Aug 13, 2012

Holiday until the end of August

I am on vacation until the end of August. The next update will be on the first of September.
Current thoughts - I think that the indexes will make some topping pattern in the next 2 weeks but we will see higher high before that. I do not expect some huge correction in the next two weeks rather weakness and topping process.... something like this bellow on the chart:

Aug 11, 2012

Weekly review

Short term view - more on the upside, watch the 1415-1425 area.
Intermediate term view - the time projection for a move up till mid August has been reached. I think that the indexes are near to a top, but there is no bearish signals for now.

I thought that we will see a pullback after the divergence on the hourly chart but the indexes was moving sideways burning time - the result is the same the MACD pulled back to the zero line and the histogram is reseted ready to rise again. Short term I am bullish - the targets has not changed the first one is 1415 and the higher one 1425. The second half of August we should see weakness and at least some kind of a correction.

The bigger picture looks bearish but all this is based on indirect signs - Tom Demark's sell setup 9 on the weekly chart, the larger cycles pointing down, ugly looking structure of the whole rise since June... all this makes me think that the move since June is part of a bigger corrective structure and the last move lower of this bigger correction is upon us. My gut tell me that a correction will start in the next 1 or 2 weeks till the end of September early October, than up till the elections but lower high and final move lower marking 54 month and 18 month cycles low.
Nevertheless stay bullish until the market tell us to get bearish.

Short term - MACD and the histogram have corrected and are rising again so I expect the SP500 to move higher to 1415 or 1425. After that the probability of triple divergence is very high which would mean the beginning of a correction.
Intermediate term - is still bullish the histogram on the weekly chart is above zero and moving higher. The MACD on the daily chart is still pointing up, only the histogram does not look nice but the whole move looks ugly. Even if I am wrong about the big move lower I still think that we will see at least a correction to the lower trend line and the MA50 (the 1360 area) before making higher highs.

Market Breadth Indicators look better now after a green week but I still think that we are near to a top. I do not see strength and the beginning of a new bull move.
McClellan Oscillator - is above the zero but very weak. It makes lower towers and for example on Friday ended down when the SP500 was positive.
McClellan Summation Index - issued buy signal, but I think this will be just a second high with divergence before the correction to begin.
Weekly Stochastic of the Summation Index - in a sell mode. That means usually that its time for a swing in the opposite direction.
Bullish Percentage - moved 5 points up and at first glance looks ok but the last time at this levels of SP500 there were 85% bullish stocks now only 68%.... not very encouraging.
Percent of Stocks above MA50 - gained 5 points too reaching 80%. It can stay there for a while but the easy money are behind us.
Fear Indicator VXO - closed below 14 - the area which usually marks tops. It can stay there for a while, but again the easy money are behind us and the risk/reward is not worth anymore for trades longer than 2-3 days.

CYCLES (TD - trading days)
The 20 day cycle continue moving higher as expected. Now it is at day 13 so 1-2-3 days up but after that we should see a move to the downside.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
This week Combo 13 finished on the daily chart. I have mentioned for two weeks that we will see Sequential Reinforcement 9-13-9. A second setup was canceled last week but now it is on the radar again. Another 3 days and it will be finished. That fits perfect with technicals and cycles.
The T-theory has guided us perfect in the last two months - time target reached:)
This week sell setup finished on the weekly chart - another red flag. That does not mean "the top is in" or reversal right away but the move is mature and no easy money any more... sorry:) Next week or two will tell us what to expect.

Aug 7, 2012

Short term update

On last Thursday we saw -18 points and the VXO was negative so I called this move a bluff. Now we have +12 and the VXO is positive so I think that this a short term top. Lets see if I will be right:)
There were now pullback and I think that the short term picture is evolving to an ending diagonal which is pointing to 1420-1425.... divergences on the MACD and the histogram so its looking promising for a short term top.

Aug 4, 2012

Weekly review

Short term view - one more push higher, watch the 1410-1415 area.
Intermediate term view - intermediate term top is near.

