/2 to 5 year long ending diagonal where we see massive shifts in capital worldwide resulting simultaneous bulls and bears and extreme volatility in just about everything…. GL

      • chrisk44342 says:

        exactly- treacherous for longs and shorts here IMO. Big short risk up to 2625, and now will have to monitor any ST pullback for an ext long set up as per your chart phil

    • kingfrogcash says:

      It’s now all about earnings. First up $C on Monday. Will the bears sell the news after a run-up? The yield curve is a little above my head for actual impact to earnings on big banks.
      It has inverted between the 2 year with the 3 year and 5 year, with the 10 year in 2-3 weeks at this rate.
      Fri-1/4/19 – 2Y, 2.492, 3Y 2.478, 5Y 2.496, 10Y 2.67.
      Fri-1/11/19 – 2Y, 2.543, 3Y 2.516, 5Y 2.527, 10Y 2.699
      Basically a healthy yield curve would show rising rates as you go out in time.

    • aahmichael says:

      As mcg posted below, “One such example of this is Urban Carmel. In September he was writing along the lines of ‘a pullback is probably coming, but it will be limited to 3-5% and there’s no chance of a bear market as there isn’t a recession on the cards anytime soon.’ ”

      Basically, Carmel’s permanent approach is to say that the odds of a bear market are always very low, therefore, you should always be long and stay long. This makes him look like a genius during bull markets, but then he gets killed during bear markets.

      • gtoptions says:

        Let’s see how your BS post ages…….

        “40% decline at a minimum”

        “aahmichael says:
        December 22, 2018 at 10:44 am
        No change in my view. Trend remains down, and wave 3 continues to subdivide down from the 12/3 high. At this point in the decline, we’re in 3 of 3 of 3. ES has declined a minimum of 34 points from its daily high for 14 consecutive days. That’s every day in December. Last weekend I pointed out that we had finally closed below the 100 week sma at 2606, and that meant it was entering a black hole down to 2350. Black hole indeed. However, since we’re almost at 2350 already, and we still need to do 3-4-5, 3-4-5, 3-4-5 before wave 3 is complete, then I don’t see how 2350 will provide anything more than temporary and minimal support. Ultimately, before this bear market concludes, I expect a 40% decline at a minimum, but more than likely it will go down 50%, and 60% is becoming more and more possible as each day goes by.”

        • aahmichael says:

          It’s not BS to me. I think we’ll see 1800 at a minimum before we see new highs, but I didn’t just post that projection on 12/22, I posted it in early October. Everything the market has done since then has only reinforced that projection.

          • I agree with you Michael, it’s not BS. Please keep posting, your posts are useful and worth reading.

          • mcgcapital says:

            People are getting pushed around emotionally here. It’s because of the plethora of misinformation that’s been put out there by fintwit and the like. If you look at price and forget all this stuff about breadth, volatility indices and surveys on how a small number of people are positioned and the like that people seem to think are predictive, it’s clear who’s in control.

            Was bullish above 2550-2600 if it held in December but it didn’t, so bears in control. Market got overextended lower so rebounds. At the lows everyone is looking for a bounce. Then when it comes they switch the view completely back to bullish without the market first proving it first. This whole area around 2550-2650 is key, it’s for bulls to prove they have the strength to push through it rather than the other way around here. We can all start believing it’s something other than a bear market rally if it breaks out but it hasn’t yet.

            • aahmichael says:

              As I wrote in the post that gtoptions reposted, after the market closed below the 100wma for the first time since 3/4/16, it immediately crashed straight down to the 200wma. Now it’s bounced back up to the 100wma. Normally, once previous support is broken, it then becomes new resistance, which is why the market has not been able to get through the 100wma yet. The other warning flag is that volume evaoporated last week during the rally. The average daily SPY volume in December was 163MM, but the average daily SPY volume last week week was only 92MM. Some people on this blog claim that volume doesn’t matter, but it sure mattered in the July-Sept rally from 2800-2941 when there was no volume at all. They say that they never ring the bell at the top, but that anemic volume was a very loud clanging bell.

