Sep 15, 2012

Weekly review

Short term view - I expect a topping process to start next week.
Intermediate term view - I think we will see a short term top soon and 4%-5% pullback.

Again nothing surprising SP500 moved higher and touched the upper trend line. My forecast was for 1450-1455 where a lower trend was residing(see last week) but who cares if I am wrong 10-15 points when I am on the right side:)
So the alternate scenario from last week kicked in thanks to the central banks which are now all in.

How this scenario looks like:
- Short term I think that the indexes will start topping process. Crawling along the upper trend line we will see higher prices and topping pattern. For now there is no bearish sign but the indexes are already in the late stages of this move which is very mature.
- Intermediate term - as I have said the bullish scenario presented last week is playing out. That means short term top between now and the end of September, 4%-5% shallow pullback in October to finish the 20 week cycle and clear out the overbought conditions than a move higher into the year end should follow.

Short term - its difficult to predict the short term squiggles best guess is move lower to EMA50 on the hourly chart and another move higher to the trend line. We will see a divergence before a reversal. We are not there yet.
Intermediate term - pullback to the trend line and support. Than we will see how high the next move will go.
Long term - weekly chart of the DJIA. The same idea with Elliot wave labels. The move from June is wave a, pullback should follow wave b and another move higher wave c to finish the wave Y of a bigger degree. After wave Y a correction should follow into the 4-year low but that will be in 2013.

All the indicators are bullish no divergences. Exception is the VXO which has triple divergence and this levels marked always a top.
McClellan Oscillator - making higher highs.
McClellan Summation Index - moving higher too.
Weekly Stochastic of the Summation Index - issued buy signal but I think it will short living.
Bullish Percentage - in buy mode.
Percent of Stocks above MA50 - still bullish signals.
Fear Indicator VXO - all the previous occasions of VXO at this levels have triggered a reversal. This time will be the same but I think that this will be only a short term top and not a major top.

CYCLES (TD - trading days)
I have changed the short term cycles a little bit. I think it fits better when the start of the rally is the low of the previous 20 day cycle and the beginning of the next one which is currently at day 8. That aligns with a short term top in the market in the next week or two.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Combo moved this week from 9 to 11. Two candles making higher highs are needed to finish it. That aligns with a short term top in the market in the next week or two.

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