Aug 24, 2013

Weekly review

Short term view - more upside but most probably choppy move, it should be corrective move.
Intermediate term view - the indexes are in the middle of a correction now.

As expected we saw short term bottom this week. I have forgotten to mention that the FOMC Minutes marked a bottom/top.... again

I wrote about McClellan oscillator and this chart is my guidance for the intermediate term. There is two options according to the McClellan oscillator - the correction is over and the second the first leg of the correction ended two days ago. The move lower does not look finished that is my feeling looking at the charts, so I will bet on that we will see another leg lower after the current move up is over. I will change my mind if I see strong impulsive move above 1700.
If I am right we should see move up for a while 8-10 trading days, which should be choppy with corrective nature and it will not violate 1700.

P.S A good article from Adam Hamilton. Basically he says the same what I am saying for months with my Long term chart. The circled areas are not marked just like that because I am a bear and I am expecting the crash. It is about long periods without correction. They always end the same way - topping sequence and deep correction 15%-20%. The sequence consists of 5 moves and the first three of them are following the plan perfectly. As Adam Hamilton says there is too much greed and it must be purged from the system. In the previous two occasions the bull was still young and we saw just correction, but now the bull is very mature and this top could be the top for the cyclical bull as in 2007.

Short term - SP500 managed to move above resistance and MA50 on the daily and hourly chart. The move does not look strong and impulsive and I expect some retracement soon before continuing higher.
- Triple cross(EMA10 and EMA20 crossing EMA50) - there is no cross for now, probably on Monday.

Intermediate term - the price touched the lower trend line and MA50. Usually you see a bounce in such occasions, especially when the oscillators are oversold. SP500 will move up for a while but after that it should plunge to the longer term trend line and MA200.
If I am wrong a new leg higher has begun - red scenario. The signs for that will be a strong move up in the next day or two and break above 1700.
- Trend direction EMA50/MACD - the price is playing with MA50 and MACD with the zero line, expect some bounce. The MACD divergence says the intermediate term trend is down.
- Momentum Histogram/RSI - momentum turned up.

Long term - no change, the indexes are following the plan. We have MACD divergence and the previous three occasions have signaled for serious correction ahead.....
- Trend direction EMA50/MACD - long term trend is up, but MACD and the oscillators show divergences and we must be prepared for a bigger correction.
- Momentum Histogram/RSI - momentum is pointing down, intermediate term trend is down.

The Market Breadth Indicators - the trend following indicators are in no man's land, no signs for a top or bottom. I would say rather in the middle of a correction. The oscillators like McClellan Oscillator and Issues Declining are oversold and we are seeing the expected reaction.
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 20 day cycle has bottomed right on time and the 40 day cycle made very nice curve almost perfect:) The next 20 day cycle has begun and we should see at least another 5-10 trading days higher prices.

At week 9 of a 20 day cycle. The average cycle size is 14-16 weeks and the shortest was 11 weeks. This is one of the reasons why I do no think that we hit a bottom and the next rally higher has begun. The cycle topped out earlier at week 6, which means expect a move lower of a bigger degree and 8 weeks is way to short for the cycle to end.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
We saw a price flip, which strengthens the case for a short term bottom.
No change the next week of the setup currently at two.

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