Weekend Report

Weekend Report

Provided by the OEW Group

August 17 2019

SPX started out the week with a gap down (same as last week) and continued lower for the rest of the day to close 9 points off Monday’s low at 2882.  Last week’s close was 2919.  Tuesday rallied sharply to the high of the week at 2943 within the first hour of trading, but then pulled back and traded in a range to finish the day at 2926. Wednesday gapped down big at the open, as the bond market reacted forcefully, apparently to the turmoil in Hong Kong.  Within the first 10 minutes, SPX retraced the entire Tuesday rally, then proceed to decline for the rest of the day and close on the low at 2840.  Thursday saw continued weakness as SPX declined to the low of the week at 2826 in the afternoon, followed by a rally back to 2855 before closing the day at 2845.  Friday finally gapped up and rallied to a high of 2891 just before noon, then leveled off within a few points for the rest of the day to close the week at 2889.  A third consecutive week of volatility!

For the week, SPX/DOW lost 1.03%/1.53% while NDX/NAZ lost 0.60%/0.55%.

On the economic front, CPI, Core CPI, Import Prices, and the Treasury Budget deficit all increased.  Our Weekly Leading Indicator is down slightly from last week but holding firm at 49.5%.

Next week economic news comes from Existing Home Sales and Initial Claims.

LONG TERM: Uptrend

spxwkly

In the US, the long-term count remains unchanged with the Super Cycle SC2 low in March 2009.  The Primary wave I high occurred in May 2015 and Primary wave II low in February 2016.  Primary wave III has been underway ever since.  Major wave 1 high of Primary wave III occurred in October 2018 and Major wave 2 low in December 2018.  Intermediate wave i of Major 3 is now underway and is subdividing into Minor and Minute waves.

As mentioned last week, we haven’t yet seen any evidence on the long term charts to suggest anything more than a typical medium term downtrend in context of an ongoing bull market.  However, the move in bonds this week pushed 3o year rates to new lows, prompting an additional subdivision and extension of our long term cycle low originally established by Tony back in 2016 (updated chart below).

tyxmonthly

This caused some concern and generated much discussion within the group.  The general consensus was that even though tariffs may be a contributing factor, the root cause of such a shift is most likely based on worries over economic risk in Asia due to the Hong Kong protests and potential for recession in Europe.  Nevertheless, it’s just not showing up broadly in the US markets yet.  We discussed several options for alternate counts with more bearish outcomes and concluded that the probabilities are too low at this time to warrant adding these into the mix.  We will continue to monitor and adjust our outlook on these alternates as more data comes in.

Currently we have all four of our core US markets and most US sectors in confirmed bull markets and trading not far from the highs.  While RUT and TRAN are notable outliers, these indices have been in bear markets since December and have been struggling to regain their footing.  It’s not unusual for TRAN to deviate from DOW like this, it happened exactly the same way back in 2012 coming off a deep 20% correction in 2011.  One of our members has suggested that RUT in particular may be more susceptible than most to the bond rally due to higher weighing in rate sensitive shares.  Still there’s historical precedence for these kinds of sideways moves as RUT moves in corrective structures whether in bull or bear mode.  Consequently, we don’t consider these deviations either out of the norm or cause for concern.  The bottom line here again is, there’s just not enough OEW evidence in the few sectors that are underperforming to change our long term outlook.

MEDIUM TERM: Downtrend

spxdaily

SPX opened lower for the third week in a row, rallied back on Tuesday to find resistance at the medium term EMA’s, then accelerated down from there to find support right at last week’s higher low of 2826.  This is now the second test of the low established last week at 2922 and sets up a potentially completed pattern for Minute wave ii, with Micro wave a = 2822, Micro wave b = 2943 and Micro wave c = 2826. The 200+ point 6.5% decline mentioned last week is still intact.  Although, the rally off the low is substantial, it’s still within range of countertrend moves in context of the existing downtrend.  Consequently, caution is advised for a possible extension lower.  Some in our group have noted that strength in NAZ and NDX may be a bullish indicator, since these are making higher lows relative to DOW and SPX.  It’s possible, but could also be a case of the glass half full, since these may still have work to do on the downside.  There’s just not enough evidence yet to mark the bottom for this downtrend.  A SPX rally back above 2930 or so will further build confidence for the Minute wave ii bottom.  However, a break below 2822 will signal Micro wave c is subdividing and brings into play alternate counts.  We will report on those if/when price dictates.  We’re still waiting till it becomes clear that a new uptrend is underway before updating our targets for Minute wave iii.