              • aahmichael, I completely agree with the importance of VOLUME! I pointed out last week how it was dropping; think I called it neg. divergence. I SPECULATED that institutions had finished placing funds, and the rally might be done. Of course, in this market, can’t quite tell, but when vol. dries up, in general, it’s done for now. Top of open range at 2519.49, or lower should be the close on Thurs. 1/17.

    • mcgcapital says:

      http://fat-pitch.blogspot.com/2018/10/weekly-market-summary.html

      ‘Equities fell 4-5% last week and have given up most of their 2018 gains so far in October. This might feel like the start of a bear market, but that is the least likely outcome.’

      ‘The bottom of the recent swoon may not be in but our view is that investors’ bias should now be for higher prices in the weeks/months ahead.’ Said near 2800 mid October.

      ‘As the recent downward momentum is worn off, we expect price to strongly rebound, probably to new highs.’

      ‘And here’s the bad news: US equities have a topping pattern in place. Price weakens before it reverses. This is how tops are formed: there is a momentum high before an eventual price high as the uptrend falters. The momentum high for SPX was in January; in fact, momentum had not been higher in the past 40 years, a warning. Price eventually made new highs in August and September. This pattern is how every major top in the past 40 years has started.’

      The guy is like an ostrich with his head in the sand. He pointed out that there’s a topping formation in place and when price continues to confirm, he continues to go against it for a load of nonsensical reasons. Good in depth analysis, extremely biased extrapolation on what it means… you have to read him and draw your own conclusions rather than following the ones he’s providing.

      This is from this weeks’ analysis:

      ‘Sharp falls of at least 15% have a strong tendency to have their original low retested in the weeks/months ahead. That is true even, as now, a sharp 10% bounce occurs.’

      ‘On Tuesday, the NYSE experienced a “Zweig breadth thrust.” Created by Marty Zweig, his eponymous indicator occurs when the 10-day average percentage of advancers swings from less than 40% to over 61% within 10 days. As Tom McClellan says, “it is a sign that a rapid surge of money is trying to push its way through the door to get into the market.” Since 1962, there have only been 11 Zweig breadth thrusts. The forward results are impressive. Since 1970, SPX has continued to rally every time over the next 20 days by a median of about 6% (table from Quantifiable Edges).’

      So which is it? Are we going up or down? He’s saying if we retest there’s a good chance it holds but on what basis.. surely we have to wait until then before making a judgement.

      I predict that DH will be talking of wave 3 of 3 again soon.. but down not up.

      • phil1247 says:

        mark

        its all a lot of talk on both sides

        none of it matters

        the only thing that pays is price
        the only thing that matters
        to me is we continue up while above 2549

        bears are SOL until they can push it below there
        case closed

        • mcgcapital says:

          It’s true that it’s trending up on the shorter timeframes for now. But don’t you have a bigger picture short we need to break somewhere to confirm it carries on? Like in November you were saying that we were bullish above 2617 on the larger timeframe and that target was 3000s above there. Isn’t there a level we still need to break up to invalidate the larger downtrend? After all we haven’t quite retraced 50% yet. For me it would need to clear 2600s to confirm (and obviously in my opinion I don’t see that happening, but will see)

          • phil1247 says:

            mark

            the way it works is ….
            yes there are potential resistance levels above as you say
            but they are just potential levels until the extension long fails
            that is how you prove where the resistance is

            so you could blindly short at hwb 2573 but that didnt work
            why? because the extension long was still intact
            and we kept going up thru 2595 target
            creating the new extension long i am showing now

            we are grinding up into the potential short level at 2627 at .618
            will that work?
            not as long as the extension longs continue

            bottom line
            i look at the extension as a third wave
            so as far as im concerned
            we are in 3 of 3 up now until i see evidence to the contrary

            • phil1247 says:

              if you want to get a head start on it going down
              how about at least a 15 minute short off the high that holds?

              we cant even do that ….
              that says extreme strength until that changes

              • xEVAx says:

                How about a massive shift of capital out of USA into some EM’s and hard assets as the the dollar drops with stocks and bonds??? The trigger is corporate/usa debt serf/bankruptcy/sentiment/massive uncertainty/political gridlock/hard leftist politics and finally KING MATHEMATICS .)

              • Excellent detailed explanation Phil. Ive been guilty of trading against the short term trend thinking a larger 50% level or another would kick in while shorter time frame extensions or even traditionals were still in play. Sometimes it does get confusing.

