Jun 8, 2013

Weekly review

Short term view - the market taking breath for 1-2 days and move higher.
Intermediate term view - some kind of a test of the high and the real correction to begin.
Trading system signal (swing trading) - Direction: UP | Last entry signal: at SP500=1617 on 06.06.2013 | Stop at: 1618

The market stretched to the downside to the limit, tested the break out of the previous high and reversed. The support level around 1600 was on my radar as lower boundary for this correction, but I thought with oversold indicators the reversal will come earlier. I must not forget that the game is f**k most of the traders and almost always the price moves to the limit up or down.

The plan works very good for now. Next we should see a relief rally for a while and retest of the high. The price action and the indicators look almost 1:1 compared with April 2012 and I think will see something similar.
The alternate scenario is marginal new high with divergence before the correction. It is shown in red on the second chart. This scenario will be on the radar and we should take it serious:) Reasons:
- f**k most of the traders - when most of the traders, bears and bulls, will be fooled? - marginal new high suck in the bulls and kill the bears.
- the move lower were clearly corrective, so another move higher will not be a surprise.
- very oversold indicators as we had correction(7%-8%) behind us, but only oscillators not trend following indicators.
- Tom Demark setup at 7 on the weekly chart. At least 2-3 weeks higher will fit perfect to finish the setup.
- the cycles tell me this should be a 20 and 40 week cycles low which means several weeks move higher. We saw already explosive move from the low which is typical for such cycle lows.

Short term - the price is in a resistance zone. I expect some kind of a pause and test of the broken trend line and the gap around 1622. The pattern looks like IHS with target around 1680.

- Triple cross(EMA10 and EMA20 crossing EMA50) - after a pause a new short term up trend should be confirmed.

Intermediate term - added an alternate scenario. I have explained the reasons above. Lets see how the market moves higher.

- Trend direction EMA50/MACD - the price is above EMA50 and MACD above zero so the intermediate term trend is still up.
- Momentum Histogram/RSI - momentum has turned up.

Long term - the bigger picture has not changed. We have bullish candle which opens the door at least for a relief rally 1-2-3 weeks... we will see.

- Trend direction EMA50/MACD - price is above EMA50 and MACD above zero so the long term trend is up.
- Momentum Histogram/RSI - RSI is still strong, the histogram shows divergence... momentum is without clear direction.

The Market Breadth Indicators - show at first glance conflicting signals. The oscillators like McClellan Oscillator and Advancing/Declining issues reached very oversold levels. The trend following indicators like Bullish Percentage for example are still pointing down. My conclusion is that in worst case we will see relief rally at least 61,8% and the more bullish scenario is higher high.
McClellan Oscillator - reached extreme oversold levels bellow 100 and the sharp reversal is not a surprise.
McClellan Summation Index - still showing sell signal.
Weekly Stochastic of the Summation Index - still showing sell signal.
Bullish Percentage - still showing sell signal.
Percent of Stocks above MA50 - in no mans land...
Fear Indicator VXO - jumped sharply and now moves lower for a higher low as expected.
Issues Advancing - hit extremes, at least a pause is in the cards.
Issues Declining - hit extremes, at least a pause is in the cards.

The only way which I can count the cycles is that we saw 80day/20week/40week cycle low.
Look at RSI - every time when it touches the support line we have 80day cycle low. I do not know why this time should be different.

We have 20week/40week low. This argues that we should see strong move higher.... or something like double top and top of the 18 month cycle. We will know soon which one will be.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Setup at 7 on the weekly chart. At least 2-3 weeks higher to finish the setup fits perfect with the technical analysis.

No comments:

Post a Comment