Weekend update

REVIEW

The week started at SPX 2596. After a gap down opening on Monday to SPX 2570 the market rallied to SPX 2589. Tuesday and Wednesday the rally continued to SPX 2626. Another gap down opening on Thursday dropped the SPX to 2606 at the open. But then the market reversed, and rallied to SPX 2675 by Friday. For the week the SPX/DOW gained 2.95%, and the NDX/NAZ gained 2.75%. Economic reports for the week were mixed. On the downtick: the PPI, NY FED, import prices, and consumer sentiment. On the uptick: the NAHB, Philly FED, industrial production, capacity utilization, plus jobless claims improved. Next week’s reports will be highlighted by durable goods orders and housing. The ECRI ticked up 0.3% this week from -6.5% to -6.2%.

LONG TERM: uptrend 60% probability

After writing this blog for over 13 years, and reading over 200 emails a day, it is often hard to remember who said what and when, including oneself. That’s why I keep notes. My notes. Week of Sept 17th: mentioned after two year bull run it was time to get cautious. Scale out during bull market tops, and scale in during bear market bottoms came next. Week of October 22nd: consistent weakness in most of the foreign markets, with Canada, China, Germany and Spain already in confirmed bear markets. Week of November 26th: after a bear market rally many US indices looked ready to enter the next downtrend. Week of December 3rd: after the POTUS Tariff Man tweet sensed a potential mini-crash. Week of December 17th: the market needed some sort of event to halt the decline, i.e a PWG event. Week of December 24th: many of the foreign markets appeared to be in their last downtrend of their bear markets. This week: we offered on Wednesday, and will repeat below, the five criteria to help in determining the probabilities of the market retesting the December lows or already in a new bull market.

The long term count remains unchanged with the exception of the recent low around Christmas. Primary I unfolded from 2009-2015. Primary II was a moderate bear market from 2015-2016. Major wave 1 of Primary III advanced from 2016-2018. And now probabilities suggest a Major 2 bear market lasted from September/October until December of 2018. If this works out to be correct an Intermediate I, of Major wave 3, bull market should be underway.

MEDIUM TERM: uptrend 60% probability

In Wednesday’s update we published the following. We’re using five criteria to hopefully determine if the market will still retest the low to end Major 2, or the bear market has already ended. The criteria are: the size of rally, NDX/NAZ and SPX/DOW wave patterns, rebound percentage from the low, and breadth rise from the low.

First, this rally is the largest rally since the bear market began: a positive. Second, the NDX/NAZ look like they have done five waves up from the Christmas low: another positive. Third, the SPX/DOW look like they have done three waves up from the low: a negative so far. Fourth, the largest rebound for B waves, under similar conditions, in the past three decades has been 13%. The rally reached 14% on Friday: turning this positive. Fifth, the maximum percentage rise in breath for a B wave has been 26%. Thus far breadth has risen 24%: a negative.

Since the market now has reached three of the five criteria this would raises the probabilities in favor a new bull market to 60%. A fourth positive would increase those probabilities, and a fifth would almost assure them.

SHORT TERM

Quite a strong rally from the Christmas low. We can clearly see five waves up on the NDX/NAZ charts. But the SPX/DOW charts still look like three waves. The first two waves we have noted in previous updates [2347] 2520-2444. Last week we noted a lot of rising but choppy activity, and thought a possible ending diagonal was forming. That idea was blown away this week, especially in the latter part. That rising choppy activity now looks like a series of 1-2’s before the SPX 2570 low.

Looking ahead we see a wave 1 (2347-2520), a wave 2 (2520-2444), and a wave 3 underway (2444-2675). Currently wave 3 is 1.34% wave 1. At SPX 2704 wave 3 would equal 1.5 wave 1, and at SPX 2724 wave 3 would equal 1.62% wave 1. There is also an unlikely wave 3 double wave 1 at SPX 2790. With wave 3 starting off with a choppy rising series of 1-2’s, it is likely to end with a choppy rising series of 4-5’s. Then after a significant decline for the wave iv of this rally, a push to higher highs should follow. Short term support is at SPX 2656 and 2632, with resistance at SPX 2731 and 2780. Short term momentum hit its highest level since July 2018. Enjoy the three day weekend!

FOREIGN MARKETS

Asian markets were all higher on the week and gained 1.7%.

European markets were mostly higher and gained 1.3%.

