Jan 14, 2018

Weekly preview

Short term view - lower next week.
Intermediate term view - topping in January and lower in February

In the last two posts I have shown that something more bullish is going on - the counts are changed accordingly. I see five waves for the week and five waves from the low in the end December with divergences on the hourly chart. So I expect something lower next week, but I think this will be a correction with another higher high with divergences on the daily chart. This top late January should be the top of the 20 week cycle and bigger correction for a few weeks should follow in February. Worst case this is the intermediate term top with a deep retracement, but I do not expect sudden plunge before the end of January(FOMC 31.01).

Last week market breadth indicators were positive, but this week Bullish Percentage and Percent of Stocks above MA50 turned lower, VIX is higher since last week, A/D issues with more divergences. Of course this is early warning and there is no sell signal, but the last positive sign is turning negative. Maybe we will see a divergences developing in the next 2-3 weeks.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - now I think the count should be started from the November low(see the previous post). In this case we should see one more correction and a high for an intermediate term top.


Intermediate term - this is the count from the previous post. Alternate this is the top of wave III with extended fifth wave. Interesting is both follow the same path until the 18 month cycle low in the summer. This is good for trading:) just follow the market and in summer the market will show it's cards.
The RSI erased the divergence and shows strength so the probability is higher that this is a third wave with 4 and 5 to follow before an intermediate term top (yellow 3 late January).
The next important lows are late Feb/March and late June/July 18 month cycle low.

This is the alternate scenario with the top of wave III. Put aside EW what we have is weekly RSI close to 90 which is crazy, price extremely stretch far from MA200 daily(MA50 weekly) so in the first half of 2018 we should see reverse to the mean - the price will drop lower to the MAs.


Long term - one more correction and a rally before turning very bearish. I am not sure if the indexes are heading higher for the final top or just the third wave. The wave into the June/July low will invalidate one of the both scenarios.


MARKET BREADTH INDICATORS
Market Breadth Indicators - now most indicators are not following the rally. Some toping is needed no sell signals so far.
McClellan Oscillator - above zero and more divergences.
McClellan Summation Index - buy signal, but clear intermediate term divergence.
Weekly Stochastic of the Summation Index - buy signal, in overbought territory.
Bullish Percentage - turned lower, but still buy signal.
Percent of Stocks above MA50 - turned lower, but still buy signal.
Fear Indicator VIX - is not following the indexes with lower lows, 6 green candles in the last 7 trading sessions.
Advance-Decline Issues - intermediate term and short term divergence now.


HURST CYCLES
Day 39 of the 40 day cycle. A pullback next week should be the low of this daily cycle.


Week 8 of the 20 week cycle, in the middle of the cycle.


Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
If we see the final high around FOMC 31.01 we will have finished countdown on the weekly too.

Jan 13, 2018

EW pattern some thoughts

I have problems with the daily EW pattern for a long time, it is obvious that is some kind of a third wave but that is all. Looking at other guys which are better than me... their counts are not convincing either. We have very shallow pullbacks for a long time(since Nov.2016) which makes difficult to find the pattern and opens the door for a lot of speculation when you try to use EW.
Different indexes have different looking pattern and I have played a little bit with the charts comparing them and here is what has come out.


DJT looks different compared to SPX / DJI, but I think it's pattern looks easy to count without a lot of contradictions.
DJTA weekly.... I can not see what could be wrong with this count. Btw XLF has similar pattern with missing 4 and 5 of V.


Than we have NYSE. It is very similar to SPX / DJI with one important difference the Oct-Nov.2017 correction which diverge from the major indexes barely noticeable on their charts, but seems to be important. This drives me nuts for a long time:)
Looking at the chart we have wave up Aug-Oct.2017(1 yellow) correction(2 yellow) and acceleration most likely third wave(3 yellow). Now how to fit this in the bigger picture?. We have weak wave April-Aug.2017(see the angle of ascend) probably a fifth wave(5/III) where does this fifth wave fits if you start to count from 2016 low? It fist like the top of wave III. So the move up from the Aug.2017 low should be 1-2-3 from wave V.
And you end up with the same count like DJTA. If you look at the RSI and draw trend lines you will see that it follows every wave even the internal waves without breaking the trend lines so the start and end of the waves on the chart are right.


SPX / DJI and NYSE have very similar charts. If you compare them there is hardly any difference(except Nov.2017 which could be very important clue) and I think they all have the same EW count. So applying it to SPX it looks like this on the chart below.
We will know soon if this is right or wrong, but I think this count is better than any other I have seen. Cycles are ok with it.... what could go wrong - this is the top of wave III and not V. We will know this when we see the 18 month cycle low in the summer(expected in late June or July at the moment).

Jan 9, 2018

Update

UPDATE: I see five waves for the week and five waves from the low in the end December with divergences on the hourly chart, so something lower is expected. I can not say if this is the top or another pullback wave 4, but I do not think the indexes will reverse and plunge before the end of the month. If it is the top we will see an impulse lower and deep retracement, if not another pullback and higher high with divergences on the daily chart.



I was playing with the charts searching for a way to extend the impulse higher... it looks a little bit crazy with nested 1-2 i-ii (i)-(ii), but the bull is strong enough it can handle 50 points higher:)
After a pullback if we see another higher high I have to switch to this count. The Fibo extensions look very good so after all may be itis not so crazy.