Medium term, RSI ended the week neutral and MACD is yet again trying to turn back up.  DOW continues to show positive divergence based on the low this week.

SHORT TERM

spxhourly

SPX was never able to impulse higher off of last week’s rally, but instead failed at the 2943 high on Tuesday, after a corrective sequence of overlapping waves up from 2822, then collapsed to retest prior lows at 2826.  This now suggests the irregular zig-zag pattern reported last week becomes our preferred count for Micro wave a, followed by an overlapping five wave structure for Micro wave b.  Micro wave c is either underway with two small waves so far or completed as a failed flat at 2826.  As mentioned in the previous section, the wave status at this juncture is unclear, so further waves are needed to sort it out.  As always, we’re looking for an impulsive structure to develop using our short term techniques to help solidify a potential bottom.  We can count one 68 point wave up to 2894 based on Friday’s rally, but so far, it’s inconclusive.  If the market reverses lower, that will suggest the possibility of double three pattern and potential extension for Minute wave ii.  Not much more to report until further price action clears up the near term picture.

Short term support is at the 2884 and 2858 pivots.  Resistance is at 2929 and 2957 pivots.  SPX is still holding within the same support and resistance levels as last week.

FOREIGN MARKETS

Asian markets (using AAXJ as a proxy) gained 0.33%.

European markets (using FEZ as a proxy) lost 1.48%.

The DJ World index lost 1.28%, and the NYSE lost 1.32%.

COMMODITIES

Bonds are in an uptrend and gained 1.04%

Crude oil is in a downtrend and gained 0.57%

Gold is in an uptrend and gained 1.00%

GBTC is in a downtrend and lost 11.35%.

The USD is in an uptrend and gained 0.70%.

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

 

Have a good week!

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457 Responses to Weekend Report

  1. M Wags says:

    For the benefit of this blog and the comment section’s survival, I strongly suggest that Phil start up his own blog.

    It would relieve a lot of the “noise” here.
    I dont think Im alone in this suggestion.

    Liked by 2 people

  2. kvilia says:

    Here is my 2c. Quoting something from May and June 2019 just shows how immature the posters are. Wise Tony used to say “monitor, adjust, trade what’s in front of you”. If you folks have a crystal ball, I am happy for you. However I doubt you do. And if I currently in favor of bear scenario, then I see markets bouncing and exceeding SPX 1950, and at that point (or even earlier with appropriate stops) not adjusting my calculations and still believing in my bear scenario, I’m simply going to loose money. Remember, milk is only good while its fresh. After that refrigerator gets cleaned up and new carton is bought. Stop referring to the June carton of milk, its just not how it works. On top of that it is beyond me why this is so difficult to understand that timeframes for day trading, swing trading and investing are completely different, and someone with a long term view will have absolutely different perspective compare to one who is not holding position overnight.

    Having ego is fine, having growth in your portfolio is much, much better.

    At this point I suggest all to cease the BS and concentrate on feeding this blog thoughtful and analytical trading ideas, so we could all benefit, instead of criticizing. For that, there are Yahoo boards.

    Liked by 4 people

    • lml25 says:

      Kvila,half of the blog’s comments are phil stating he’s making profits no matter what he predicts or which way the market goes after those predictions. If he’s wrong short term,he says ,”yes but long term ,I was correct”–or vice versa.Where is the benefit for me and others?There is none.Today,I read that 1338 crap and said, I have to call you on that phil.I made my point–that’s it from me about phil for a long while.

      Liked by 4 people

    • phil1247 says:

      excellent post k

      but is it REALLY that difficult
      for someone to grasp the difference between

      long and short term trading ?