The DJ World index gained 2.1%, and the NYSE gained 2.6%.

COMMODITIES

Bonds appear to be in a new downtrend and lost 0.8% on the week.

Crude is in a new uptrend and gained 4.8% on the week.

Gold is still in an uptrend but lost 0.5%.

The USD is in a downtrend but gained 0.8%.

Bitcoin remains in a downtrend and lost 1.0%.

NEXT WEEK

Monday: MLK holiday. Tuesday: existing home sales. Thursday: weekly jobless claims and leading indicators. Friday: durable goods and new home sales.

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

About tony caldaro

Investor
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564 Responses to Weekend update

  1. I was looking for a SPX move up.
    Just can’t spark a rally.
    News must be coming … probably not for the bulls.

  2. Dex T says:

    Verizon Media, which owns HuffPost, AOL and Yahoo along with other media brands, will lay off 7 percent of its workforce this week, a company spokeswoman confirmed.

    The news comes more than a month after Verizon took a $4.6 billion write-down on HuffPost’s parent company, Oath (now called Verizon Media).

    In the wake of the write-down, some news outlets reported that Verizon planned to cut 10 percent of Oath staff, or more than 1,000 jobs. Now, with the updated numbers, the number of jobs affected will be closer to 750. HuffPost staffers in the U.S. expected to see layoffs in their newsrooms, though it was not immediately clear how the cuts would affect the brand.

    https://www.huffingtonpost.com/entry/verizon-media-huffpost-layoffs_us_5c48b986e4b083c46d64e85a

  3. lots of afternoon news. Cohen postpones testimony claiming threats from Trump
    Pelosi says Trump cant have the keys to the House for his speech. little sell off. still think we head higher with a green close and gap up. but children in DC are making it difficult.
    See ya all tomorrow

    • Desensitized. Only the most powerful man in the world in total control of the justice department and FBI announcing threats in a TWEET for ALL to see against Cohen and his family. . A YAWN! But wait i have news not yet considered that will surely rally this dead market. mark this down. Pelosi firm on no state of union in the capital. Must open government before allowed in. Want to bet government gets opened so he can stand in chamber to give his speech. I mean the ego on this man is too great.

      Future news flash: Trump opens government before January 29th deadline.

      I will await the news and subsequent days rally. Easy way to make money without silly charts.

      • johnnymagicmoney says:

        news alert – Trump will have his state of the union address elsewhere. Trump knows that as long as the TV stations televise it and they call it a state of the union address then its a state of the union address. he doesn’t need Congress in front of them.

  4. fxaprendiz says:

    Last night I studied in more detail some of David Rice’s articles in seekingalpha regarding the business cycle, and then I researched on my own some more on the 10-yr bond/3-month Tbill yield curve (had previously studied only the 10-yr/2-yr bonds curve). I am now fairly sure I’m on the right track regarding my long term long count which calls for a top of this Cycle degree bull since 2009 not sooner than year 2022, with recession coming after.

    Having said that, on the other hand I think the Primary wave 4 we are in from SPX 2942 is only halfway done. The soonest I got for its end is May, but it’s more probable it will extend until July/August.

    Since it seems most trolls are gone or quiet, I’ll post some charts tonight giving more details.

  5. Mary773 says:

    Today provided a good ES day trade short and there could be more to the downside, but at some point Trump will announce a trade agreement with China and God forbid you are short overnight when that happens. It might be a great short on the open following the announcement, but the name of this game is preservation of capital.

    • nsteve24 says:

      or there may be non deal and more tariffs which is more likely as China will not bend on the IP argument, they will ride out Trump’s term (or impeachment) and deal with the next President. China has a longer term view than a Presidential cycle. Also China economy to pick up in 2H of 2019 while US economy is expected to slow in 2H of 2019. Why would they settle now.

      • Mary773 says:

        If Trump yielded on IP in exchange for concessions on manufacturing, it would simultaneously bolster his base while hurting his political opponents. What ultimately happens is conjectural. But if you are wrong and you are short the futures, you could be looking at a huge loss that will damage your ability to trade both financially and emotionally. Given your scenario, I would rather own inverse ETFs in moderation than be short ES.

