May 25, 2013

Weekly review

Short term view - 1-2 green days expected.
Intermediate term view - up until we see signs for anything else.
Trading system signal (swing trading) - Direction: UP | Last entry signal: at SP500=.... on xx.xx.xx | Stop at:

No surprises, up until FOMC and than sell off. Nothing scary for now.

The last two candles are bullish - they have touched MA20 on the daily chart and closed near the highs of the day. I think that we will see at least 1-2 green days. Even a new high is possible. The charts do not look bearish for the short term. For the intermediate term I am expecting one more push higher before a top - marginal new high, double top I do not know what exactly we will see.

Short term - two scenarios we are in wave B from A-B-C the broken channel will be tested and another wave lower will follow with target 1600-1625. Or the highs will be tested before move lower.

- Triple cross(EMA10 and EMA20 crossing EMA50) - short term moving averages and price bellow EMA50. Short term direction is down but there is no really support from the daily chart. In this case the system says wait...

Intermediate term - the plan stays the same. Such parabolic moves are followed by by sharp sell off, which should not mark THE top.

- Trend direction EMA50/MACD - price is above EMA50 and MACD above zero so the intermediate term trend is still up.
- Momentum Histogram/RSI - momentum is down.The histogram is bellow zero and RSI broke its trend line, but it is often tested before the price moves lower.

Long term - the bigger picture has not changed. The bulls must be careful. We have bearish candle and momentum has turned down - histogram lower bar with divergence and RSI tested its broken trend line and turned down(see cycles weekly chart).

- Trend direction EMA50/MACD - price is above EMA50 and MACD above zero so the long term trend is up.
- Momentum Histogram/RSI - momentum points down, intermediate term trend change in the next weeks can not be ruled out.

The Market Breadth Indicators - show first cracks in this up move since April, but there is still no signs for a reversal.
McClellan Oscillator - very oversold outside its bollinger bands, which usually means expect several days in the opposite direction.
McClellan Summation Index - moved into sell mode... this sell off has some strength and this are these cracks which I am talking about.
Weekly Stochastic of the Summation Index - still shows buy signal, but in overbought territory and McClellan Summation Index turning lower. The swing is mature, we must be careful.
Bullish Percentage - buy signal, not very impressed with the selling.
Percent of Stocks above MA50 - dropped from very very extended levels but still above 75%.
Fear Indicator VXO - I think it is making a rounding bottom. Bollinger bands are very tight and I expect a jump in volatility. It will probably jump higher after a pullback and make higher low with divergence when the indexes make higher high in June.
Issues Advancing - the selling is broad based.
Issues Declining - the selling has strength, huge amount of shares is moving lower.

I think we have 20 day cycle bottom and next week the next cycle should begin. I expect at least 1-2 green days even marginal new high is possible but not for a long time. The bigger cycle should override the smaller one and I expect move lower after that.

Week 13 of 20 week cycle. A sharp sell off for several weeks should mark the bottom of the 20 and 40 week cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
On the daily chart we saw price flip - the first bearish sign for a long time:)
Countdown at 9 and setup at 5. Another 3-4 weeks moving higher before a top... not impossible.

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