Weekend Report

Weekend Report

Provided by the OEW Group

October 5 2019

SPX opened the week up and rallied most of the day Monday to close at 2977.  Last weeks close was 2962.  Tuesday had a gap up to reach the high of the week at 2993 within the first half hour of trade, but then sharply reversed lower, apparently based on the bad ISM report signalling a contraction in manufacturing.  SPX then sold off the rest of the day Tuesday, gapped down on Wednesday and continued to decline until it found the low of the week at 2856 in the first hour on Thursday.  From there, SPX rallied to reach 2911 by Thursday’s close.  Friday opened with a gap higher and continued a strong rally all the way back to within Tuesday’s price range, before closing the week at 2952.

For the week, SPX/DOW lost 0.33%/0.93% while NDX/NAZ gained 0.94%/0.54%.

On the economic front, ISM Manufacturing and Services were both lower, although Services remains in expansion mode.  Payrolls were higher as the unemployment rate made a 50 year low at 3.5%.  Our Investor Sentiment indicator increased to 56.5% and is quite bullish as we read the data.  The ECRI weekly growth indictor moved up for the third week in a row and is back above the zero line at +0.83%.

LONG TERM: Uptrend may be weakening

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 and the Major wave 1 high of Primary wave III occurred in October 2018.  Our preferred long term count is posted on SPX, which reflects that Intermediate wave i of Major wave 3 is underway from the Major wave 2 low in December 2018 and continues to subdivide into Minor, Minute and now Micro waves.  However, we maintain our cautious status that the uptrend may be weakening until Major wave 3 can clearly breakout of this overlapping structure.  Consequently, we’re still tracking our alternate count on DOW in the public chart list.

MEDIUM TERM: Downtrend

spxdaily

SPX extended the decline with a large outside reversal down on Tuesday (same as last week), followed by a gap below the critical 2940 level mentioned last week and reached a low of 2856 Thursday morning.  A strong reversal for the remainder of the week retraced halfway back for the entire decline from the 3022 high.  SPX finished the week at 2952, which is within the next pivot range and just below the medium term EMA’s which are providing resistance for the time being.  This price action confirmed that a new downtrend is underway with the possibility of a completed pattern at the 2856 low.  This also resolved the scale dilemma that we’ve been discussing for the last few weeks.  As a result, we can now count five waves up from 2822 to 3022 with a small fifth wave, which suggests the entire uptrend is Micro wave 1 of Minute wave iii.  Micro wave 2 has been underway since the September top and found support at our 2858 pivot range, with medium term subdivisions that suggest a completed zig zag pattern of three waves down.  This represents a 5.5% decline, which would be typical for this wave scale.  However, we need more price action to see if a new uptrend can take hold, or whether another retest of the low may be forthcoming.  Medium term RSI got sufficiently oversold at the low, which is consistent with prior downtrend lows.

SHORT TERM

spxhourly

As mentioned in the previous section, we’ve rescaled the count to show Micro wave 1 as five Nano waves up from 2822 to 3022, which includes a subdivided leading diagonal for Nano wave i as part of that sequence.  Using our short term techniques we can count seven small wave down from the 3022 top, which suggests a 5-1-1 zig zag pattern for Micro wave 2 so far.  That gives Nano wave a = 2946, Nano wave b = 2993 and Nano wave c = 2856.  We then have a 98 point rally off the low to the intraday high on Friday, which is by far the largest retrace since the downtrend began.  Short term RSI ended the week extremely overbought, so a small wave pullback could come at any time.  With all the volatility this week, SPX ended right back in the same support/resistance zone where it left off last week.  As one of our members pointed out while discussing group sentiment, “nothing has changed”.  So far, only the speculative short term waves have been affected.

Short term support is at the 2929 and 2884 pivots.  Resistance is at the 2957 and 2984 pivots.

FOREIGN MARKETS

Asian markets (using AAXJ as a proxy) gained 0.83%.

European markets (using FEZ as a proxy) lost 1.49%.

The DJ World index lost 0.90%, and the NYSE lost 1.08%.