            • aahmichael says:

              re: “so you could blindly short at hwb 2573 but that didnt work”

              On the contrary, the jury is still out as to whether shorts at 2573 will work or not. Just because it hasn’t paid off yet, doesn’t mean it didn’t work, or won’t work. Even according to the DH system, that trade is still very much alive, as the .618 level has not been violated yet.

      • mcg…DH doesn’t believe in EW.

    • I’m with you on that Phil
      Thumbs up ++

      I’ve been looking at some other poorly performing markets, which have no doubt been acting like suction on the U.S. Markets.
      Maybe they are a little overdone to the downside now.
      Also, they seem to have pivoted up about the same day (Dec 26) as the U.S. Markets have. News that we don’t know about?

      • BTW, I don’t have FTSE on here, only because Stockcharts doesn’t get that data anymore.

        • mcgcapital says:

          FTSE looks to have clear parameters to me… we basically retested the Xmas eve low on the 27th, then since then we’ve had 6540-6760-6600-6760-6680-6880-6780-6950-6860-7000-6900 (so far). So lots of steep retraces and some overlap between them all. That doesn’t fill me with confidence as during prior corrections we’ve gone up off the lows in a fairly linear fashion to start with.

          Below 6860 and we fully retrace a rally leg, and that suggests the rally has come to an end, and we can start to look for lower highs and lows again. Hold here and turn up, and we can print another high for the rally above 7000. Ultimately there’s nothing bullish about it bigger picture until we break 7100s up. That’s 3% or so above current levels so the way I see it, the bigger picture bear view is basically 3% risk to potentially 40% reward from current levels.

      • Scott J says:

        Germany -> recession

  7. micky says:

    Bluehorse, good timing you had on EXAS. The circles indicate where my 2nd resistance and support was hit.

  8. fxaprendiz says:

    Comparing Long Term Charts Update, part 2

    3. Next up, and update on Tony Caldaro’s count

    When compared to the Traditional EW counts presented in previous post, Tony’s OEW count looks so unique and above all, optimist, I really want to like it.

    In this count, the SC wave from 1932 wasn’t a wave 3 but a wave 1 (he’s actually the only one I have read affirming that which makes his count so unique), 2000-2009 was SC wave 2 and since then we are in a SC wave 3 so in his view we are just getting started, with the best still to come =)

    What’s not to like? Well, it’s not that I don’t like it, it that it has a major problem that I don’t see how it will be resolved unless we have a recession like, right now. Here’s the incompatibility: we cannot have a recession right in the middle of his coming Major degree wave 3, that would be unheard of. That would mean the next recession wouldn’t happen for at least another 8-10 years from now, during Major wave 4, adding to the almost 10 years we have already been recession-less. That would be even more unheard of, an economic expansion of 18-20 years in total… people are already in disbelief of this aging bull, and with good reasons. This is already the second-longest bull run in history, soon to be the longest in June 2019. Fundamental cracks are starting to show. The solution to this dilemma? having a recession during this Major wave 2. Easy-peasy. Only little problem… where’s the recession? With the Major wave 2 maybe even done already -Tony’s assessment- or with just a few more month’s in its life, time is running out…

    Tony’s initial expectation for his Major 2 was a decline of 15-20% that has already been met. He has mentioned his wave 2 will only get invalidated in a break of the year 2016 lows (SPX 1807) so there’s room to the downside, but the invalidation will probably come from the upside, when SPX makes new highs without the US having entered a recession first. And later confirmed, when the US finally falls into a recession, a few years later, too soon for a Major wave 3 that should last beyond 5 years.

    4. Avi Gilburt’s chart update

    On the bigger picture, Avi’s count is almost a rehash of the Traditional EW count presented in first chart of previous post. The difference is that he doesn’t consider the year 2018 as the top of SC wave 3 and Cycle wave 5. In his view that’s a few years away, although not that many as the current decline is in his eyes a wave 4 of Primary degree, with only Primary wave 5 to come before Armageddon gets unleashed.

    He doesn’t talk about decline percentages, but gives the 2200-2100 numbers are targets for his Primary 4 in the SPX. Then he talks about 3200+ for Primary 5. I once read him saying up to 3800 so that’s the top of the range in this chart. He isn’t good at timing (his own words) so no specific years given but he has talked about mid 2020s for w5. That would be the end of SuperCycle wave 3 from 1932 and the start of a multi-decade decline in SC wave 4.

