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.

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