Oct 27, 2012

Weekly review

Short term view - 2-3 green days after that we should see the final move lower.
Intermediate term view - expecting an intermediate term bottom soon.

The short term action was a little bit different than expected and I have had to adjust the chart on Tuesday but that has not changed anything - we had a red week and the bigger picture has not changed.

We had three days sideway action... it does not look like a bottom. I think we will see some upside pressure for a several days followed by the final leg down. If you look at the daily chart you will see a series of lower lows confirmed by lower troughs of the histogram. The correction will be over when we see higher low or lower low with divergence.

Short term - MACD still moving higher but it says that this should be a corrective action... I think we will see 2-3 green days before another sell off. Target is the zone between 38,2% and 50% Fibo retrace 1428-1433 (MA50 on the daily chart is at 1434 so it looks like a logical tatget.).
The alternative is a sudden drop to support finishing the correction.
Intermediate term - still no reversal signs... we have series of lower lows confirmed by lower troughs of the histogram. But the price and the MACD are nearing their trend lines and I think that we are near to an intermediate term bottom.

The Market Breadth Indicators are showing weakness confirming that the direction is still down. The McClellan Oscillator made higher low so I expect to see something on the upside next week.
McClellan Oscillator - made higher low and looks the same way short before the last two rallies.
McClellan Summation Index - in sell mode moving lower....
Weekly Stochastic of the Summation Index - reached oversold levels, now waiting for a bottoming signal.
Bullish Percentage - in sell mode. Dropped this week to 70. My target stays the same 65-70.
Percent of Stocks above MA50 - dropped to 39 this week. One final move lower and it should reach levels between 25-35.
Fear Indicator VXO - reached 18.... I expect 20-22 to mark the end of the correction.

CYCLES (TD - trading days)
Right on track... waiting for the bottom of this 20 week cycle and a rally for at least 4-6 weeks.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Currently at 6 of a buy setup. If the alternate scenario plays out probably the setup will be finished and issue a buy signal. If the indexes move higher on Monday the setup will be invalidated.

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