COMMODITIES

Bonds are in a downtrend and gained 1.17%

Crude oil is in a downtrend and lost 5.54%

Gold is in an uptrend and gained 0.43%

GBTC is in a downtrend and gained 3.89%.

The USD is in an uptrend and lost 0.22%.

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

 

Have a good week!

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431 Responses to Weekend Report

  1. M Wags says:

    Futures just came back 33 points off the low.

    Only off 4 now

    News?

    Like

  2. M Wags says:

    Nat-Gas in the longest losing streak since 1990.

    Gas storage is currently at 3.317 trillion cubic feet. Thats 16% above levels a year ago.

    Like

  3. Edward Disney says:

    I’m not the world’s smartest person,but I don’t think the trade talks are going very well judging by after hours trading.

    Liked by 2 people

  4. mcgcapital says:

    Phil (and everyone) here’s what I see… on the daily we have two very similar patterns vs the August drop (circled) and both resulted in lower lows than the prior week’s lows. i.e. on FTSE this would be under 7000. 3 day rebound, followed by a down day, followed by a retest (that’s today), then 1-2 very big down days to follow.

    So the daily is saying sell into 7200, stop above 7230 and target sub 7000.

    Weekly is much the same picture. Clear huge head and shoulders for the whole of 2019 price action. Plus can see lower highs and lows… May 2018 – December 2018 – July 2019. This year was a counter trend rally. Lots of charts look like this… SPX kind of masks it because it’s the outperformer but it doesn’t decouple.. best times to be long US stocks is when everything is going up like 2013 and 2017. On FTSE, every visit to 7000 area has been bought with a reclaim of 7100 within 2 days. 7100 is a key area being the 2015 highs and pivot point in the middle in 2018. Looking for price to hold under there to confirm this bigger picture bear is playing out. Would expect SPX to lose 2800 too at this point if it plays out. On top of that, I’ve circled the other sell offs and typically they’re 3-4 weeks long before bounces hold. Last week was week 1, so think this can go down comfortably for a few weeks from here then probable bounce into month end/fed meeting.

    On top of that, the market is trading like it’s waiting for something, like it does around central bank meetings (obviously around the trade meeting). Once that’s out the way, there’s no reason to hold it up. So in summary, selling into top of the range at 7200, stop above 7230… watch what happens around 7000. Needs to lose it and stay under 7100 on rallies, then that opens the trap door. Expecting trade to be a disappoint, maybe even more tariffs.. then a weak earnings season on top starting next week. There’s no reason to be long to me.

    Liked by 6 people

    • M Wags says:

      Mcg…. earnings season cranks up in earnest next week. According to FactSet, earnings are looking to be down 4% for Q3… which is the worst quarter since 2016.

      It will be most interesting to see how Mr. Market responds to this coming earnings season. Those in the Wave 3 camp are clearly thinking that it will not be disappointing.

      Liked by 2 people

    • phil1247 says:

      ok mark
      i dont watch ftse
      only what i am trading
      spx has the setup for 2814 now
      but it needs to burst down thru 2879
      or you are going to keep going sideways
      making this look more like a triangle and
      preparing for the coming favorable seasonals
      and post triangle thrust up to
      3050 LOL
      actually all that is required is a new high

      Liked by 3 people

  5. kvilia says:

    OK, Fiona. NG is hitting its support area. If this is wave ii, it should reverse here, otherwise it will go much lower. Where is your chart’s breaking point?

    Liked by 1 person

  6. mcgcapital says:

    I have today as the last chance to sell before the bottom finally falls out. Careful going to be big!

    Liked by 3 people

    • kevinm76 says:

      We are almost half way through October and today being an up day hurts the chances of a move lower. Not much chance left for momentum to accelerate to the downside. Once October is over it’s going to moon shot into year. end. Question is, how low do we go here in October?. More likely than not, the lows are in or it just undercuts the early October lows. The Bears are very disappointing.

      Liked by 1 person

  7. sixpack says:

    whoops. Meant this one.

    Liked by 1 person

  8. sixpack says:

    Here it comes all!

    Liked by 2 people

  9. sixpack says:

    Just need some strength here now and we are still on plan. Apple flirting with the old highs too.

    Liked by 2 people

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