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.

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