Mar 16, 2013

Weekly review

Short term view - I do not know, no topping pattern for now.
Intermediate term view - when we see topping pattern expect 8%-10% correction to follow.
Trading system signal (swing trading) - Direction: UP | Last entry signal: at SP500=1514 on 01.03.2013 | Stop at:1535

Last Sunday I have posted a new chart and wrote that the picture is a little bit more bullish - exactly that is what we are seeing. For the short term I was hoping that we will see some pullback.... in vain:( SP500 continued crawling up 2-3 points average per day.

The action and the indicators confirm for now my forecast that we should not expect major top and any move lower should be just a correction. This move is bigger and lasts longer than the previous move up so it should be a part of a bigger one and after correction another push up should follow. From cycles point of view the next cycle of a bigger degree has begun. You can not expect 18 month and 54 month low and instead seeing 17 weeks up. That means the November low was a 4 year low and the next 18month/54month cycle is running. The markets does not make major top with the indicators showing strength - on the weekly chart there is no Histogram/RSI divergence, MACD made higher high erasing the divergence so it will be a huge surprise if this is the top for the cyclical bull.
On intermediate term scale the move is very stretched in time and we see MACD divergence on the daily chart and the market breadth indicators so I expect a correction. For the short term there is no topping pattern and it could last 2-3 weeks before a correction begins.

Short term - no idea. There is no topping pattern and I expect the first push lower to be bought. Triple MACD divergence that could be a signs for a pending push lower.

- Triple cross(EMA10 and EMA20 crossing EMA50) - EMA10 and EMA20 are above EMA50 so the direction is still up.

Intermediate term - Wedge busted as i wrote on Sunday and now we have a channel. Sp500 could squeeze another 10-15 points higher but the next bigger move should be a correction.

- Trend direction EMA50/MACD - price is above EMA50 and MACD above zero so intermediate term trend is still up. MACD does not made a new high and we must be careful for intermediate term trend change.
- Momentum Histogram/RSI - RSI is testing the broken trend line with triple divergence. The histogram is pointing down with small divergence between the peaks in the current tower. The oscillators are saying momentum shift to the down side is not far away.

Long term - the action confirmed the corrected chart from Sunday.
P.S - changed the count... you can count it different ways but it shows the same. It just fits better - first move as a part of a bigger one.

- Trend direction EMA50/MACD - MACD above the zero line and price above EMA50, the long term trend is UP. MACD made new high erasing the divergence.
- Momentum Histogram/RSI - up and strong

The Market Breadth Indicators - the market participants are very complacent again(VXO) but the indicators are not very supportive. A lot of divergences which suggest weak internal structure and less stocks participating in this rally(Percent of Stocks above MA50/MA200).
McClellan Oscillator - divergence....
McClellan Summation Index - divergence - in buy mode but making lower high...
Weekly Stochastic of the Summation Index - issued buy signal I think it should be ignored.
Bullish Percentage - making double top
Percent of Stocks above MA50 - divergence, less stocks are above MA50
Fear Indicator VXO - the traders are again veeery complacent VXO making multi year lows.
Issues Advancing - making lower high...
Issues Declining - making higher low...

At day 14 of a 20 day cycle.
P.S. NOT adjusted for the changed cycle count on the weekly chart bellow, but that does not change the 20 daily cycle presented on the chart.

The way this move looks like, its length... everything says this a move from an important low and a cycle from a bigger degree has begun. Translated into cycles that means we saw 18 month and 54 month low in November and first 18 month cycle from the next 54 month cycle has begun(I will keep an eye on the old chart but it has no low probability). This 18 month cycle was shorter than expected and I missed it... I do not think that we will see another 4 year up move. Last week I have posted a chart and stated that we have a 9 year dominant cycle. That means that we will see probably an year the indexes pushing higher and H&S top. The important conclusions:
- I do not expect violent 15%-20% move lower, just a normal correction.
- 2013 should be a transition year when the bigger cycle turns from up to down. We should see sharp moves first down and then up H2 2013.
- The next 4 year cycle should not carry the prices much higher. H&S or double top is to expect and the indexes are still working on the first shoulder.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Another setup was finished this week.

Setup finished for two weeks and we have 2 of a countdown and 9 of a combo.... I do not think that we will finish them before a correction.

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