Sep 8, 2012

Weekly review

Short term view - more upside in the next several days.
Intermediate term view - on a crossroad... I am in wait and see mode for 2-3 weeks.

This past week was not a surprise - SP500 tested the support level 1398 one more time and moved higher. Short term - next several days look bullish I do not see any danger on the downside.

Intermediate term its tricky we are on a crossroad so I am in wait and see mode for 2-3 weeks. The picture is bullish but I can not imagine a huge rally after moving higher for 3 months already, in the September-October period which is the weakest for the stocks for the whole year and the VXO in the 13 area for a month already. So the plan for the next weeks is follow the market and short term trading like this week - nice gains who cares if I am right or wrong:)

The options which I see (we will know soon enough which is the right one):
- The whole stuff technical analysis, cycles etc which guided me for months perfectly is right (its too early to throw everything away:) and we will see an intermediate term top soon followed by sell off into the 4-year cycle low scheduled somewhere between the end of January and March.
If this is the scenario than we should see a top around ~1450 +- 5 points:) and a serious decline should start after that for 3-4 weeks and all this should happen soon the end of next week for example.
- The bullish scenario - the charts which I followed for months are wrong:) than we will see SP500 rise to around ~1485, consolidation September-October with shallow pullbacks staying above 1425. The market breadth indicators clean up, and the 20 weeks cycle bottoms with sideways move. A rally into year end will follow.

Short term - more upside with target 1450-1455.
Intermediate term - the two options explained above are shown on the chart - short term up to around 1450 and the lower trend line than reversal. The second scenario up to around 1485 and the upper trend line.

Nothing bearish for now. Only the weekly Stochastic of the Summation Index is in sell mode but there is no price confirmation.
McClellan Oscillator - above the zero line and made higher high. No bearish signs.
McClellan Summation Index - issued a buy signal, but still below the previous two peaks.
Weekly Stochastic of the Summation Index - still in sell mode. It tells us that soon we should see a correction.
Bullish Percentage - in buy mode. SP500 made new high but the indicator is way below the previous high.
Percent of Stocks above MA50 - showed some strength reaching 84.... at last before this surge it was weak moving above and bellow the 75 line.
Fear Indicator VXO - says we are near to a top. Lets see if we get a divergence.

CYCLES (TD - trading days)
The 20 day cycle should top in the next several days probably not before the FOMC meeting on Thursday. The next week or two will tell us how the 20 week cycle will look like and which scenario will play out.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
We have another combo currently at 9, several more days and it will be finished. That fits perfect with the cycles and technical picture.

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