Jul 28, 2012

Weekly review

Short term view - probably consolidation early next week before more on the upside
Intermediate term view - intermediate term bottom on June 4-th and higher prices till early August.

Wow what a crazy week.... great fake move:) All signals were in line - triple divergence on the histogram and heading lower bellow the zero line, candle formation saying lower prices, cycles pointing to 20 day and 40 day low, 13 on DeMark's count, broken wedge and support level, the market breadth indicators issued sell signal... and the result can be seen on the charts:)
I switched in short mode, that is what the market was saying - bearish signals and moving fast lower to the last important low ~1325. Than it took to much time to break it and I was smelling that something is wrong. On Thursday SP500 opened higher again and I switched back to long mode. That is very import - a trader should not stick to some bearish or bullish calls, a trader should follow the market and switch bull<->bear in a matter of seconds. Overall I made more money than expected (because of the strong moves down and up) so you should not hate the market that it does not react as you expect, just follow it:)

After all crazy moves the call for higher prices in the first half of August stays the same. After the low from Wednesday the wedge has muted to a channel. In Elliot waves terms this is W-X-Y move. My interpretation(I have changed it a little bit) is that we have 3 waves for W, 5 waves for an ugly connecting wave X and now another 3 waves should finish Y from a double zig-zag. W is ~97 points long another 97 points for Y is exactly at the upper channel line and the highs from March around ~1425.

Short term - after this two strong days probably there will be a consolidation before moving to the upper channel line. The first wave of W was 60 points now we have 60 points too, two huge bars resistance from a trend line through the last several peaks so it looks logical to see a healthy pullback.
Intermediate term - there is no bearish signs so the move should continue higher. The histogram on the weekly and the daily chart is moving higher, two strong days with huge candles, SP500 found support at the last significant low and EMA50... no troubles for the bulls at the moment.

Market Breadth Indicators are mixed the most are still in buy mode but showing weakness and the McClellan Summation Index waving the red flag that despite the strong two day rally the internals are weak. My interpretation is that we will have some move on the upside but this is not the beginning of a new long term move and a strong rally rather the end of the swing which began in June.

McClellan Oscillator - not impressed at all by the rally. The high for now is even lower then the one from the last week. In any case we will see a divergence.
McClellan Summation Index - issued a sell signal. Probably we will see a divergence.
Weekly Stochastic of the Summation Index - issued a sell signal. This is an early warning that the swing from the June low is nearing its end.
Bullish Percentage - still on buy, but very weak.
Percent of Stocks above MA50 - touched the 75 level. Intermediate term correction usually touch this level and reverse. Probably we will not see it much higher.
Fear Indicator VXO - not so impressed by the rally. I think its building a base before moving higher.

CYCLES (TD - trading days)
The 20 day and 40 day cycles made their lows as expected and the next 20 day cycle has started with explosion. Currently are 3 days and I expect at least another week moving higher.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
On the daily chart after finishing countdown 13 we saw strong move lower but now we have higher high. I think we will see TD Sequential Reinforcement 9-13-9 before this move is over.
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.
T-theory - I have posted the chart after the bottom in June and I think the call for a move higher till mid August will be right.

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