Jun 30, 2012

Weekly review

Short term view - green week expected but not much percentage gain.
Intermediate term view - intermediate term bottom reached higher prices in the next months.

Ok this week gave us the answer just higher low. I was expecting ~1300 for higher low it was 1310... so it be.

The call for a bottom early June was right. The alternate scenario is out of the picture. As I said for two weeks - trade what you see and not what you want to see. I wanted to see lower low with nice divergences but the market do not care about my wishes:) I have started the blog with the Idea to be more objective and I am glad to see that its achieving its goals.

I am taking my decisions based on technical analysis and I called a bottom early June. Now when the alternate scenario is out of the equation the cycles and Tom Demark sequential are adjusted accordingly(mentioned already last week the alternate view). Not that they contradict with the technical picture, it was just my mistake wanting to see something different.

What to expect? - I am not 100% sure. I do not think that this is the beginning of a great bull move. Probably a lot of volatility through the summer and I will have to change my charts a lot:) - my best guess is we will see choppy upward move at least till mid August.

Currently I do not see anything bearish, momentum on all charts turned up.
Short term - SP500 is touching resistance, probably we will see 1-2 days a pause before reaching the trend line.
Intermediate term - choppy moves but pointing up. With this huge bar and MACD and the Histogram above the zero line pointing up the pressure is on the buy side.

The indicators are positive and on buy. McClellan Oscillator is at extremes and its possible to see divergences which should bring the sell off from the upper to the lower trend line (the chart above).
McClellan Oscillator - near to extremes, upside move should be limited.
McClellan Summation Index - on buy, nothing has changed
Weekly Stochastic of the Summation Index - buy signal since end of May predicted the move very nice.
Bullish Percentage - on buy confirming the move. The 40-50 level is usually a bottom for intermediate term correction.
Percent of Stocks above MA50 - did not show divergences early June but reached oversold levels and now rising confirming the move.
Fear Indicator VXO - moving lower probably we will see 13-14 before the next significant correction.
Put to Call Ratio - moving up confirming the move

CYCLES (TD - trading days)
Last week I have said that probably I should revise the cycle count. Well I must do it now. If you expect 40 week cycle low you do not want to see 100 points or almost 8% on the upside just the opposite.
The previous 20 week nominal cycle lasted 23 weeks which is 5 weeks longer than the average length of 18. The next one should be shorter. Exactly that happened - 14 weeks long cycle which means 23+14=37 and the average length of the 40 week nominal cycle is 36 - fits perfect. There were two small cycles lasting only 9 days and I thought it cant be they are to short and discarded them.
The new charts with the cycles revisited are shown bellow.

One small cycle 16 days has finished. Currently we have 4 days up from the next one so I think we have at least a week more on the upside.
4-th of June was 20 and 40 week low. The next 40 week cycle has begun so we will have upward pressure at least through the summer(10-12 weeks). But we have 18 and 54 month cycles pointing down already so the move up should be limited. The way it moves up will give us clues what to expect.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
The revisited counts are on the charts bellow.
On the weekly chart we have buy setup finished and that is all that mater. The daily chart - the combo reached 12 what should I say.... f**k 13 is missing not perfect for just 1 day.

On the daily chart I am ignoring the problem with the 0,11 points(mentioned last two weeks) and accept that we have finished setup and countdown is currently at 5.
Currently at 3 from a setup.
T-theory after a period of weakness expect period of strength at least with the same length. Expect the indexes to move higher at least till mid August.

Jun 29, 2012

Shorterm update

Update - I think the SP500 will close above 1345 so the correction is over
Update - the futures are now at this levels... lets see if everything is only rumors and quarter end rally or the correction is over.
The new plan

Jun 25, 2012

Shorterm update

Short term I was expecting the indexes moving sideways for another day because SP500 spend whole day above 1330. Well I was wrong but as I have said if SP500 open bellow support 1330 forget it we are going down. The sellers look very strong and new low looks more and more probable(which is my preferred scenario). Line in the sand for higher low is 1285.

Jun 23, 2012

Weekly review

Short term view - probably positive start of the week but at the end I expect another red week.
Intermediate term view - intermediate term bottom reached higher prices in the next months.

The forecast from last week played out very nicely:) The market chose to break through the upper boundary of the wedge and touched resistance... almost touched it SP500 hit ~1363,5 and resistance is at ~1365 but who cares:). I have said also if we see a breakout it will be short living and a fake one. The market waited for FOMC and plunged on Thursday. For now is everything on track.

