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.

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