Weekend Report

Weekend Report

Provided by the OEW Group

December 14, 2019

SPX closed Dec. 6 at 3146 after a weekly high at 3151.  This week opened unchanged, but then drifted lower in front of the Wednesday Fed meeting.  Tuesday and Wednesday ranged between 3127 and 3143 before exploding higher on Thursday’s open in reaction to renewed US-China trade optimism.  After reaching a new all-time high at 3176, profit-taking and nervousness dropped the market back to retest old high 3151 before bouncing once again.  Trade talks, UK elections and impeachment proceedings generated volatile action that carried the market to a new all-time high at 3182 on the Friday open before finishing the week at 3169.

For the week, SPX/DOW gained 0.73/0.43%, while NDX/NAZ gained 1.08/0.91%

No big surprises on the economic front.  As expected, the FOMC maintained the federal funds rate at 1.5-1.75%.  The real news came during the press conference, when FED Chair Powell signaled to keep rates unchanged in 2020 even if the 2% inflation target should be met or slightly exceeded for a short period of time.

Most economic reports were stable or moderately to the upside: NFIB Small Business Optimism Index (104.7 vs 102.4); CPI (0.3% vs 0.4%), up 2.1% YoY, and core CPI (0.2%) in line with expectations; PPI unchanged; import prices up 0.2%, but down 1.3% YoY, and business inventories increased 0.2% in October vs -0.1% in September. Weekly jobless claims though, rose to 252k from 203k last week, and retail sales declined slightly to 0.2% vs 0.3% last month.

The slow but steady improvement of the economy is reflected by the WLEI Index, which has been rising for a while and made a yearly high last week at 2.4%.  It is now at 2.2%.

ecriweekly

Next week’s reports are: Empire State Manufacturing Survey, Housing Market Index, housing starts, industrial production, capacity utilization, JOLTS, weekly jobless claims, Philadelphia FED Business Outlook, leading indicators, existing home sales, GDP, Michigan Consumer Sentiment, corporate profits, personal income, consumer spending and Kansas City Manufacturing Index.

 

SECULAR CYCLES:  Revisiting 100-years of OEW by Tony Caldaro

A classic chart, just as a great painting, will stand the test of time.  Such is the case with the 100-year DOW chart Tony Caldaro posted here on the public blog on October 21, 2017.  The chart reveals, like any masterpiece, many levels of information.  Primarily, it shows his Objective Elliott Wave count for over 100 years of stock market price and time.  Second, it identifies a Saeculum.  A Saeculum is a long-term cycle that has existed throughout history.  It lasts on average about 75-80 years and consists of four phases or turnings, each one about 15-20 years.  Notice these secular cycles have averaged about 17 years each going back to a Grand Super Cycle top in 1929.  All bull and bear market cycles within these secular periods have been fully quantified by objective analytic methods, with no exceptions.  This is the essence of OEW.  For simplicity of presentation, the chart summarizes bull and bear cycles down to Primary scale only.

Tony was both, knowledgeable about the Saeculum and had his own method of analyzing the stock market, which he coined Objective Elliott Wave (OEW).  One of Tony’s master strokes was to identify the turnings of the Saeculum using the stock market via his OEW approach.  His conclusion was that in February of 2016 the stock market made a Primary wave II low at SPX 1810, which he also identified to be an inflection point and the beginning of the next turning in the Saeculum.  Tony unified the Saeculum and the stock market via OEW.  Thus, in 2017 when most believed the economy and stock market were late cycle, Tony forecasted the stock market was just beginning an OEW Primary III wave which should last about 17 years (the length of the previous OEW Primary III wave) and coincide with a Saeculum growth cycle.  It is a chart and forecast that has survived the test of time.  At OEW we continue to monitor and hopefully build on the work of Tony Caldaro.  We have recently observed that the previous Primary III wave, which began in 1982, was about 25 years after the Baby Boom birth rate high of 1957.  The next cycle, suggest the current OEW Primary III wave began in 2016 about 25 years after the Millennial peak birth rate of 1989.