What to expect? - Move lower has began. I think both options - higher low or lower low are alive. Depending on the way the correction is moving lower and its speed will tell us which option has higher probability. If the prices are moving lower fast and fall back in the channel(chart 2 daily) lower low has higher probability. If the prices start moving slowly and crawling on the outside boundary of the channel(chart 2 daily) higher low has higher probability.
I would prefer to see lower low. In this case everything will look better - the technical picture with divergences, the market breadth indicators with second low, the cycles, Tom Demark's sequential... but the market does not care what I wish and what is perfect or not.

Short term - I think the week will start positive and we will see the histogram turning positive before the next sell off. The two scenarios are shown on the chart bellow (if SP500 opens below 1330 on Monday than forget it:).
Huge bars ignite selling at the begging of a move or mark exhaustion and capitulation at the end of a move. The one from Friday June 1-st appeared at the end of a move and on the next day a have said this is capitulation and the move will be over soon. Now we have huge bar at the beginning of a move which means a sell of has began. In the Next days sellers should show strength and prices should not retrace more than the half of this bar which is ~1341 and resistance at ~1344. This levels should not be broken and if the SP500 touches them should reverse right away. If this does not happen the sellers are not strong enough.
On Friday SP500 spent whole day above 1330 and closed above this level which raises red flag. That left the door open for a move higher above resistance ~1344 and probably test of the broken wedge.
Again the way the prices are moving will tell us how deep this sell off will be. Intermediate term - expect sell off for 2-3 weeks. The two options are shown bellow.I have explained them above.
The Histogram turned lower, the MCAD touched the zero line and it's turning down too, so I expect move lower for 2-3 weeks to reset the histogram. In both cases the indicators will make higher trough and mark divergence or confirmation in the case of a higher low.
The big picture - here we have the opposite case compared to the daily chart. The Histogram turned up, the MACD touched the zero line and it's turning up. The Daily chart is pointing down and the weekly up. Is this confusing? Not at all. We have to put the puzzle together. The weekly chart is more important so the interpretation is - we will see weakness for 2-3 weeks (that is what the daily chart says) but after that the direction is up for 2-3 months (that is what the weekly chart says). We had the same situation last week - hourly chart was pointing up and the daily down, that is why I said move higher but short living.
Anyway I wanted to show this chart because of something else.... see the dates, the month of July to be more precise. July is obviously important month. For the last six years it marked important top or bottom(two tops and four bottoms). So with expected move lower into early July I think we will see an intermediate term bottom and move higher for the next several months at least, which is November - the presidential elections in the USA:)
A perfect move from technical point of view is shown bellow:) - sell off touching support and the trend line and then move higher into November testing the trendline.

Still positive. One day sell off is too short period to expect them to change the direction. I expect to see a second trough on indicators like McClellan Summation Index and Bullish Percentage when this move is over, which usually mark an intermediate term bottoms.
McClellan Oscillator - hit extreme 82.74 and this red bar is not a surprise. Still positive but soon we will see it bellow the zero line.
McClellan Summation Index - still pointing up
Weekly Stochastic of the Summation Index - pointing up, one more reason why this move will not last very long, how deep is another question.
Bullish Percentage - turned down, but still shows buy signal. Its just too early. Waiting for a second trough.
Percent of Stocks above MA50 - at 44.40 there is now important signal, waiting for second trough.
Fear Indicator VXO - at 17,90 waiting for a divergence or move to 28 to mark the end for the move.
Put to Call Ratio - waiting for a second high with divergence.

CYCLES (TD - trading days)
The small cycle turned lower promptly. The last one was shorter so probably this one will be longer 24-25 days which means another 2 weeks of weakness. The low for this small cycle will mark the low of the 20 and the 40 week cycle. Intermediate term bottom is expected early July.
Here is the big picture - probably ~18 weeks long cycle and bottom of the 20 and 40 week cycles early July expected.
If we see higher low I must revise probably the cycles and mark 40 week bottom on the 4-th of June which means 23+14=37 week long cycle which fits perfect with the average length and the previous four 40W cycles. The smaller cycles do not fit into the bigger ones but... who knows. Sorry but I am not a cycle professional but I follow them because they are interesting tool and have added value.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Last week I have mentioned that setup(shown in red) on the SP500 was negated because of 0,11 points. The DJ Industrial do not have this problem:). We had similar situation in March - the SP500 finished 13 combo on the weekly chart, on the DJ it was negated, and eventually the combo played out perfect. I am not sure how to handle such situations. Sorry again I am not a professional I have just read the book from Tom Demark and I count manually:)
My suggestion until negated - the weekly chart is more important than the daily and SP500 finished buy setup 9 bars on the weekly chart. If this is the real deal we count the setup (the red one) on the daily chart, the countdown and the combo are canceled(because of a setup in the opposite direction) and this move lower should not break the TDST Line which is the true low for the setup or the lowest point of bar 1 ~1285 - that is the scenario with higher low.