    There’s really not many holes one can carve in his count, except by a few wave degree violations.
    And the hard part about the invalidation of this count, is that when the next recession comes in the 2020s, the only way for this count to be discarded is when the apparent wave B of SC wave 4 takes out the start of wave A, making new ATH years later from the start of apparent wave B, confirming it was actually an impulsive wave. I don’t think anyone will want to wait that long for invalidation proof though. So this will be a nut hard to crack.

    5. fxaprendiz count update

    I won’t give a long explanation of my own count. Don’t want to be accused of excessively peddling it. But I wrote in there all the information necessary. Only major change that must be mentioned is that this current decline we are in, I now consider it of Primary degree instead of Intermediate, with next decline to come being of Cycle degree, accompanied of a recession after 2022.

    Invalidation level for my count on the downside is the year 2016 low.

    • fxaprendiz says:

      Typo: in the description of Tony’s count, it should read “2007-2009 was SC wave 2”

    • tony caldaro says:

      during the 1949-1966 P3 there were three recessions; 1954, 1958 and 1961
      during the 1982-2000 P3 there was only one recession; 1990
      this growth cycle is already stretched, entering its 10th year
      suggesting we’ll get one sooner than later

  9. Troy B says:

    Hi Tony, your daily chart for the ASX200 has it in an uptrend and weekly showing Int II is in however also stating bear market, why bear market? at what point would bear market be removed? Thanks in advance.

  10. fxaprendiz says:

    Comparing Long Term Charts Update, part 1

    3 months ago was the last time I posted an update on the very long term counts of Tony, Avi Gilburt and myself. Much has happened since then so I’m making an update on them, but before I’ll add 2 more charts, to include the more traditional EW views and see how they stack against the others.

    Most of the counts assume a SuperCycle wave 3 started from the year 1932 and the main difference is in where they see we are within that wave or if we are already past it.

    They are posted in the order in which they will be proven right or wrong by future price action.

    1. First, the Mother of All Bears

    This is the wet dream of perma-bears. In this view, the whole upswing since 2009 is a terminal wave 5 of Cycle degree, which completes the SuperCycle wave 3.
    The Cycle wave 5 has clearly 5 subwaves of Primary degree completed. The count is so obvious, right? Well, in trading, the obvious if most often obviously wrong.
    This count is pushed by distinguished perma-bears of the caliber of Prechter, who has been pushing the SuperCycle wave 4 case since at least the year 1998. He then thought 2000 was it, then 2007, and now he thinks he finally got lucky in 2018. How realistic is it? you be the judge.

    The 89% decline is because that’s the same as the 1929 crash, that is of the same degree. It could be less but would have to be above 60% to be considered a SuperCycle correction.

    This count may be the first one to be proven wrong because it needs a wave 1 down of Primary degree subdivided in 5 waves to have any chance of being viable. And well, we are still waiting for the 5 waves…

    2. Second, the “baby bear”

    This is a popular alternative to the extreme bear case. In this view, the SuperCycle 3 from 1932 is already done. It was completed in 2000 and then the next 9 years were the corrective SC wave 4, and we are already in SC wave 5 up, with the stock market having just completed its wave 1 of Cycle degree, and we are now in Cycle wave 2.

    This may be the count of the likes of Daneric and Trader Joe. Maybe Trader Joe favors the first chart but if not then this is the count he’s following.

    If this is the correct count then you can expect a decline between 35-60%. Most bears seem to like the 50% round number, maybe because it would take SPX down to test the years 2000 and 2007 tops, which seem like a logical target for this kind of wave degree.

    Again, this count seems so clean, logical and obvious, what’s not to like? Well, for once, the lack of evidence of a recession coming anytime soon. Cycle degree waves are always recession triggers, unlike Primary degree waves which can be with or without recession. So what will probably prove this count wrong will be the lack of a recession and eventually new ATHs.

    These 2 charts are based in the traditional (for lack of a better term) Elliott Wave theory. In next post I’ll show the 3 charts with less traditional focus.