What does all this mean?  If our beloved maestro’s thesis is correct, and we think it is, then it projects DOW 100K by 2032/33.

The link to Tony’s original Weekend Report post, you will find below.

https://caldaro.wordpress.com/2017/10/21/weekend-update-627/

indumonthly

LONG TERM: Uptrend extension continues

In the US, the long-term count remains unchanged with the Super Cycle SC2 low in March 2009.  Primary I concluded in mid-2015 with Primary II concluding in early 2016.  Primary wave III has been underway since February 2016 with the Major wave 1 high occurring in October 2018 and Major 2 bottoming in December 2018.  Our preferred long-term count is posted on the SPX Weekly chart, which reflects that Intermediate wave i of Major wave 3 is underway and continues to subdivide into Minor, Minute and now Micro waves.  A breakout above the September Micro 1 high at 3020 has occurred, ushering in a series of potential wave 3 moves higher.  However, we’re still waiting to see if the current trend continues to make new highs, rising enough to not overlap the previous uptrend high, during the next downtrend.  We maintain our bearish alternate count as posted on DOW in the public chart list, though its probability continues to drop as the market goes higher.

spxwkly

MEDIUM TERM: Uptrend testing possible extension

SPX continued to rally off the previous week’s low and achieved another all-time high at 3183 by early Friday morning.  Our 3180 pivot became both a magnet and stop sign for the price action the week.  This gives the second largest rally for this uptrend of 113 points, without a meaningful pullback.   We can now count seven qualified subdivisions from the downtrend low at 2856.  This latest rally puts pressure on a potential breakout of the inflection point mentioned last week.  We’re still waiting for a break above 3200 to signal an extension of this uptrend.  Until then, our wave status remains unchanged.  Some in our group have suggested an alternate analysis such that Nano wave iv (as shown) was too small to be considered and should be replaced with Nano wave iv at 3070.  This different view suggests the uptrend may be working on the fifth significant wave up off the low.  There’s some merit to this idea as the NAZ may be signaling a similar characteristic, however we’re sticking with our existing metrics until further wave action clears up the picture.  SOX reversed this week to a new uptrend while TRAN remains in a confirmed downtrend, another sign the trend may be strengthening.  Either way, our target for Minute wave iii remains unchanged at 3300 by early next year.

spxdaily

SHORT TERM:

Our short term count continues to align with the medium term subdivisions.  We can count five qualified waves up from 2856 to 3154 with a large third wave, which gives a nice impulsive structure to that point.  From there, we have two more waves, 84 points down 3070, followed by 113 points back up to 3183.  It’s unclear whether the recent rally is Nano wave b of an ongoing Micro wave 4 or the beginning of a third wave extension.  Our upper limit for Nano wave b would be 1.618x Nano wave a, which gives 3206.  If/when that region is breached, we will update our wave count accordingly.  SPX ended the week with a negative short term divergence, which suggests another pullback may be on the horizon.

Short term support is at the 3156 and 3121 pivots, while resistance is at the 3180 and 3210 pivots.

spxhourly

GLOBAL MARKETS:

trends

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

 

Have a good week!

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779 Responses to Weekend Report

  1. cj32 says:

    Cr. to CBZ

    Liked by 3 people

  2. phil1247 says:

    esh20 march future

    daily chart is straight up bullish in 3 of 3 above 3234
    overlap there and wave 4 could be forming

    3254 was – 618 target of extension long
    almost impossible to go thru there
    without a pullback first
    always take profit there
    or you are pushing your luck

    Liked by 4 people

  3. Observation: Sox Index Bearsh Engulfing Candle Today. + AMD Inside Day Candle !

    AMD over bought, I’m thinking, Down day for AMD and Sox Index.. on Monday.

    Tuesday still unclear..