Jun 21, 2012

Short term update

UPDATE: Now it's official 1330 has been broken and the pullback has began:) And with this kind of action a retrace to the lower wedge boundary is history too. A pause on Friday and more selling on Monday.
Short term moves have played out very nice:) I think the pullback has began. The line in the sand is the support at ~1330.

Jun 16, 2012

Weekly review / Седмичен преглед

Short term view - next week more on the upside.
Intermediate term view - intermediate term bottom reached higher prices in the next months.

Positive week as expected. The news about the Spanish banks receiving 100 billion cause a huge gap. The futures hit resistance ~1345(the market opened lower) then we saw a pullback and a move higher to resistance again, which was the yellow scenario from last week.

What is next? I think the move on the upside does not look finished. One more push up is missing but we are nearing the top for this swing.

Short term - the prices are moving in a wedge. With Greek elections this weekend we can see a gap again. I have two scenarios - the indexes exploding higher after a positive news and start working on a top, or a move to the upper boundary of the wedge, pullback to support ~1330 and the lower boundary of the wedge, than moving to ~1360-1365 to mark the top for this move.
The support level is around ~1330 which should not be broken or the move on the upside is over. The MACD and the histogram will tell us when the moment has come (the top for this move) - we will see the divergences. There will be a tradeable move only if we see a pullback.
The bigger picture - There is no signs of reversal for now, MACD we will reach probably the zero line, the histogram still moving higher. But the prices have reached serious resistance - MA50, 50% Fibo retracement, resistance level, the upper boundary of the channel. That is serious cluster of resistance. So when I look at the previous chart and this one, I think we will see higher prices but this event will be short living something like fake breakout before the price fall back in the channel again. Then I expected a correction to around ~1300. The alternate scenario, which I keep in mind (explained it last week) new lows ~1250.

Most of the indicators are in buy mode supporting the move. Nevertheless I will wait for a pullback.
McClellan Oscillator - positive above the zero line
McClellan Summation Index - in a buy mode
Weekly Stochastic of the Summation Index - in a buy mode
Bullish Percentage - issued a buy signal
Percent of Stocks above MA50 - heading to the 50 level, supports the move on the upside
Fear Indicator VXO - it looks like it topped at 26-27 level
Put to Call Ratio - no useful info, back to more normal values but still very high.

CYCLES (TD - trading days)
The 20 day cycle reached the middle of the cycle 10 days. The last one was shorter so probably this one will be longer 24-25 days. There is still 2-3 days on the upside which fits the technical picture. The low for this small cycle will be the low for the 20 and the 40 week cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
SP500 almost made it - a setup:) The bar which should be 6 closed at 1314,88 and the bar 4 days before it closed at 1314,99 so the setup was invalidated. This technique says one more low is missing..... or I can close my eyes for 0,11 points and say we have a setup on the upside:) I am in a wait and see mode for now.

Jun 9, 2012

Weekly review / Седмичен преглед

My hard disk went broken..... very nice:) I will need some time to repair my computer and recover the data. Bellow are the charts the comments later!!!!

Short term view - short term bottom, next week more on the upside
Intermediate term view - intermediate term bottom reached higher prices in the next months.

Not surprised of the action this week last Friday was clear exhaustion bar. The market already closed above it which means strength. I expect next to be positive too. The move on the upside is not over.

My thoughts - it looks like scenario 1 which i mentioned last week is playing out and we saw the bottom. The histogram made divergence, the McClellan Oscillator made divergence, we have strong rally and I do not see reversal next week. But my intuition tells me that something is missing. The cycles are missing one small 20 day cycle, Tom Demark sequential is missing lower low, the market breadth indicators compared with the other intermediate term bottoms in 2010 and 2011 are missing the retest of the low with divergence. A lot of news this month and I expect a lot of volatility.
So did we see THE low or not? I have no Idea, but we should trade what we see and not what we feel, that is why my blog's name is "practical":)
I say we saw the bottom, but we will have another buying opportunity - a deep retracement(the second chart). BUT bear in mind that lower low is possible(the third chart cycles). Lower low should not scary you.If we see it will be short living and a great buying opportunity.

Short term - higher prices ahead. I am not sure exactly how. See the open on Monday. If SP500 break above the last top ~1329 next target is the resistance and 50% Fibo ~1340(yellow scenario). If we see weakness probably a-b-c correction ~1300 and then moving higher(red scenario).
The bigger picture - we saw divergence on the MACD Histogram and strong rally. Next I expect move to resistance and 61,8% Fibo ~1360 and deep retracement before moving to the last high ~1420.