      Liked by 6 people

    • fionamargaret says:

      There is one basic demarcation line, and that is the truth.

      Liked by 5 people

  3. Menachem Uzan says:

    No way to have a wave 3 up in the SPX at this stage without this kind of sentiment. Willing to wait it out. Would rather sell China than the USA any day of the week. It may take time but the best is yet to come. As a matter of fact, I am looking forward to a nice rally in stocks on Monday. Have good weekend!

    Liked by 3 people

  4. The recent 3 month performance of Gold just beating the stuffing out of SPX

    I can understand so many people are afraid of this trade.
    Hard to find entry points when it’s on the move.
    My count has the month of July as a correction with a C wave barely lower at all.
    Wow.
    THE gold ETF, GLD seems to be entering some fractal of a “3 wave”

    Of course I know many people would like to say my count is incorrect because … .
    And they are trying to make money long the SPX
    Whatever.

    Liked by 3 people

    • torehund says:

      Hard to enter in the middle of a stellar rally.

      Liked by 2 people

    • fionamargaret says:

      Nice chart Tom.
      GLD suggests up to 193, and its sidekick UGLD had a TTBreakout on Friday, suggesting 200.
      Well Done.

      Liked by 3 people

    • phil1247 says:

      this is rally or die time for gold Tom
      coming close to targets i gave you months ago
      i know where the exit is
      do you?

      Freddie ..
      i am sure you saved my ” golden line ” chart
      correct ?

      Liked by 2 people

      • lml25 says:

        Phil,you were bearish on gold unless it crossed 1450 or some similar number.Knock off the revisionism.It’s starting to sound bizarre.

        Liked by 2 people

        • phil1247 says:

          wrong again
          above 1338 was the bullish trigger
          200 dollars ago

          ask freddie

          again lml… stick to casino
          markets dont seem to be your game

          Like

          • lml25 says:

            Bull.

            Liked by 1 person

          • lml25 says:

            I’m not going to waste my time going through every WU,I looked at one in May though.Here’s a phil prediction…period.Afterwards,when gold started moving up,phil said he wasn’t interested unless it topped 1450 or 1500. Whatever,it’s getting ridiculous.I’m starting to think phil is Trump.

            phil1247 says:
            May 22, 2019 at 10:36 am
            here is a pertinent GDX review ..
            going nowhere for 2 years
            yes …. lets concentrate on that !

            SILVER .. straight down
            warned years ago
            that bear market was not over
            and not to buy

            Like

        • aahmichael says:

          lml, I believe this is what you’re referring to. His level was 1400, not 1450, but your overall claim is correct.

          phil1247 says:
          June 13, 2019 at 10:25 am
          if its really going to 1800
          i am not really interested until above 1400
          so far you have a lot of nothing

          Liked by 2 people

      • Phil you didn’t give me any [upside] targets months ago.
        All you said was gold had burned you so many times with fake breakouts, you weren’t buying this one. That’s what happened.

        Phil you have to get control of yourself.
        Stock market is a challenge of dealing with reality.
        Many of your posts cast a pall over the whole discipline.

        Like

  5. M Wags says:

    Read this morning in the Weekend Edition of the Wall Street Journal that Buybacks have slowed by roughly $40 Billion in Q2, to the slowest pace in 18 months.

    This post brought to you by someone that believes in Fundamentals.

    🙂

    Like

    • M Wags says:

      Just think about this for a minute.

      U.S. Corporations tightened their wallets and didnt support their share prices at the rate that they did during the final months of 2018, even with a nearly 7% drop in the SPX in May.

      And this is how 3 of (3) starts ???

      Liked by 1 person

    • torehund says:

      Buy backs slowing could imply that corporations are getting ready to distribute shares to retail investors in exchange for cash, no ?

