Weekend Report

The Weekend Update

posted on March 16, 2019 by the OEW group in honor of Anthony Caldaro

Report

The SPX, NAS, and NDX all reversed last week’s losses of 2% and rallied to new recovery highs.  The Dow lagged and only recovered approximately 62% of last week’s losses.  The SPX gapped up to 2748 at Monday’s open and rallied to 2798 on Tuesday.  After a short-lived pullback to 2788 into the close on Tuesday, price continued higher to 2821 on Wednesday.  A late day sell off on Wednesday was followed by more weakness to 2803 on Thursday morning.  Price remained in a range for the rest of Thursday and then gapped up again on Friday and rallied to the week’s high of 2831 and closed at 2822.

For the often volatile Options Expiration week, the SPX gained 2.9%, the NAS/NDX gained 3.9%, while the Dow gained 1.6%.

On the economic front, we saw an uptick in retail sales, NFIB Small Business Optimism, CPI, PPI, construction spending, industrial production, University of Michigan Consumer Sentiment, and JOLTs job openings.  On the downtick:  core CPI and core PPI, durable goods, new home sales, Empire State Manufacturing Index, and capacity utilization.

Next week’s report will highlight NAHB Housing Market Index, factory orders, the FOMC rate decision, the Philadelphia Fed Index, Leading Indicators, and existing home sales.

The ECRI WLI continues to improve and rose this week from -3.7 to -2.9.

1ECRI

LONG TERM: Uptrend

We continue to track the foreign markets as we have for the past several months.  All of the foreign indices we track were positive for the week.  The Indian Nifty 50 up 3.6%, the German DAX up 1.8%, the French CAC 40 up 3.3%, the Brazilian BVSP up 3.8%, the Japanese Nikkei 225 up 3.6%, the Shanghai Stock Exchange (SSEC) up 2.7%, the Hang Seng Stock Exchange up 2.8%, and the South Korean KOSPI up 1.9%.

spxweekly

In the US, the long-term count remains unchanged. Super cycle SC2 low March 2009. Primary I high May 2015, and Primary II low February 2016. Major wave 1 high October 2018, Major wave 2 low December 2018. Intermediate wave i of Major 3 is now underway.

MEDIUM TERM: Uptrend, possible near-term weakness

We count a five wave impulsive rally from the Major 2 low at SPX 2347.  Minute i at 2520, Minute ii at 2444, Minute iii at 2739, Minute iv at 2682 and Minute v at 2817.  We tentatively labeled the 2817 high as Minor 1 on last weekend’s report, thus we were expecting a correction for Minor 2.  Indeed, the SPX/Dow broke support levels and fell 3+% in a three wave move during the correction.   From the 2722 low, SPX has risen to 2831 while the Dow has not reached new recovery highs.  This divergence among the indexes tells us to be conservative in our market view and consider that a complex Minor 2 correction may still be underway.  This conservative market view is shown on the Dow chart below and will remain our primary count awaiting further price action.

INDUdaily

We continue to track the more near-term bullish count, shown on the daily SPX chart below, with the Minor 1 top at 2817 and Minor 2 bottom at 2722.  This count suggests Minor 3 is currently underway.  See additional comments in the short-term section regarding these wave counts.

SPXdaily

SHORT TERM

From the Minor 1 high at 2817 we saw a three wave decline to the SPX 2722 low (2768>2796>2722).  We expected that low to be the minute a wave which would be followed by a minute b retracement rally and another decline in minute c to end Minor 2.  Instead the SPX has rallied in one wave from 2722 to the week’s high at 2831.

The SPX rally could be part of an irregular b wave with a wave c decline to follow.  If this view is correct, the Dow price should fall below last week’s low.  The SPX and Dow will likely realign during this correction.  If the Dow rallies to new highs before declining below last week’s lows, this count will be eliminated.  Also, if the SPX rises over 2876, this count will be dropped.

The strength in the SPX and NAS/NDX indices also suggest near-term bullish wave counts.  These include 1) Minor 2 is complete at SPX 2722 with Minor 3 underway which will likely subdivide as well (shown above on the SPX daily chart), and 2) The impulsive rally from SPX 2347 continues with an additional extension of the Minute v wave into Micro waves (shown below on the 60 minute chart).  Clearly, we will need to see the Dow rally to new highs for these bullish counts.