  6. All markets should be in sync to trade higher. Sp made a lower low today. Rally time

  7. Here is something to watch out for….

    Correlations across assets have hit their highest level in almost a year, with the S&P 500, the 10-year U.S. Treasury yield and U.S. crude oil moving in tandem in nine of the last 12 sessions. A six-day run of declines for the asset classes earlier this month was the longest streak since June.

    The rolling correlations between the S&P 500 and the S&P GSCI commodities index, 10 Year Treasury Yield, and the MSCI All Country World Index (ex U.S.) have all stayed at or above 0.8 in recent weeks for the first time since early last year, when analyzing 50-day periods.

    This is analogous to what happened in 2015 and 2016.

    The risk being that all of your market positions become the same trade.
    That’s not going to work real well on the downside.

  8. Here is something to watch out for….

    Correlations across assets have hit their highest level in almost a year, with the S&P 500, the 10-year U.S. Treasury yield and U.S. crude oil moving in tandem in nine of the last 12 sessions. A six-day run of declines for the asset classes earlier this month was the longest streak since June.

    The rolling correlations between the S&P 500 and the S&P GSCI commodities index, 10 Year Treasury Yield, and the MSCI All Country World Index (ex U.S.) have all stayed at or above 0.8 in recent weeks for the first time since early last year, when analyzing 50-day periods.

    This is analogous to what happened in 2015 and 2016.

    The risk being that all of your market positions become the same trade. That’s not going to work real well on the downside.

  9. elmer510 says:

    We now see a fourth wave from 2347. Question is what kind of wave – minute or minor?
    If we see 2700+ after the fith wave, I guess Intermediate 1 would be a good suggestion cause it’s above 10-11% increase. The current waves should then be Minor 1-5.

  10. lml25 says:

    Another sign of a looming drop by equities–VIX slow stochastics have gone above 20.Lost the embedded.Could regain it with a big drop by VIX but a first warning signal.

    • lml25 says:

      Here’s the way stochs are setting up.If PPT can push equities up today and keep VIX bearishly embedded,a stock rally is very likely from here.VIX stays above 20 through today (and tomorrow)a selloff is on the way (or has started).PPT sees this–if I do–and whatever they have up their sleeves will happen by tomorrow at 4pm.Also staying below 2635 is bearish.That’s all from me.

    • lml25…..just back from working out. /VX is testing it’s 50% LONG at $19.92, the 61.8% LONG is $19.64. If /VX defends the 50% long and rallies, equities are going lower. If /VX drops below $19.64 equities will rally.
      Bottom line /VX $19.64…bearish above for equities and bullish below for equities.

  11. EXAS +5% to $80 and traded as high as $81.00 on no news.
    +31% since Xmas Eve.
    🙂

    • riderbobo says:

      Are you going to tell them about the time you held it from $58 to under $5 with no stop loss?

      • As usual, you are nothing but a Troll and a highly misinformed one at that. In fact, its the only reason why you have recently shown up here and left the handful of “losers” that still populate Daneric’s blog of P3 Death.

        What’s wrong 67 year old Dumb Canuck? No one left to troll over at Danerica? Thought you had posted to everyone here that you were going to ignore me. Ooops!

        Anyone looking at a chart of EXAS can clearly see that the stock never traded from $58 to under $5.00

        Youre a moron.
        Now go back to Danerica and yap about Trump 24/7.

  12. Jack kendo says:

    + div @2612.86

    cheers!

  13. Smooth draw down today is NOT indicative of the start of something big. But once it breaks 2600 watch out! here is my silly take on why this market is doomed till trump leaves office. Not only will we see additional tariffs on China and executive order destroying China’s telecommunication companies Trump will move right back to his pledge to build the WALL against all other auto makers. He will attack the EU, Canada and any other nation involved in steel imports. he will get a very quick response from the EU. All this is a promise for March at the latest. So tell me folks how in the world do we rally from here with all that happening?

    Watch the tweets and watch SPX 2600 area. Just think a few days ago it was to the moon…. Schizoid market and investors. I will guarantee as i have two other times that the coming events are market breakers. Democrats are fully engaged to catch up to all the illegal and criminal shenanigans this GOP allowed for 2 years. Cleaning this swamp will take decades. The revelations from the Dems and Mueller along with the destructive power of Trump make it totally impossible for this market to gain traction. i mean 100 percent impossible.

    One more fact: You have not seen anything yet! New lows is a guarantee! Especially as the two men, Trump and McConnell control our fate. If you think this winter is cold and nasty there will be no thaw this spring (assuming our fearless leader is still in charge).