  11. fxaprendiz says:

    There’s a white supremacist (at least one) in this blog whose comments about race really get on my nerves, but I have refrained from saying anything until now, so as to not create more antagonisms than the ones already present in the blog, and because I know things would quickly escalate into a personal confrontation. But you, the guy I’m talking about, because surely you know I’m talking about you, you better tone it down or at some point I won’t want to refrain myself any longer and you will have a piece of me. You can keep your sick and outdated notions of race superiority to yourself and your Apartheid friends, but this is an international forum, with people from many countries and different races trying to make a positive contribution and I don’t want to think how many talented people have been pushed away already by comments like yours.
    And in case you are so dense you haven’t still figured it out, I’m not from your country neither I’m “white” so if you really despise people like me that much you can start by ignoring my posts from now on along with all the other posts of people who you know or suspect don’t belong to your cherished little group of prejudice and bigotry.

  12. fxaprendiz says:

    test post
    not sure why I can’t post

  13. torehund says:

    Saudis think oil is on the right track, lets see come Monday 🙂

  14. Billy says:

    M1 I would further add COMPQ has around 3.3% further to run before the count is invalidated (NDX even further). Furthermore, and this is where things really get interesting, INDU (min. 24268.75) & SPX (min. 2631.10) both require around 1.2% to trigger the same count.

    • M1 says:

      Exactly. We could even see a gap up on monday.

    • Billy says:

      Cancel my last comment. INDU and SPX have ALREADY triggered the same count and both have a similar distance (around 3.3%) to run higher before the count is invalidated. Invalidation levels are INDU (24828.29, SPX (2685.44) & COMPQ (7197.29).

      • M1 says:

        Erase “exactly” 😊
        Honestly i didn’t recheck the numbers. 🤭
        What is important to note is that Naz may try to cross over its 50dma so we could see a gap up at the open on monday

  15. M1 says:

    Thanks Tony !!
    Certainly some alt counts are possible at this point. I like the one I noted last week. macd, rsi, % decline and fib retracement are all suggesting the market may be bottoming like in january 2008.
    I agree there could be one more bullish count and interm wave I of a new bull market may be already underway as you suggested on your report (” When it concludes, if it hasn’t already, an Intermediate I bull market will be underway”)
    However, I see this rally a bit suspicious. Like the one we saw in med sep 2008. Perhaps I am forcing the count (it’s very complex), but here it is.

  16. rd3777 says:

    Tony is correct again, I’m using MasterCard as a market proxy, MA should loose at least 60 to 70 pct of it’s current value in this major C wave down. The initial thrust down should be brutal.

    • E says:

      Why do you specify MasterCard? Is it a good candidate to short?

      • R D. says:

        Three peaks and a domed house….a strong bump and run on the right side…the 3 peaks,and the domed house is complete with the drop on the LH side

        • E says:

          Thank you. I will consider for next down trend. Do you think it starts next week?

          • R D. says:

            If you look at the daily candlestick chart for the Dow futures every top since the high has left a doji candle. Friday was a hanging man and a three candle formation has failed to breech 2597 area. I think most stocks are up against their 50 DMA’s. I expect we topped Friday and expect a gap down opening Monday. YMMV

          • R D. says:

            Also interesting is from the December 3rd high Friday was the 27th day. There is a 27 day analog that took place in 1929 and 1987.
            We should not breech 2609 and the analog does allow for +~1 trading day. The waterfall event would end by January 31…YMMV

    • micky says:

      Hey RD, thanks, love your charts and please keep us updated when they get validated/invalidated.

  17. SPX max down is 2293 for the int. term pattern,,,,,Bud

  18. xEVAx says:

    CL looks like resistance to $62 likely range bound between $58-$42 with $34 possible on the downside but King Dollar looks weak….

  19. jobjas says:

    ES projection adjusted

  20. xEVAx says:

    Sorry I didn’t mean to post this down there, Grrr… Anyway I have $93 to $89 as support and $96 as resistance….. Still think we’re going to $84??? I could see it….