Some indicators like McClellan Oscillator and McClellan Summation Index issued buy signal. But I feel like something is missing. If you see the other intermediate term corrections in mid 2010 and 2011 we have a retest of the lows and second through on the market breadth indicators. Now its missing - my interpretation up leg with deep retracement or lower low before the bottom.
McClellan Oscillator - divergence and now above 0.
McClellan Summation Index - issued buy signal.
Weekly Stochastic of the Summation Index - turned up, we have buy signal.
Bullish Percentage - turned up but still no buy signal.
Percent of Stocks above MA50 - turned up and above 25.
Fear Indicator VXO - no useful info - in no mans land ~20.
Put to Call Ratio - no useful info - back to more normal values but still very high.

CYCLES (TD - trading days)
On the weekly chart we have cycle 14 weeks long and with the previous one(23 weeks) longer than the average cycle its Ok to mark a bottom.
But on the daily chart one small cycle is missing - one final low around end of June.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
On the weekly chart we have already 9 bars and buy setup. On the daily chart the move is looking unfinished. We need one more lower low to finish Combo and bar 13 closing bellow bar 8 to finish Countdown. In both cases we need one more lower low.

Jun 2, 2012

Weekly review / Седмичен преглед

Short term view - expect bottoming process to start soon, but we will see lower prices
Intermediate term view - we are near to an intermediate term bottom... it could be next week or it could take another 2-3 weeks. No reversal signs yet.

Last week I said its difficult to predict short term moves when have long weekend, wait for the open. That was right:) the indexes opened higher and the alternate scenario played out. I said also that MACD and the Histogram on the hourly chart look very bad - that was eventually right too:). SPX500 touched 1335, five points from my target 1340, made double top and plunged lower.

This week I do not have short term chart because I have no idea how the next move will look like.
The intermediate term picture - the trend is still down, no signs of reversal but the huge candle on Friday smells like exhaustion and capitulation.
I expect one of the following two scenarios to develop:
- early next week to see lower prices touching support between 1260 and 1250 which is 50% Fibo retracement, strong rally after that and deep retracement into mid June.
- the second one some consolidation with upward bias to resistance ~1292 followed by final move lower into mid June.This one is shown on the chart.
It does not mater which one will play out I think that we will see lower prices but the ~1250 support level will hold. I think we will see divergences on the Histogram and many other indicators which will mark the bottom. The question mark is the time - next week or in 2-3 weeks.
Look at the divergences here - RSI, Histogram, Volume....
The big picture - MACD is nearing the zero line, the indexes a near to a support level and the trend line. Intermediate term bottom is upon us. The duration and size of the following rally will tell us what to expect in the future.

The market breadth indicators are near levels which usually mark the end of intermediate term corrections. There is NO reversal signs BUT..... the message from the indicators is we are near to a bottom. That means - if you are short you should start thinking about taking profits, if you think to take short positions(for longer time) its a little bit too late.
McClellan Oscillator - I think we will see a divergence and that will mark the bottom (as expected according to the plan:)
McClellan Summation Index - the trend is still down, not a surprise it is still too early for a reversal
Weekly Stochastic of the Summation Index - waiting for the next swing up...
Bullish Percentage - in the 40-50 area where intermediate term correction usually end, but be patient there is no reversal signs
Percent of Stocks above MA50 - at very low levels
Fear Indicator VXO - we are nearing the area which usually marks the end of intermediate term corrections 28-30
Put to Call Ratio - we will see here a divergence too, like last year August-October

CYCLES (TD - trading days)
Short term cycles - expecting bottom of the 20TD cycle(probably we saw it on Friday) and the beginning of the next one.
I do not know how it will play out. On the chart is shown the perfect setup the up part of the cycle reaching resistance and then the down part hitting support at 50% retracement. The move of course will not be perfect, but expect some relief move or consolidation followed by another sell off.
The bottom of the next 20TD cycle will mark the end of the intermediate term correction and bottom of the 20 and the 40 week cycles.
The short term cycles are arguing that we should expect the second scenario.
Intermediate term cycles - waiting for a bottom of the 20 and the 40 week cycles in the next several weeks.
The last 20 week cycle lasted longer so I expect this one to be shorter 14 to 16 weeks. Currently 13 weeks so another 1-3 weeks to see a bottom.
After that we should see a move higher for at least 2-3 months.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
The counts currently - countdown at 7(chart is wrong) and combo at 11 on the daily chart.
Two days which make lower lows will finish sequential 9 plus combo 13 on the daily chart and weekly sequential 9 - this is scenario one.
Another possibility is sequential 9 plus countdown 13 on the daily chart - this is the second scenario which will take some time.
On the weekly chart sequential is currently at 8. So any lower low next week will complete buy sequential 9-th bar on the weekly time frame.