      Like

  6. valunvstr says:

    Worth noting that no bear market has ever occurred with the week vix under 20. Bear markets and crashed go through a topping process first where volatile picks up and persists for a period of time. 1987 (VXO rather than VIX which started in 1993), 1990, 1997.1998. 2000. 2007. 2010, 2011. All preceded by a 20 week vix over 20. Don’t get me wrong, 2015 and 2018 happened with a 20 week vix below 20 but they were corrections within a secular bull not the beginning of a bear. Today the 20 we VIX is quite low at 15.25ish. Again, this can still be a healthy correction but hard to make a bear market argument without the proper topping process occurring.

    Liked by 3 people

    • kvilia says:

      tore,
      there are better places to make bets.
      BTW, GDX, if breaks above 31, aims 35-37 in a quick fashion. If not the break now, a good entry point would be around 27 with at least the same targets. And that’s several weeks.

      Like

      • phil1247 says:

        Tore
        agree with k ………
        while that count is possible ……..

        cash spx short at 2950 has never been broken
        no long from low at 2822 has ever held
        unless you are doing intraday smash and grab
        you just cant be long right now

        Like

        • phil1247 says:

          lets concentrate on bonds Tore

          looking for one more peak as described
          then it should be TBT time

          Like

          • torehund says:

            Thinking that interest rates are at ground zero right now. Diverging from here in neg or pos direction will create massive selling of real estate. Flatlining is possible,but as soon as the equilibrium is disturbed from input of significant proportions you may get a large move in either direction. Dont know which way 🙂

            Liked by 1 person

      • phil1247 says:

        k
        upside momentum is waning in gdx
        targets at 31.. and 31.50
        that is where i want to EXIT … not buy

        Like

        • phil1247 says:

          draw up a weekly GDX
          initial surge had 2 closes outside boll band
          next surge had 1 close outside
          next touched band but no close outside

          look for final peak within boll band at targets 31 to 31.5 and EXIT

          Like

        • kvilia says:

          Phil,
          That’s what I implied. GDX can have a correction from the target or go through the target and accelerate. I personally hate buying on a breakout but that’s not to say one should not.

          Like

  7. torehund says:

    https://torehund.wordpress.com/2019/08/24/srs-if-it-runs-it-might-go-big/

    Rates positive or negative, result may be the same for real-estate.

    Liked by 2 people

  8. Facts
    Since 2018 highs ..
    Almost 4/1 days under it
    https://www.tradingview.com/x/QkPI04Wn/

    Liked by 1 person

    • More facts

      IF china did not come thru with 1- 3 trillion in stimulus in JAN – FEB 2016 Tony’s BEAR market call would have happened. They bailed out the markets – YOU CAN’T argue against it – I will make you look like a toddler if you try.

      Like

    • aahmichael says:

      …and NYA has never come close to exceeding its Jan 2018 high. It has put in a series of lower highs ever since that top.

      Liked by 1 person

      • valunvstr says:

        The January highs advance decline compared to today is irrelevant. The distance between price points matters. It’s like comparing the advance decline line in 2013. It doesn’t matter if it was stronger back then to now. Divergences needs to observed closer in time. They are also relevant as the market makes new lows or new highs, not while in the middle of a trading range.

        Like

        • aahmichael says:

          NYA is the NY Composite index. It’s the price index of all common stock listed on the New York Stock Exchange. It’s not the A/D line. NYA shows that the overall market peaked in Jan 2018.

          Like

          • valunvstr says:

            My mistake. Thought you were talking about NYAD. Yes, small and mid caps have been terrible which has led to the NYSE not looking so hot. But who trades the NYSE? The SPX behaves in a different manner.

            Like

          • aahmichael says:

            When you go to a doctor to get a physical, he/she doesn’t just look at your outside appearance. They do blood tests in order to see what’s going on internally. It’s the same with market analysis. NYA is a very important index in that regard.

            Like

          • valunvstr says:

            There is no doubt that the NYSE can be useful for those looking for internal weakened but it can appear years before the SPX break down and since no one trades the NYSE and most trade the SP500 it makes it not so important to most. Also, the SPX will show it’s own internal breakdowns much closer to the actual price breakdown which would make it much more useful to look at the index you’re actually trading. JMO. 🤷🏼‍♂️

            Like

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