I told you that the summer will be choppy:) but this is already extreme, the volatility is very high - the German DAX for an example 4% down day than up 4% on the next day WTF????. This time I did not let myself be fooled like last week:) We saw correction as expected, deeper than 25 points(37 points exactly 61,8% retracement) but nevertheless just a correction.

We are now in the time frame where I expect an intermediate term top. The move up from 4-th of June looks awful with a lot of overlapping, the internals are week, the longer cycles are pointing down,Tom Demark sell setup on the weekly chart will be finished next week - all this suggesting that we are near to a top.
But I should not get too bearish before seeing confirmation from the price action and it is still bullish.

Short term - the price is still respecting the trend line connecting the last highs(the gray one). After short pause it should be busted. The last push higher was 60 points and another 60 points from the low on Thursday is 1415. W was 97 points and another 97 points from the low of X is 1425 or the upper channel line. So the target for Y is 1415-1425. I lean toward that the SP500 will not make new highs so I will watch the 1410-1415 area.
Intermediate term - waiting the move on the upside to finish. Bullish candle, the histogram turned up so I expect more on the upside with target 1415.
Long term - this is an interesting weekly chart of SP500 with tend lines and support/resistance levels.
Trend line fan - the green yellow and red trend lines. The theory is that when the third line is broken the trend has changed. The yellow one has been broken and retested. This cyclical bull is already mature but still alive.
Support and Resistance lines - they span through two cyclical bull markets and one bear market many years in the past. Look how the market respects them.
The interesting part, which concerns the presence, is the channel. It looks so perfect that its scares me:) If I am right with the move lower than it should start soon because the upper channel line is reached and the target will be the point where all trend lines converge - the lower channel line, the red trend line and the support levels. In numbers target between 1225-1250(50% Fibo retracement of the rally which began in October 2011).
On the technical front - the index is still moving higher. The histogram just turned positive respectively MACD the green line crossed the red line which is bullish. The part which does not look good - look at the last seven candles from overall nine candles they are shooting stars or hammers. That is not bullish. This is a warning but as I said above lets not get ahead of the market and wait for price confirmation.

Market Breadth Indicators look weak and do not inspire me at all to be bullish.
McClellan Oscillator - making lower high after lower high.
McClellan Summation Index - in a sell mode ignoring completely the furious rallies from last week and this week.
Weekly Stochastic of the Summation Index - in a sell mode for two weeks.
Bullish Percentage - two months "rally" and it struggles around 60 how bullish is that?
Percent of Stocks above MA50 - the same story as the last week - touched the 75 level again.
Fear Indicator VXO - we are moving towards a top.
Percent of Stocks above MA200 - at the 1422 top 78% of stocks were above MA200 at 1391 only 58% of stocks are above MA200. Bullish, broad based, strong rally are not the words which I will associate with the move since 4-th of June.

CYCLES (TD - trading days)
We are in the middle of 20 day cycle currently 8 days. There is high probability that we will see a couple more up days.
The big picture - we are in the middle of a 20 week cycle currently at week 9,the 40 week cycle which brought this rally is still up, we are in the middle of a 18 months or 80 weeks cycle currently at week 44, the 54 months cycle is pointing down.
From cycle point of view the rest of the year looks negative because the larger cycles 54 months(4 year cycle) and 18 months are pointing down. If the 80 weeks cycle has the same length as the previous two the low should be in January.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
On the daily chart the SP500 is working on combo currently at 12. One more high will finish it. 9-13-9 sequential reinforcement was canceled on Thursday which I interpret as a sign of weakness.
The weekly chart - the SP500 continue moving higher towards its time target predicted from the T-theory. Tom Demark's weekly sell setup currently at 8 and the next week it will be finished just one more higher high.

Aug 2, 2012

Short term update

I still think this is just a correction and we will see a higher high before an intermediate term top.... so do not panic:)