Nov 24, 2012

Weekly review

Short term view - 2-3 days weakness before moving higher.
Intermediate term view - I think we saw the intermediate term bottom which I was expecting.

Last week I wrote that I expect a bounce for 3-4 days (based on an extreme of the McClellan Oscillator) - there we have it. After such bounce usually follows a lower low but this move looks like a wave from a bigger degree so I think we will see a higher low and the move up which I was expecting for several weeks has already begun.

Next week I expect a retracement for 2-3 days and the move up should continue.
If I am right we have finished double zigzag W (from September to 16 November) and we should see now a rally for several weeks - X and final Low Y (the green scenario daily chart).
If I am wrong wave X of lower degree has finished and we will see final wave Z of a triple zigzag (the alternate scenario in red - see the hourly chart).

Short term - the indexes are short term overbought, divergence on the histogram, testing the broken trend line (see daily chart) so I expect a pull back. There is support between 1380 and 1390.
If the move up is over the indexes should start dropping hard next week. But taking the seasonality in account that does not look very probable. Nevertheless we should be careful so we do not get surprised.
Intermediate term - higher for several weeks into December.

The Market Breadth Indicators turned up confirming the move.
McClellan Oscillator - very strong move up which makes me think that this only the beginning of a bigger move.
McClellan Summation Index - turned up but still there is no buy signal. I think we will have one after a pullback next week.
Weekly Stochastic of the Summation Index - issued buy signal which again makes me think that this only the beginning of a bigger move.
Bullish Percentage - turned up but no buy signal for now...
Percent of Stocks above MA50 - in no mans land around 50... dipped bellow 25 and turned up that is bullish basically
Fear Indicator VXO - plunged lower as expected. The indicator has not reacted to the rally on Friday and moved outside the bollinger bands. That makes me think that we will see a pullback.

CYCLES (TD - trading days)
The cycle charts are not very clear too. We have two scenarios - the daily chart shows the first one that 20 week cycle has just begun and that means longer lasting rally and 4-year low early March. On the weekly chart the second one - nearing the end of the last 20 week cycle with 4-year low around the end of January.

We have finished 20 weekly cycle which was very stretched and lasted 24 weeks(average length is 18 weeks). The strength of this move suggests that the next cycle has begun.
The alternate scenario is that we are in the middle of the last 20 week cycle before 18 month and 4 year cycle low.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
From last week - "I do not expect SP500 to close 25 points higher on Monday so we will see a setup completed on Monday"... well the market can make some one look like an idiot very easy:)
So the buy setup was invalidated but nevertheless we have our bottom:)
We are at 7 of a setup of the weekly chart. I think we will have finished setup only if the alternate scenario plays out and the indexes start dropping hard next week.

No comments:

Post a Comment