Feb 2, 2013

Weekly review

Short term view - on the smaller time frames the move does not look finished but I think that any move higher should be short living.
Intermediate term view - a top is expected and correction for several weeks... wait first for confirmation from the price.
Trading system signal (swing trading) - Direction: UP | Last entry signal: at SP500=.... on xx.xx.xx | Stop at:

The most interesting for the week was the spike on Friday which could be the exhaustion bar which I am waiting for. The next 1-2 trading days will give us the answer. The two red days are the first cracks in this uptrend which I think is nearing its end.
I know I know, there is contradiction between analysis and trading which I present. I have tried to explain it last week. The charts are telling expect a correction but I can not nail the top and I am not trying. Important is the trading signal which keeps me on the right side and its still up.

Next week - I think that SP500 has not hit the high for the move but any move higher should be short living. Still waiting to see something to confirm that a move lower is starting until then the direction is up and I am waiting.
If I am wrong an acceleration higher should start but with this indicators.... such thing I will see for the first time.

Short term - I think we will see one more push higher but short living. The MACD divergence is getting bigger and bigger, the trend line is still respected.
- Triple cross(EMA10 and EMA20 crossing EMA50) - the EMAs are pointing up so the short term trend is up. We have MACD divergences so we must watch out for a reversal.

Intermediate term - nothing has changed... the bar on Friday is a good candidate for an exhaustion bar. The problem is that too many people are watching now the wedge trend line. We need probably fake break out before we see a capitulation on the upside.
I still think that in the the next several weeks we will see a correction - target between 1430-1450 - support/lower wedge trend line/38,2%-50% Fibo.
- Trend direction EMA50/MACD - pointing up so intermediate trend is UP.
- Momentum Histogram/RSI - RSI and the histogram are pointing higher and momentum is up. But I have to mention that they have lower high and SP500 made higher high. The index should continue rallying or we will have a divergence for this last move.

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

The Market Breadth Indicators - no change - in overbought territory but bullish. First signs of troubles appearing - VXO higher low, Percent of Stocks above MA50 and McClellan Oscillator lower highs.
McClellan Oscillator - another lower high, the divergence is getting bigger.
McClellan Summation Index - bullish moving up.
Weekly Stochastic of the Summation Index - says that the move is mature... but no sell signal for now.
Bullish Percentage - bullish on buy....
Percent of Stocks above MA50 - the index made higher high, the indicator not. First warning sign of an exhaustion.
Fear Indicator VXO - plunged 11% on Friday smells like capitulation... I expect to see a higher low.
Advancing issues volume - another lower high, the indexes are advancing but the volume is shrinking.
Declining issues volume - another higher low, the indexes are moving up but the volume on the downside is expanding.

The smaller cycles are difficult to distinguish because the bigger cycle is dominant. We have the same situation like the previous 20 week cycle from June to November. The bigger cycle is well visible and the smaller ones are hard to see. So it is a better idea to concentrate on the bigger one - the 20 week cycle. The expected top should be the top of the 20 week cycle.
We are currently at week 11 of the cycle. After a longer cycle comes usually a shorter one. See the previous sequence 23-14. I expect the same outcome - correction in the next 4-5 weeks to finish this cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
On the daily chart there is combo running at 10 which probably will finish next week. That confirms the short term picture.
SP500 reached point of exhaustion... we know that. The question is now when a correction will start. I will wait for my system to give me the sign.

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