    But Monday looking Bearsh so far for SOX chip s stocks

    Like

  4. fxaprendiz says:

    One thing is clear, the Dec 2018 move up has consisted of only 3 big waves so far. And 123 is ABC until proven otherwise. So I’m starting from this to write the following.

    For 2020 I’m trying to be flexible regarding my EW analysis, so I have been studying the charts for some days, and also reading EW material like that from Glenn Neely. I have to say though that this move up from 2334 still doesn’t look like a motive (impulsive) wave. The only way this move can be considered as wave 1 of a Primary wave 5 is if said wave is an Ending Diagonal, which by definition is more terminal than impulsive. Other than that, all the other counts are still part of a corrective Primary 4.

    Having said that, I have to say that the Expanded Flat is dead. The SPX has gone just too high for me to consider sub-2334 as still possible. There’s a replacement count for that one, an Irregular C-Failure Flat, in which wave C would fall short of 2334, circa mid 2500s, so it’s still a big drop.

    There are other counts that may be possible at this point. All of them consider the B wave from 2334 to be composed of only 3 subwaves, so as long as it doesn’t morph into 5 subwaves, these are the counts I’ll have in my radar for 2020:

    • Ending Diagonal (Primary 5)
    • Irregular C-Failure Flat
    • Irregular Contracting Triangle
    • Running Flat
    • Running Contracting Triangle
    • Running Double-Three

    Of these 6 formations, 2 end the wave from 2334 at ~3300, while the other 4 end it at ~3500. Regarding the drop that follows, 2 counts have a drop of 500 points, 2 have it at 700 points, and 2 at 800 points.

    I’ll follow all 6 counts and wait for Price Action to eliminate one by one until only one remains. Or if all 6 get eliminated, then it’s back to the drawing board…

    There’s more details about each count and a rough draft of every count, with approximate levels for each significant turn; but I left that aside for the readers of my blog…

    Liked by 4 people

    • SPYtrader says:

      Since you mentioned Neely. He is projecting 3450+ sometime in February.

      Liked by 3 people

    • gary leibowitz says:

      So we are either in the early part of primary 5 or still in 4? Either way any correction is a buy buy buy….

      Seems completely out of wack with the historical charts on market cap VS. GDP or Shiller Index. These have never had a sustained bullish move from today’s levels. in fact almost always it indicated a deep bear market was starting. How do you reconcile the discrepancy? Even if we are still in 4 that assumes the corrective drop will be immediately followed by even higher highs within a couple of years. This would create a chart pattern on those 2 that has never happened before. New Paradigm? So many were absolutely sure in 2016 and i can’t remember seeing any alternative chart that turned out correct. Am i missing something? There seems to be no pattern that would call for a long deep bear market. NONE? if true i guess i should just load up and walk away for a decade.

      Like

      • chicotheman says:

        Gary, I like to read your market view, but you have been so sarcastic for weeks that it is hard to follow. Are you still looking for the big top in short order?

        Like

      • fxaprendiz says:

        Actually all patterns call for a delayed deep bear (+30% decline) after Primary waves 4 and 5 are done, in 2022.
        If you’re asking if there’s a pattern that would call for such a recession-inducing bear already in 2020, no I don’t see it. But if I do I’ll mention it.
        For now these are the 6 patterns I see as more probable, to the best of my abilities.

        Liked by 3 people

        • Gregory Ewanizky says:

          Hi, this is no troll question. What makes you believe that we’re in some type of ABC fourth wave with a fifth primary wave still to come? What would be the matter with the end of five waves being right here right now? Thanks for your work

          Like

          • fxaprendiz says:

            Gregory, it’s a matter of time, mostly. First, the SPX has a Primary wave 3 spanning almost 7 years from Oct 2011 to Sep 2018. I find it very difficult for w4 to be only 3 months length, Sep-Dec 2018; especially since we was only 5 months, May-Oct 2011. By alternation, and considering the length of w3, w4 should be +1 year long and of a complex nature.
            The other issue regarding time is that the business cycle, while declining, is not ready yet for a recession, and a recession in the current environment can’t happen until all 5 primary waves from year 2009 are done. Hence if the business cycle, according to econpi.com is still more than a year away from a recession, then any correction in 2020 will still be part of Primary 4.
            The other issue is the Price Action itself. The move up from the Dec 2018 is just too complex to be counted as a simple impulse wave, and really doesn’t follow the rules for the formation of a 5 subwaves within itself. Therefore it counts better as a complex wave B, or at most as a 3-legged wave 1 of an Ending Diagonal.
            So, it’s time and wave structure the issues that prevent me from considering the end of five Primary waves at this point in time.
            Come 2022 (2023 at the latest), and it will be a different story.

            Thanks for asking the questions that matter, Greg.

            Liked by 6 people

          • Gregory Ewanizky says:

            Actually I was under the impression that according to the theory if we have a really really long third wave like we did then we can have a short fourth and fifth. But the way I figure it is that the leading stocks like apple and Microsoft are so extended long-term it’s hard to imagine them having a big sell-off and then a big rally back to New highs. The only way for the bull market to last until 2022 would be if energy stocks went crazy, which I guess is possible, who knows. There’s so many variations it’s almost not even a theory

            Like

        • gary leibowitz says:

          Yes I misinterpreted your assumption. Should have read it thoroughly. I am also considering 2020 is a positive year with a possible sharp and short correction. My sarcasm is a problem when I can’t accept the path we are heading into. I saw what was going to happen, it happened, and yet no one seems to recognize it. Daily barrage of dictatorial lunacy. I am the person carrying the sign “The End Is Here”. I hope it is all in my head. Over reacting. I hate what i see for our future. It could have been prevented.

          A positive year guarantees my worse case scenario.

          Like

          • phil1247 says:

            gary

            the most bullish thing a market can do is keep going up
            according to your perverse logic
            the higher the market goes
            th3 worse it is

            no wonder you are having such a hard time figuring this market out

            Liked by 1 person

    • E says:

      Thanks for you alternate views fx. Wondering… Do you have a count on iwm or xlf? These seem more interesting to me than the mostly uncountable spx.

      Like

  5. jobjas says:

    RUT continues to lead

    Liked by 3 people

  6. lml25 says:

    Have to see an indication of losing the embedded stochastic.If one index goes,the rest should follow.IWM is the most likely to lose 80 first.A drop below 165.60 should move it lower.Avi says losing 161 on IWM is an indicator of a top.If IWM breaks,I believe SPX and the Dow and Nasdaq follow.HYG should be watched as well.GDX holding 26 a while back,27 last week(as I pointed out)was a good sign.Test of 31 very possible–above that,42.GL all.

    Liked by 1 person

    • notgeno0010 says:

      RUT daily adx rolled over today, atr ticked up
      I usually give the daily adx signal 20-40 pt leeway so safe to short against 1700-1720 stop-loss

      Liked by 1 person

  7. xEVAx says:

    Alternate count should Doom be averted…. Target 2656, it’s 3256 OEW pivot time =)

    Liked by 1 person

  8. M Wags says:

    Top Picking is a terrible disease. Exhibit A: TSLA

    Liked by 4 people

  9. fxaprendiz says:

    Not expecting much out of these shorts now though. Maybe low 31xx, but more probably 3190-3200.

    The change in expectations is due to me working in several alternatives for long term counts for 2020, and most of them are calling for either low 3300s or low 3500s as a significant top in first half of 2020. And from there the ride gets rockier. Not expecting sub 2334 anymore but you will agree drops in the order of 500-700 points will still scare the hell out of most.
    Overall though, 2020 won’t be the year when SPX picks a definite direction. Leave that for 2021 and 2022, when a true Primary wave 5 will finally take shape.

    Liked by 4 people

  10. M Wags says:

    Recommended CSTL week before last here.

    +23% to $35.20 and traded as high as $39.76 today.

    Happy Holidays! 😀

    Liked by 1 person

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