Jun 22, 2013

Weekly review

Short term view - bounce higher
Intermediate term view - correction for 2-4 weeks
Trading system signal (swing trading) - Direction: DOWN | Last entry signal: at SP500=1622 on 20.06 | Stop at: 1622

The markets follow my plan:) so no need to change something.

Next week a bounce higher should start. The two resistance areas are around 1610 and 1620. The strength of the move will tell us what to expect.
I see two scenarios
- weak bounce to 1610 will probably mean impulsive down leg to lower levels ~1510 / Y=1,618xW / 50% Fibo retracement / MA200(red scenario)
- sharp rally to ~1620 and retest of the broken trend line and MA50 will probably mean three wave structure lower with target 1550-1560 / Y=W / 38,2% Fibo(green scenario).
What are saying the indicators - advancing issues and McClellan Oscillator are making higher lows, the internals to the downside are not so strong which means the bounce should be strong not just 1-2 days sideway affair.
Previous occasions of similar moves on which my forecast is based(see the weekly chart) - normal correction 7%-8% followed which was 38,2% Fibo retracement.
Because of the reasons above I am favoring the green scenario that the move lower will not be very deep. We will see what the market has to say. Anyway a bounce higher is a sell opportunity and if you a good day trader you can play the bounce higher. On Monday I expect initial move lower which should be a good buy opportunity to ride the bounce.

Short term - both scenarios are shown on the chart. On the smaller time frames it looks like inverse H&S is taking shape. Probably we will see the right shoulder forming on Monday and short term bottom followed by a move higher.
- Triple cross(EMA10 and EMA20 crossing EMA50) - the moving averages are pointing down, the short term trend is down.

Intermediate term - I have explained above about the targets for the two scenarios, you can see them on the chart.
- Trend direction EMA50/MACD - the price moved bellow MA50 and MACD bellow the zero line, the intermediate term trend is down.
- Momentum Histogram/RSI - momentum is pointing down too.

Long term - the market action confirms the plan for now, so no change here.
- Trend direction EMA50/MACD - price is above EMA50 and MACD above zero so the long term trend is up.
- Momentum Histogram/RSI - RSI broke bellow its trend line and the histogram is bellow the zero line, the intermediate term trend is down.

The Market Breadth Indicators - e oscillators are making higher lows, trend following indicators are near to their targets for a correction. I think there is more on the downside but not too much as points and time.
McClellan Oscillator - two consecutive higher lows and double divergence.
McClellan Summation Index - sell signal. Lost more than 1200 points and now bellow the zero line.
Weekly Stochastic of the Summation Index - sell signal. Reached oversold territory the usual behavior is expect reversal in the next 1-2 weeks.
Bullish Percentage - sell signal. Not very impressed from the sell off still at elevated levels.
Percent of Stocks above MA50 - sell signal. Moved lower to 36 which is not far from 25 the usual target for a correction.
Fear Indicator VXO - exploded higher and almost touched 22. That is what you want to see during a correction.
Issues Advancing - making higher lows, more issues are advancing.
Issues Declining - making lower highs, we have less declining issues.

I have changed the count a little bit. The last two 20 day cycles are a little bit stretched, but I think this is the right count and after the correction is finished we will see an intermediate term bottom marking 20 and 40 week cycle low.

The 40 week cycle making nice arch. Its top was late in the cycle at week 26, which means that the cycle of a higher degree, the 18 month cycle, still has not topped out. After the correction is over, we should see at least a tests of the highs.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Second bar of a buy setup on the weekly chart. Another 7 weeks lower to finish it... a little bit too long for the correction and I think this setup will not be finished.

DAX chart - the price hit the trend line and support level and I think we will see rebound followed by another drop to the next support level and 38,2% Fibo around 7500 to form a nice parallel channel

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