May 20, 2012

Weekly review / Седмичен преглед

Short term view - relief rally
Intermediate term view - lower low and intermediate term bottom second half of JUNE

I was expecting a move lower for 2-3 days but not so much. SP500 hit the first target ~1290. I thought this will happen in June... but it is what it is!!!
So whats next? - When I look at the McClellan Oscillator and the Put to Call Ratio(see the links bellow) I see a lot of bearishness. When this short term indicators reach such extremes the result is always relief rally and a lower low, which marks THE LOW for a particular move.

Short term - no signs of a reversal.Probably 2-3 days bottoming process and a relief rally. Targets are ~1340 resistance and 38,2% Fibo retracement, ~1360 resistance and 50% Fibo retracement.
Intermediate term - SP500 touched 38,2% retracement for the move since October 2011. I think in June we will see lower low. The next levels are ~1270 and ~1250 which is support level and 50% Fibo retracement.
Long term - On the weekly chart the indexes have reached my target the EAM50. Lets see where we will find a bottom. If SP500 stays above 1250, the bullish scenario is still possible. If not the target is 4 year low in Q1 of 2013 reaching at least the October 2011 lows.

The momentum indicators like McClellan Oscillator are screaming that the rubber band is too stretched - expect a bounce.
The Trend following indicators are telling us that the move is still not over.
McClellan Oscillator - take a good look at the chart. Always when such levels are reached a bounce is following. Another important thing - that is not the low. Expect lower low
McClellan Summation Index - the move on the downside is not over.
Weekly Stochastic of the Summation Index - the move on the downside is not over.
Bullish Percentage - the move on the downside is not over.
Percent of Stocks above MA50 - it's time for a bounce
Fear Indicator VXO - pullback and a move to 28-30 will mark the end of this intermediate term move.
Put to Call Ratio - crazy levels, everybody are on the bearish side of the boot

CYCLES (TD - trading days)
I am not showing a daily chart of the smaller cycles. I think that there is cycle inversion, but I am not a "cycle guru" so I prefer not to comment something that I do not understand:) The 20 day cycle is moving for 7 days lower instead higher. Probably for the second half of the cycle we will see the prices moving higher, which will correspond to relief rally.
The bigger picture - 4 to 6 weeks to reach a 20 week and 40 week cycle bottom.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Sequential has been completed last week. Countdown is at 4 now and Combo is at 10.
My interpretation:
- Combo finishing next week and a bounce, Countdown finishing later in June. That means three days with lower lows.
- continue lower to finish the Countdown. That means continuing lower with pauses for a day or two.

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