  21. Week 4 coming. Long time since we had 4 weeks up in a row. 2615 sounds right to me. A break above and we could accelerate higher. Odds on bet is we stall before the week is out. My 12 to 18 month expectation AFTER the lows of this bear is seen (by March?) is the best sharpest drive of whole cycle. Super Cycle bear starts right after (2020) and will last decades. Not an EW bet and like the 2016 mistake not many saw it. Most here just don’t account for real world fundamentals and debt structure combined with deflationary pressures. Deflation never goes away till it washes away creditors.

    Peak euphoric drive leading into 2020. It will put back the silly notion that this bull can go for decades more. New government leaders soon with zero drama and that in itself will set the euphoric relief last stage higher. one for the record books! Just as late 2015 saw a major reversal in mindset over next 6 moths so too will the current drop. We are not there yet. My timing on when we hit this cycle low is just a guess but once it is over and the political landscape is calm you will not believe how fast we dismiss this event. Just one mans emotional rant.

    • One other major point. The current cycle low will not be before Mueller’s report comes out. I can only guess if shutdown is gridlocked we might get that report earlier than originally planned. Latest should be mid-February. Anyone betting for rally thru the announcement is swimming against the tide.

    • Tim M says:

      long term deflation? NEVER GOING TO HAPPEN! Central banks have already proven they will expand balance sheet to infinity if necessary, governments will eventually monetize their debts and if everyone does it, nobody loses. its like a reset button.

  22. Tony- has your proprietary WROC signal been triggered? Thanks for the update.

  23. mcgcapital says:

    The level of delusion out there is still pretty unreal, and that tells me there’s a way to go before sentiment is washed out. We’ve had a decade long bull market yet when the cycle turns, people expect it to be over in 3 months. Jeez.

    One such example of this is Urban Carmel. In September he was writing along the lines of ‘a pullback is probably coming, but it will be limited to 3-5% and there’s no chance of a bear market as there isn’t a recession on the cards anytime soon.’ Obviously the market had other ideas. Since he made said comments, US housing data has weakened followed by US manufacturing. That’s on top of the plethora of weak data coming out everywhere outside the US.

    Yet this week he’s put out this piece (https://fat-pitch.blogspot.com/2019/01/weekly-market-summary_12.html) which basically picks out a range of statistics which back up his earlier call around an ongoing bull market, and to quote says “That is consistent with our macro economic view that a recession is not currently unfolding.. It is also consistent with our view that the correction was mostly a panic attack in which investors dumped equities on an unprecedented scale.” AKA, the market got it wrong and we were right all along. If the market doesn’t confirm your opinion, you should look for other opinions rather than trying to data fit to your existing hypothesis… that should be obvious but people aren’t doing that. He’s another one who is talking a lot about the so called ‘strong breadth’ yet ignoring the fact that it was completely washed out pre-Xmas, and ignoring the obvious weaknesses in its calculations which I explained in detail here this week. All thats happened is that we’ve closed in on moving averages from the underside.

    I’m not picking on Urban here, he does some good extensive work which is provided for free but his opinion seems to be quite common place amongst a lot of US talking heads. I don’t know why people are being so biased in their analysis, maybe its linked to the current US political situation whereby the pro-Trump side want to push this false narrative about the US economy being amazing and infallible, and I’d imagine that people with money (i.e. those involved with markets) are more likely to be Republican.

    If you do the maths, this major wave 3 count looks like pure fantasy so its irresponsible to push it as the base case scenario. Where is the earnings growth coming from for such a scenario… for non-organic earnings growth, you need some of the following factors to be in place:

    Oil prices to rise – EPS is correlated with oil prices due to the effect they have on energy company earnings which is significantly greater than the effect on consumers. Oil prices are falling YoY.

    Margins to rise – margins are at record highs, so looks unlikely you get further expansion there when considering higher financing costs and wages.

    Corporation taxes to fall – they’ve already been slashed last year, they aren’t going to be cut further, if anything they will have to be put back up to cover the budget deficit.

    So if you accept that most external factors are headwinds not tailwinds you’re left with earnings at best rising in line with nominal GDP, at worst contracting. Which is way below what is priced in by analysts here. And that assumes no slowdown/recession in GDP, which could make them fall significantly. Most people still seem to have EPS in the $170s for this year which looks unrealistic. Look at the guidance coming out of companies.. last earnings season they told us to be prepared for bad numbers yet for some reason people are choosing to ignore this. On top of that, you have the fed continue to tighten by reducing the balance sheet which isn’t supportive of PE expansion. No/negative PE expansion + no/negative earnings growth = a lower stock market. It’s that simple.