    Immediate take: 70/30 assumption the first drop holds at 2600 and a subsequent rebound occurs. the market behavior is too well controlled today. How high is not the question but how long is. Should not last more than 5 days.

    • Trying to match the charts against reality is a futile exercise and everyone here knows it. The ability of EW Charting to approve all 10,000 alternative paths is a given. the rules of EW is so complex that virtually any situation can be justified. I keep bringing this up because not a single person has kept track of the EW assumptions and how well it did for profitable trading. in the abstract all EW charts are perfect as they adjust their counts and change the path going forward. Translate it to profits and it gets an “F”.

      I propose a paper exercise in placing bets according to current charts. Sell or add bets as the charts dictate. Anyone want to give it a try? I find it peculiar how common sense approaches to determining the worth of a system is always ignored. it’s as if we don’t want to know the truth since it will not allow you to follow a path predetermined. Going it alone is much too scary. I acknowledge that intra-day Fibonacci targets are much better in accuracy BUT to make money is another matter since the changes can happen too fast.

    • tommyboys says:

      Ha! Ironically market is only up BECAUSE Trump is in office. God forbid crooked hilary got in. We’d be a Dow 6k. We all remember your end of the world calls “if Trump got in” election night. Check your TDS dude or ignore it and trade the charts.

  14. phil1247 says:

    travis

    what are your plans when we get to 2602 es ?

  15. purplember says:

    has anyone considered the down waves (2947 to 2337) as a ABC. The rally from 2337 to 2670 is a “X” wave and now another ABC down.

    • Jack kendo says:

      Meaning 2947 to 2337 was double zigzags, and followed by another double zigzags down?

      yesterday I asked Tony about 2947 to 2337 as double zigzags, the answer was …

      cheers!

  16. retiree247 says:

    We turned red on the DOW a few minutes ago.
    Guess we’ll see a member of the PWG make an appearance shortly.

  17. Mary773 says:

    There have been a couple of British billionaire hedge fundies banging the table that Brexit is dead and Sterling is headed for 150.

    • mcgcapital says:

      Agree with your chart, we’re reaching the end of the road on Brexit so we should get certainty and the Brexit risk premium will come out of sterling. Hopefully it still goes ahead, but think sterling rallies either way. It’s the uncertainty that weighs rather than the outcome

  18. At /ES 2634, RSI was oversold on the 1-min and on the 5-min /ES.
    50pma on 1-min is 2643.
    Interestingly, on the 5-min, the 50pma is at 2644.
    Also interestingly, on the 1-HR, the 50pma is also at 2644.
    As the time is now 10:52, a move to recapture 2644 is possible.
    Also, just below Phil’s 2644 level.

    Otherwise, we’ll have a trifecta where the 1-min, 5-min, and 1-HR are trending confirmed downs.

    • xEVAx says:

      NDX is leading the way,COMPQ below it’s 50 on the 60 minute chart, no impulsive wave seen since January 2018 blow off top, It’s a bear market and at the very least a retest of the lows and positive divergence with the event whatever it is will be needed to start off a new bull trend…. Id show a chart but Im done with that, the exact same levels are in play today as yesterday, short here with a stop at 2645 and a target of 2612 or long with a stop at 2625 and a target of 2681-2696-2713…..

  19. lml25 says:

    Yup,big rally,now the tale of the tape–the rest of the day–and tomorrow will give the markets intentions.Should be pretty clear by 4pm Thursday.

  20. mcgcapital says:

    Last few weeks SPX has been regularly gapping down with a perma bid coming in after the first half hour. Opposite might be in play now. Change of character, change of trend…

  21. /VX just broke a long at 20.00. Could have a small (4 points) counter trend rally but expect continued weakness in equities. If /ES trades above 2650.12 this analysis is invalidated

  22. Nothing like good earnings to prop this up again. Me, i am rooting for 2720. Rah, rah.
    Hope trump remembers to stop tweeting about China. Absolute latest this current rally can go is February 2nd. Yes folks it’s based on a silly spat between us and China. Awaiting the order to kill the Chinese telecommunication giants also. I suspect it happens as one big package.

    Man is this fun or what. I wait for the latter part of day to see if this current move has legs.

  23. scottycj1 says:

    For the market to stay bullish must breach 2658 on the upside

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