Jul 21, 2012

Weekly review

Short term view - 1-2 days more weakness after that continue moving higher
Intermediate term view - intermediate term bottom on June 4-th and higher prices till early August.

No surprises this week. I said we have resistance zone between 1365 and 1375 we will go up than a pullback will follow. SP500 touched 1380 and a pullback has began. I was wrong for 5 points third week in a row:) but pretty close again.

The first chart shows what I was using for a guidance the last 3 weeks. In terms of Elliot waves W-X-Y correction - W=95 points, X running flat, Y=W=95 points touching the upper channel line around ~1410. We saw A from Y 55 points, now we are in B of Y which should put a low around the 50% retracement from A which is ~1355, than C should follow to finish the Y wave C=A=55 or ~1410.
This count worked great for the past several weeks, but now there is one big BUT.... on Friday SP500 and the other index put very ugly candle, we have triple divergence on the histogram(which turned lower) and now a divergence on the MACD. So there is very high probability that the top is in and we have double top in play.

How to trade this fifty-fifty situation? If the SP500 will gone move higher we should see max another 1-2 days of weakness, no huge red bars and more up and down intraday, low for B of Y between 1350-1355. If you see weakness lasting longer, intraday moving only in one direction - down, breaking the 1345 level than we have a double top.
The line in the sand is 1345. If SP500 close bellow this level the damage will be done - we will have a low lower than the last minor low(see A of Y on the first chart), trend line broken and support level broken(see the second chart).

Short term - if the count continue working we should see pullback to 1350-1355 before moving higher.
Intermediate term - now we have some very bearish signs - very ugly candle formation, triple divergence on the histogram which turned lower and a divergence on the MACD. So far the count was perfect so I will stay with it until proven wrong. That is way move higher is the preferred option. BUT again the line in the sand is 1345(where the red line on the chart starts) below this level there will be too many technical damages - trend line and support broken.

Market Breadth Indicators are still in buy mode but that does nor contradict with a sell off. We have a divergence on the McClellan Oscillator, Bullish Percentage is very weak, Percent of Stocks above MA50 almost touched the upper boundary of 75, Weekly Stochastic of the Summation Index overbought and can reverse if we see a red week. So its not a problem to see a top with this Market Breadth Indicators they just need some more time before reversing.
McClellan Oscillator - made lower high, the top could be in.
McClellan Summation Index - still in buy mode, no reversal signal.
Weekly Stochastic of the Summation Index - in overbought territory, no sell signal for now.
Bullish Percentage - still on buy, but very weak.
Percent of Stocks above MA50 - almost touched the overbought level 75. Intermediate term correction usually touch this level and reverse.
Fear Indicator VXO - flat the last weeks. I think its building a base before moving higher.

CYCLES (TD - trading days)
The small cycle currently at 18. I think this move lower will finish 20 day and 40 day cycles. The problem is based only on cycles I can not say which scenario will play out - higher low above 1345 with one more push higher or double top with lower low.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Countdown 13 finished so the top should be in.


  1. Question about today's new closing high for S and P 500 and DeMark's count: today's count = 13 for the marginal new high and trend exhaustion?

  2. I thought the same when I saw 13 on DeMark's count, triple divergence on the histogram, candle formation saying lower prices, cycles pointing to 20 and 40 day cycle low... all signals in line and we saw what happened - great fake move. I was changing everyday my mind but that is part of the game.
    On the daily chart we will see probably a TD Sequential Reinforcement 9-13-9.
    The weekly chart is interesting SP500 is now at 7 from a sell setup and I think we will finish it which is in line with my expectations for a intermediate term top in the first half of August.