SPXhourly

We will track all of these most probable wave counts.  From time to time, the market action causes uncertainty as to the next move.  Patience is required during these times to allow the markets to remove that uncertainty.

Short term support is at the 2798, 2780, and 2731 pivots and resistance at the 2835 and 2858 pivots.  The SPX continues to display a negative divergence on the 60 minute chart.  The RSI 5 on the daily chart does not show a divergence although it is now overbought.

FOREIGN MARKETS

Asian markets were up 2-3%.

European markets were up 1.5-3.0%.

The DJ World index gained 2.7%, and the NYSE gained 2.4%.

COMMODITIES

Bonds are in a downtrend but lost 1.2%.

Crude remains in an uptrend and gained 4.5%.

Gold is in a downtrend but gained 0.5%.

Bitcoin is in a downtrend and lost 3.7%.

The USD is in an uptrend but lost 1.0%.

Best wishes to all

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663 Responses to Weekend Report

  1. gary61b says:

    SPX closed in 2798 pivot range and on the 60 min chart, possible +D come Monday if ES pushes higher before the bell. I still have a short on ES with T1 at 2797.75 that has not hit yet.
    Crude Did enter into a big shorting zone at 60.39 peak (Target @ 34.21) I have a possible short term short in play from 59.09 to T1 @ 57.95 at the close.

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  2. aahmichael says:

    Besides the right shoulder of a 14 month H&S now potentially being set in place, there is an ominous analog that has been playing out, and that’s the fractal from 1998-2000. After a parabolic rally into the March 2000 top, the market had a sharp decline for 3 months, then rallied sharply straight back up for 3 months, and then crashed. The same thing has happened since 2016. A parabolic move to the 2018 high, followed by a sharp 3 month decline, followed by a sharp 3 month rally straight back up. At this point, and until the market proves otherwise, I think yesterday was the equivalent of 8/31/2000, and today was the equivalent of 9/1/2000.

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    • aahmichael says:

      Also, I’ve talked about the lackluster SPY volume during the entire rally this year, and not surprisingly, today was the highest volume day of the year since 1/04.

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    • sixpack says:

      aah – What is that indicator at the bottom of that Northern Trader chart?

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    • sixpack says:

      I see it now. MACD. Quite a big difference how that indicator played out at the two peak tops and also on the rally backs. Would be interesting to see that chart in log scale. Thanks for sharing.

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  3. jobjas says:

    CL in wave 2

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  4. sixpack says:

    This changes nothing. Just means the C wave of minor 2 could till be in play. Take a look at the current daily dow chart in Tony’s charts. They already have it labeled this way. This is normal.

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  5. aahmichael says:

    Today’s action did exactly what it needed to do. The only thing remaining is for a close below 2800 and the rout should be on.

    aahmichael says:
    March 22, 2019 at 8:11 am
    The swing high setup that I described on Tuesday and Wednesday was not eliminated by yesterday’s rally. Extended, yes. Eliminated, no. The 10/3-12/26 decline was 57 TDs, and the rally to yesterday’s high was day 58. Yesterday was also within the full moon +/-1 day window. Tony’s 2858 pivot was hit late yesterday (it was also yesterday’s DR2,) and so far, it has been rejected. It’s “possible” to count an EDT from 2722 as follows: 2821-2803-2852-2817-2860. For this setup to play out, then the market needs to go straight down today.

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  6. sixpack says:

    Ouch!

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  7. lml25 says:

    Needless to say,the close today is huuuuge.A selloff to scare everyone– and then bullishly re-embed-‘would be devious-,but possible.Check your stochastics EOD.Later.

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  8. sixpack says:

    Now that would be wild if this thing closes positive.

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  9. Investor’s Intelligence Sentiment for week ended March 19th:

    Bulls: 53.9%

    Bears: 20.6%

    Correction: 25.5%

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  10. fionamargaret says:

    TLT still suggests 143….and TMF (3xTLT) up to 28…suggested when TLT was 115.
    Remember I thought this permutation fascinating……if TLT actually reaches 143, how low does that make rates..

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