Jul 6, 2013

Weekly review

Short term view - more to the upside at the beginning of the week.
Intermediate term view - I am not sure if the intermediate term bottom is in, just go with the flow.

We had this week the expected move higher, but not the answer if we hit intermediate term bottom or one more leg down is missing. I think next week we will have the answer. I expect positive start of the week. If we hit already the bottom expect green week and strength after the indexes closed above EMA50. If the last leg lower is missing expect reversal the second half of the week and red candle with prices moving fast lower.

Next week we will continue following the both scenarios and see what happens:
- Red count W=Y the bottom is in - the only problem I see is that the rally so far is weak and not convincing, usually you see a strong move higher.
- Pink count one more leg down expected - at the moment the only signs which speak for this scenario are that we do not have explosive move higher and the European exchanges diverge, Friday was huge red bar(see the last chart DAX) which says the last leg lower has begun.
Again it is nice to play with the charts:) but trading is more important. We will follow the market and until it is up and there is no price confirmation the direction stays up.

Short term - minimum target ~1640 61,8% Fibo, move higher to 1655-1660 76,8% has higher probability if you ask me. For the short term I do not see something which points to the downside.
- Triple cross(EMA10 and EMA20 crossing EMA50) - EMA10 and EMA20 are above EMA50 the short term trend is up.

Intermediate term - the price is testing the broken trend line and the down slopping trend line. I think we will know soon which scenario is playing out.
The statement from the last week stays the same - "I am not sure which scenario has higher probability. My feeling says the green scenario, the logic(the indicators) are more favorable for the red one. I will just follow the market and not think too much:)"
- Trend direction EMA50/MACD - price has moved above EMA50 and MACD at the zero line... the intermediate term trend is up.
- Momentum Histogram/RSI - momentum is up.

Long term - no change, corrective move and higher high expected.
- Trend direction EMA50/MACD - the long term trend is up.
- Momentum Histogram/RSI - momentum is turning up.

The Market Breadth Indicators -
McClellan Oscillator -
McClellan Summation Index -
Weekly Stochastic of the Summation Index -
Bullish Percentage -
Percent of Stocks above MA50 -
Fear Indicator VXO -
Issues Advancing -
Issues Declining -

The count is based on the expectation of one more leg lower. That is not sure at all, the cycle looks stretched already and with every passing day the probability that we hit intermediate term bottom is getting higher.

On one side the cycle is looking stretched already, on the other side the price action does not look very convincing for a 20 and 40 week cycle bottom. I ignore the cycles and follow the price for now. Later I will fit the count.... I do not see an edge at the moment.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
We have sell setup at point 7 on the daily chart and I think it will be finished.

On the weekly chart we have 4 of a buy setup despite the green week.... we are at a crossroad another green week and we will have price flip or sell off resumes and we have the next bar of the setup.

The DAX diverge from the SP500/DJ... after a hammer and huge green bar(not shown on the chart???) on Thursday, on Friday we saw huge red bar closing bellow the previous bullish candlestick and price was rejected at MA20 and MA50. The only interpretation which I have is the next leg down has begun.... or extreme volatility and very ugly fake to shake out the weak hands before the indexes move higher.

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