Oct 20, 2012

Weekly review

Short term view - positive start of the week Monday and/or Tuesday but it should end as a red week.
Intermediate term view - I am expecting intermediate term bottom around the end of October.

As expected several green days and reversal. My target 1450-1455 was overshooted and for a moment I thought that the alternate scenario has a chance but the action on Friday showed that the correction is still not over. As I have said many times the crowd should be scared first before we have a bottom:)

Next week I expect short term bottom but for a day or two. it could be Monday or Tuesday I can not say but the week should end in the red.
The bigger picture - I think we are nearing an intermediate term bottom around the end of October.

Short term - short term bottom than a relief move up followed by the final sell off. SP500 is making nice moves with the same size:) I think we will see the final move from a double zigzag
With red is shown the alternate scenario for completeness. I think it has very low probability. It will be on the radar again only if this relief move continue for three or more days - Wednesday and after that.
Intermediate term - the trend line has been broken, the histogram is pointing down again(on the weekly chart too), shooting star on the weekly chart - all this makes me think that we are still not done on the downside. Target which I see is the 38,2% Fibo retracement and support level 1390-1400. At this levels there is support from the trend line connecting the October 2011 bottom and June 2012 bottom too.
The Alternate scenario is shown above - the correction finishing at the 23,6% Fibo retracement level around 1415-1420.
Long term - that is what i expect for the long term. We will see one more high but I think the indexes have already begun a topping process. The MACD says the trend is tired - we are witnessing a double divergence developing. Divergence on the weekly chart is dangerous think and double one.... loooook out.

Market Breadth Indicators are confirming the move lower showing weakness but nothing troubling and that is the way it should be this not a major top just a pullback. One more sell off to scare the herd will not be bad. This will very healthy for the bulls - the same like last week:)
McClellan Oscillator - is bellow the zero line again. A divergence will be nice to signal the end of the correction.
McClellan Summation Index - still in a sell mode, nothing unusual.
Weekly Stochastic of the Summation Index - on the right side all the time telling us for weeks that the direction is still down.
Bullish Percentage - issued a sell signal, probably will reach 65-70 at the end of the correction.
Percent of Stocks above MA50 - showing weakness... probably will reach levels between 25-35 at the end of the correction.
Fear Indicator VXO - at last showing some strength reaching 16.... I expect 20-22 to mark the end of the correction.

CYCLES (TD - trading days)
The current 20 week cycle should finish soon in the next week or two and the next one will start. This will mark an intermediate term bottom and a rally into year end should start. We will see how it develops but I expect at least 5-6 weeks upside and at least 1500.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Nothing worth mentioning... nothing has changed the setup to the downside has failed as I have predicted.

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