Jul 14, 2012

Weekly review

Short term view - higher prices ahead, but its difficult to predict the exact path of the small moves.
Intermediate term view - intermediate term bottom on June 4-th and higher prices till first half of August.

I told you to expect choppy moves through the summer:) So far my short term forecasts were pretty close - up to 1380 SP500 reached 1375, than down to 1320 and again wrong for 5 points the low was 1325. Its getting more and more difficult to predict the squiggles so focus on the bigger picture. And it tells me that we will see higher high early in August.

Short term - nothing bearish for now. MACD is above the zero line. The histogram made a divergence and its now above zero too. I think that there is more upside. There is resistance between 1365 and 1375. At this levels we will see some kind of a pause or a pullback before moving higher to 1390.
Intermediate term - we saw a correction after a divergence on the histogram. The MACD is above the zero line, the prices found support at MA50, the histogram on the weekly chart is moving higher - simply said no bearish signs. I would prefer to see the correction lasting longer and the histogram making nice trough low burning off the bearishness... now it does not look very nice. Nevertheless intermediate term I expect move higher to the 1400 area.
The long term picture - the move so far is overlapping so I have abandoned the bullish scenario with high above 1422. I think the June low was not long term low just intermediate term. I expect new lows early next year.

Market Breadth Indicators are still in buy mode. I expect to see a divergence on the McClellan Oscillator before this move is over.
McClellan Oscillator - I think the indexes will make higher highs and the oscillator lower high marking divergence.
McClellan Summation Index - still on buy.
Weekly Stochastic of the Summation Index - reached overbought levels but it can stay there for several weeks.
Bullish Percentage - still on buy
Percent of Stocks above MA50 - in no mans land ~60. Divergence or reaching overbought state above 75 will be a red flag.
Fear Indicator VXO - not impressed from the sell off at all. I think we will see levels ~14 before an intermediate term top.
Put to Call Ratio - nothing interesting here.

CYCLES (TD - trading days)
I am not sure how to count the small cycles. 12 is too short but I can not be sure. So I will leave them till I see something more convincing.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
On the weekly chart we have setup on 5. On the daily chart combo at 8 and countdown at 9. This chart tells me we will see higher high before the move is over.

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