    The parameters here are pretty simple.. 2600s resistance, 2350 support. No need to make any crazy calls about a new bull market unless we take that out to the upside. Odds strongly favour taking out the support instead of the resistance but we can just observe what happens for now.

    Choose maths over biased analysis every single time and you’ll be pleased with the results.

    • Most delusional are the car companies. GM predicting much higher earnings this year on strong China sales. Only problem with that is sales in China are falling as their economy continues to deteriorate, and sentiment against American companies there continues to sour due to the trade war. Are the executives at GM delusional or just blind? Best guess is they’re talking their book and we see some major downside revisions to car company earnings later this year.

  24. 123 abc says:

    Outstanding OEW weekend update Tony, absolute masterworks.

    “…this creation of clay is of heavenly nature;
    taught the angels the restlessness of man,
    and taught man the mastery of angels…”

  25. TommyB says:

    GA Tony,
    Once again, a great piece of analysis!
    Your momentum and price research work is very interesting and fairly conclusive.
    Based on what I’m seeing, it looks like we have 2 avenues:
    – if we go much past 2656 or 2731, we have completed wave 2, we’re in wave 3 and off to the races
    – if we return to 2270 or 2310, we’re completing wave 2 and then off to the wave 3 races
    In either case it is great knowing the global economies are coming out of downturns, which will bode well for the US economy.
    Are there any lurking caveats in the back of your mind that may affect your analysis?

  26. Hey guys don’t be too hard on Wanker. Just remember, he’s 60 and lives alone with cats in his mother’s house subsisting on his parents estate.

  27. Bill Manscoe says:

    Tony are you going to label the soybean chart? Sure couldn’t fault you if you don’t. It has always looked like a corrective wave since 1973 at least until 2002. Maybe even an irregular flat still in progress. Tia

  28. fenster6 says:

    Thanks for the up-date Tony

    I see you are no longer labelling the medium and short term charts. Too tough to call?

  29. torehund says:

    Thanks Tony, and good weekend !

  30. phil1247 says:

  31. bettyfreeman says:

    Hi Tony, thank you another very enlightening weekend summary. This is only my second comment in nearly 12 years of lurking. In fact, I have your original 1987 Barron’s article in my archives, brilliant work especially when one considers whose work you were attempting to prove wrong at that time. I have a question regarding your historical study with respects to declines/rallies and retests. Is in not important to stipulate whether the market was in a bear or bull market, the trend being down or up when drawing before drawing historical conclusions based on the data? Thank you.

  32. STEPHEN BARTLETT says:

    I think we will get a contracting triangle into the end of March. This rally wave a. Wave a likely to end around 2650 area. Wave e will complete once we have touched the trend line of the speed of the advance from 1900 points projected forward from the lower high in the S&P that ended the bull mkt.

  33. elmer510 says:

    Thanks to Tony !
    Interesting to see the probability is highest for a retest of December 24th at SPX.
    Bulls must be carefull.

  34. nyjsec314 says:

    TC- thanks as always. From a strictly OEW inspired/performance driven point of view, with major III of P3 around the corner, would one be better being allocated state side or is there as much or greater potential in developed international? Thank you

  35. manunidhi21 says:

    Namaste Tony.

    Above what level it will be clear that major 2 is in abv 2656 or 2731 ?

    • SPX strong support has now become strong resistance at current levels. Cycles indicate a sharp turn down from +/-17th January 2019. Measured projections look like a +/- 30% drop from here.

      • alexhartley1 says:

        I don’t know about the 30% drop Richard (I could certainly see another 10% from here and perhaps quite quickly into the 25th) but I certainly agree with you on the CIT date identified for the 17th. It comes at/towards the end of OPEX week as well which is one of the main reasons this market is holding up for now in my opinion. Bulls should watch out around Wed/Thurs.

        • As I said on Wed. Update, the EOB on 17th is the end of the bi-monthly open range, in which the top, is downward of here by over 50 SPX points. IF open range holds, SPX should close on 17th at 2519.49, or lower. (I had the wrong figure on Wed. Update.) 2519.49 is the high of 1/2.

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