Intermediate term view - intermediate term correction 3-6 weeks.
Trading system signal (swing trading) - Direction: DOWN | Last entry signal: at SP500=1560 on 15.04.2013 | Stop at:1591
I wrote last week that I want to see a top or something is wrong... a week later the cosmic order is restored and I am happy:))))) It is confirmed that the move up was an exhaustion and a trap. The call for a top was wrong only for one day and several points - pure luck:)
My expectations now are - short term rebound which should be the last opportunity for an entry at higher levels to ride the correction. Intermediate term - correction for 3-6 weeks time frame between mid May and the end of May. Target zone 1440-1470 - average correction size 8%->1469, support previous top ~1470, 50% Fibo retracement ~1470, trend line ~1450, MA200 ~1450, 61,8% Fibo 1440.
TECHNICAL PICTURE
Short term - support level reached, bullish candle on the daily chart, 3 waves lower not impulsive... I think we will see multi day rebound to resistance 1565-1575. We are talking about correction of the correction so be ready for surprises. Several points higher is the trend line and EMA50 and we should see a reaction to the downside which should stay above 1540 if wave B is playing out. If this level is broken again there is very high probability that the move lower has resumed.
- Triple cross(EMA10 and EMA20 crossing EMA50) - short term moving averages and price bellow EMA50. Short term direction is down.
Intermediate term - the trend line is broken but the price found support at MA50. Last week a wrote "the price will flirt for a while with the trend line and MA50" we are in this phase now. We have the expected topping process 5 weeks for now or 6 weeks with probable retest of 1575, everything as expected. After that, if you see the previous corrections, there will be no many stops on the way lower. My target - time frame and size is shown as a box on the chart.
- Trend direction EMA50/MACD - price is above EMA50 and MACD above zero so intermediate term trend up is not killed, but we have double MACD divergence and I think it is a matter of time this to happen. When the price break bellow EMA50 and MACD bellow zero beware of violent move lower.
- Momentum Histogram/RSI - momentum turned lower and RSI broke its trend line.
Long term - the idea stays the same expect correction but this is not a major top. DJIA RSI on the weekly chart made new record high 78 for the bull market. The Market does not top on strength but extremes are warning for a correction. This happened every time in the past when RSI reached such levels so I do not think that this time is different.
- Trend direction EMA50/MACD - MACD is above the zero line and the price above EMA50, the long term trend is UP. No divergences so I think that the cyclical bull is not over.
- Momentum Histogram/RSI - momentum turned lower and RSI broke its trend line - intermediate term trend is lower.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - say we are in the middle of the correction. That is not a surprise the corrections usually develop in two phases - first phase choppy sideway/down move and the second phase strong move lower. We are near to the end of this first phase.
McClellan Oscillator - looks oversold. I will not be surprised to see several green days.
McClellan Summation Index - no change, we have a sell signal since mid March.
Weekly Stochastic of the Summation Index - already in oversold territory. The correction should not last very long.
Bullish Percentage - sell signal. I expect to see the usual range for a correction something between 40-60.
Percent of Stocks above MA50 - moving lower as expected. I expect the usual level for correction 25 to be hit before the end of the correction.
Fear Indicator VXO - short term divergence was a warning to expect a top. We have series of higher lows and higher highs. The Indicator started an uptrend which means the stocks should move lower.
Issues Advancing - not very impressed with the selling even made higher high.
Issues Declining - does no made higher high. The selling is obviously not broad based.
HURST CYCLES
In the middle of the 20 day cycle. It broke slightly bellow the low of the previous 20 day and 40 day cycle which is a sign that the cycle of higher degree the 20 week cycle has already topped out.
At week 8 of the current 20 week cycle. Average correction's duration is 15-30 trading days, which is 3-6 weeks, or cycle low between 11 and 14 weeks. That fits perfect.
Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
The combo counts left unfinished at 12... I do not think that there will be completed in the next several weeks.
The setup on the daily chart was aborted. The move lower has not enough strength for now. I expect only correction so that does not worry me.
We have a price flip which means momentum has reversed.
DAX chart for a friend - DAX respects the trend lines and the support/resistance levels. It is pretty oversold and should start multi day rebound. 50% Fibo retracement and the trend line point to ~7750. Than measured move lower or W=Y for a W-X-Y correction points to the next support level 7000-7100.
krasi, can you post an entry to go short since futures are up tomorrow? Thanks.
ReplyDeleteI will not be at home all day...
DeleteEMA50 on the hourly chart is always a good entry point for a trade in the direction of the trend.
As expected we saw a reaction to the downside from EMA50 and the trend line.
At this point I would enter short if the low for the day is broken.
Basically I expect multi day rebound so the reaction up should not be over.