Dec 15, 2012

Weekly review

Short term view - I have no idea. My instinct tells me positive day or two an move to support around 1400.
Intermediate term view - the move up is not over. Before the end of the year (next 2-3 weeks) I will not worry about that.

No surprises this week quote - "positive start of the week and than a pullback". I have forgotten the FOMC meeting or I would have said - "positive till the FOMC meeting and than a pullback":) If you have an FOMC a move is extended till the meeting. It is always the same game.

I am not sure if the pullback is over. The two scenarios are shown on the first chart. When I see the divergence on the histogram on the daily chart, my instinct tells me this is not just a move for 2-3 days, it will last longer. So my preferred scenarios is move lower to 1400-1405 support area.

Short term - we have a reaction of the same size like the previous two and the price reached the lower trend line so I expect buyers to show up at this levels. The ugly candle on the weekly chart and the divergence on the histogram on the daily charts are telling us that this selling is not 2 day event. So preferred scenario some buying early next and than lower to support around ~1400.
Intermediate term - there is no reversal signs and taking the seasonality into account I still think that there is one more push higher (cycles and Tom Demark's Sequential are saying the same - see bellow). Target is the broken trend line around 1450-1455. In worst case something like double top or marginal lower low.
Of course I could be wrong:
- if this pullback moves bellow 1400 means that the wave lower the green X has begun. Even so I think that there will be a deep retracement and a second chance to sell/take profits. This scenario has low probability for now...
- anything higher than 1460 will mean to expect new highs (the red scenario - Y red). In this case we are on the right side so I do not worry much about that:)

The Market Breadth Indicators - overall there is no signs of a reversal.... VXO and the McClellan Oscillator showed divergences and have warned of a move in the opposite direction so no surprise.
McClellan Oscillator - shows divergence and warned of a correction. Probably we will see it dropping to -30/-40 and the next move higher should make a divergence of a bigger degree.
McClellan Summation Index - shows buy signal, the direction is up.
Weekly Stochastic of the Summation Index - still in buy mode...
Bullish Percentage - does not show much strength, but the direction is still up.
Percent of Stocks above MA50 - almost touched the 75 line. After the pullback the next move higher should make lower high showing weakness.
Fear Indicator VXO - shows divergence and warned of a correction.

No change - the two counts are still intact - first chart 20 week cycle has begun in November, second chart we are already in the middle of a 20 week cycle.

The 20 day cycle has topped on Wednesday now waiting to bottom and the next one to start. Using only cycles I can not say it has bottomed on Friday exactly 20 days or it will last 23 days or 25 days... what I can say is - it has topped very late in the cycle(on day 18) which means the cycle of a bigger degree(40 days cycle in this case) still has not topped. That makes me think that when the next 20 day cycle starts it will make a new high.
The second count the top is already in and the steepest part of the decline for this 20 week,18 month and 4 year cycle lies ahead.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
This week with the rise till Wednesday the count reached 10 from a combo and 6 from a countdown. This method says expect new high before this move finishes.

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