Mar 18, 2012

Weekly review / Седмичен преглед

I will start posting more information, different trading methods, for example Cycles or Demark Sequential and Countdown. I think this methods have their added value and could be helpful. Technical Analysis will stay my primary tool, but I think combining it with the other technics a trader could take better decision. I hope this way the blog will be more interesting.

So I was expecting a pullback and a new high for a long time... there we have it:)
I though the pullback will last longer and it will be deeper... but the market made its choice. In fact it was my mistake. The whole move during February the slow grinding sideways/higher was a stealth correction with one day climax sell off. The whole time the indicators like the Histogram and RSI and the market breadth indicators were saying "correction correction..." but I did not noticed it.

The question is now what? - This is the last move higher before a serious correction lasting till mid June or early July. I can not say when it will begin, but we are very near. If you look at historical charts you will see that March is an inflection point - a top or a bottom. Obviously now we are not at a bottom.
This correction will be very important. I think it will tell us what to expect for the year(see the last chart).

MARKET BREADTH INDICATORS (I will post only the links, because the charts will become too much)
They are looking very ugly and does not support the breakout and the new highs.
McClellan Oscillator - stays bellow zero
McClellan Summation Index - continue moving lower
Bullish Percentage - does not make new highs
Percent of Stocks above MA50 - triple divergence
Fear Indicator VXO - screaming danger, too much complacency

In the short term the prices will continue crawling higher...

Intraday - the histogram is bellow the zero, probably short move lower before seeing higher prices.

This technic spots areas of exhaustion.
Short term - more upside.

The big picture higher highs in the next 3 weeks will mark 13 for a Combo and exhaustion.
T-theory - areas of weakness match time-wise areas of strength. Target was reached.

CYCLES (TD - trading days)
The last 20 week cycle was much longer than the average for SP500. The last one was 106 trading days(5 weeks longer) and average is 85 trading days(16-18 weeks).
The projection of the next cycle points to the end of June. July is inflection point like March and marks a top or a bottom. So watching end of June early July.
The short term 20TD cycle says the index has still time to move higher.

The big picture - the 54 month cycle(known as 4 year cycle) is pointing lower into the first quoter of 2013. That is why I think the upside is limited. That does not mean huge correction, the indexes could move sideways. The next chart shows possible scenarios.

Weekly chart of Dow Jones. The correction will show us the path for the rest of the year. For now the highest probability has the bullish scenario and lowest the bearish scenario. The turning points are corresponding to the cycles turning points.

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