Jan 26, 2013

Weekly review

Short term view - no bearish signs... waiting to see the open on Monday.
Intermediate term view - a top is expected but wait first for confirmation from the price.
Trading system signal (swing trading) - direction: UP | last entry signal: at SP500=.... xx.xx.xx | stop at:

I have made small changes adding the signals from my system - direction and entry if generated, weekly chart and short comments about trend and momentum for every time frame. With the additional info the picture will be complete as described in the post "Trading System". I will be more disciplined and it will be more informative for the readers.
- I will post the direction which my system is showing me and when it issues an entry signal (I will try to post asap). This will bring more clarity what I am doing.
I was asked if I am shorting when I am saying to expect a top. The answer is No. I am entering a trade when the system says so. I am drawing moves in the future, what I think the logical development should be but I could be wrong or too early. I wait for price confirmation. For example in summer I was saying expect move lower - yes it started but in September after QE3 to suck in all bulls and from higher levels. After that many were bearish but I have said expect bottom - yes it came but 2-3 weeks later from lower levels. I hope you get the idea - I was wrong 2-3 weeks early or not nailing the exact level of a bottom/top but I am right for the direction and I stay long/short until the system say so. When I am on the right side it does not matter if I am right or wrong. The current situation is exactly the same pullback is overdue but it could take another week and 20 points higher.
- I will start posting weekly chart too. We will have hourly/daily/weekly chart and we can put the pieces together which will reveal us the complete picture of the market.
- The blog is about technical analysis but somehow I have forgotten to comment the indicators:) I have read a lot of books and have tried to use different indicators... You do not need many indicators or search for magic indicators, all you need is trend following indicator and oscillator to measure momentum. It is not about what you use it is about how you use it. The indicators which I use are EMA50/MACD to follow the trend and Histogram/RSI to measure momentum. Trend lines and support/resistance are visible on the charts so they do not need explanation.

Back to the markets - the upper trend line on the hourly chart was breached as expected. I have forgotten to measure the waves. The first wave since November is 105 points the second wave up from January is now of the same size 105 points touching 1503. Measured move complete, the upper trend line of the wedge touched, EW W=Y completed?, TD Sequential 13 on the weekly chart finished..... the logic says expect some kind of a top.

Many indications for a top but there is no spike and capitulation on the upside.... so in wait and see mode.

Some interesting articles about topping, VXO... if you want to read. There were comments that the market will never go down:) http://www.marketoracle.co.uk/Article28744.html

Short term - I will wait to see the open on Monday. No bearish signs but to be long when the upper trend line is breached... too many risk for me.
- Triple cross(EMA10 and EMA20 crossing EMA50) - the EMAs are pointing up so the short term trend is up.

Intermediate term - final spike and capitulation or a plunge... waiting to see which will trigger the correction. A correction expected target between 1420-1440 - support/lower wedge trend line/38,2%-50% Fibo retracement.
- Trend direction EMA50/MACD - pointing up so intermediate trend is UP.
- Momentum Histogram/RSI - the histogram says the acceleration is weakening, RSI is pointing up so overall the momentum is still UP.

Long term - no change, expecting the finish of this wave and correction for several weeks.
- Trend direction EMA50/MACD - MACD above the zero and price above EMA50, the long term trend is up. Quadruple divergence on MACD watch this veeeery carefully.
- Momentum Histogram/RSI - momentum is UP.

The Market Breadth Indicators - no change here - in overbought territory but bullish. I see strength and that is not what you see at meaningful Tops. That is another sign to expect only correction to relief overbought conditions.
McClellan Oscillator - more and more divergences, a warning that we are nearing a top for this move.
McClellan Summation Index - bullish moving up.
Weekly Stochastic of the Summation Index - says that this swing is mature... but no sell signal for now.
Bullish Percentage - bullish on buy...
Percent of Stocks above MA50 - very high at 90. At this levels is a move usually exhausted.
Fear Indicator VXO - making record lows and starting to rise slowly... complacency is very very high.
Advancing issues volume - the same like last week, the indexes are advancing but the volume is shrinking, we see lower highs.
Declining issues volume - the same picture, the indexes are moving up but the volume on the downside is expanding, we see higher lows.

Day 18 of a 20 day cycle. The best days for this cycle are behind us.
Week 10 of 20 week cycle. After a longer cycle comes usually a shorter one. See the previous sequence 23-14. So I expect the same thing - correction in the next 4-5 weeks to finish this cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Sequence 9-13-9 finished so waiting for price flip to say momentum has changed.
Weekly TD Sequential 13 finished. Watch out every time correction has followed.
I have been asked if I look backward the TD Sequential show the same result. Here is the chart for the 2003-2007 bull market - yes exactly the same results.
I have counted on both chart (above and bellow) if after every 9 and every 13 there were a correction starting on the following week - the result is 13:4 for yes there were correction. From the other 4 occasions - twice 3-4 weeks later in both cases at the beginning of the bull market when it was strong , twice no correction but that was after 9 setup and the begging of the second push higher for the bull market.
Wow two many similarities.... the cyclical bulls behave the same way


  1. Krasi, thewavetrading.com guy is more bullish than you. He's only projecting a decline to the 1470s and then back up to the high 1500s.

    1. I see finishing move A-B-C, he sees wave A since January. So he expects correction for a wave of lower degree for the move since January and I expect correction of a bigger degree for the whole move since November - 38,2% at least 1440. Time will tell who is right.