Aug 31, 2013

Weekly review

Short term view - I think the next week will start positive
Intermediate term view - I think we are near to a short term bottom

Well I was wrong about the short term bottom last week and now the picture looks more complicated with several possible scenarios, but the bigger plan stays the same the indexes are toping and we will see a serious correction. This leg since 2.August is choppy and corrective and it is not the "serious" correction:)

Short term on the hourly chart the SP500 looks like it is bottoming at support - two candles with long shadows and weak move lower to support. I think next week will start positive. Probably the index will move above 1646 and reach the upper range of this congestion zone 1645-1660, the MA50 on the daily chart is around this level 1660 too.... I can not say if this will be part of wave B before moving lower to ~1600 or this is the expected short term bottom and move to 1685-1700 will begin. A lot of divergences on the oscillators and cycles favor more the red scenario.
Analysis can be confusing but the trading plan is simple - if on Tuesday the index opens higher buy it and you have tight stop ~1626 the previous two lows where at 1627 and 1628. If it opens lower is sell with target 1600.

Short term - long weekend, no strike in Syria this weekend.... this should be positive? The signs are for a positive opening, but it could be gap bellow 1625 and reversal who knows. My bet is short term bottom soon, move higher followed by another leg lower.
- Triple cross(EMA10 and EMA20 crossing EMA50) - no cross short term trend is still down.

Intermediate term - the picture has became more difficult to predict... the exact path to be more precise. I do not know the exact path but I expect some relief move to the upside and one more leg lower before this intermediate term correction is over.
- Trend direction EMA50/MACD - the price is bellow MA50 and MACD bellow zero the intermediate term trend is down.
- Momentum Histogram/RSI - momentum has turned up and we have divergences.

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 - after the lower low the oscillators are showing now divergences after the oversold levels last week. The trend indicators all are still pointing lower. This is according to the plan - short term bounce higher and another leg lower.
McClellan Oscillator - hit oversold level and now with double divergence.
McClellan Summation Index - sell signal, correction not over.
Weekly Stochastic of the Summation Index - sell signal, but reached oversold levels. We might see something on the upside, probably after several weeks and 20 week cycle bottom.
Bullish Percentage - sell signal pointing lower, but still at higher levels.
Percent of Stocks above MA50 - nearing the 25 level where correction usually bottom. I think this move will be from higher degree and bigger than a correction and this levels of the indicator will mark only the end of the first leg down.
Fear Indicator VXO - outside of the bollinger bands several times. Cool off is expected.
Issues Advancing - divergence the advancing stock are getting more
Issues Declining - divergence the declining stocks are getting fewer.

Last week bottom looked like 40 day cycle bottom.... same story this week:) with the divergences this time it could be really the 40 day cycle bottom and the expected short term bottom.

At week 10 the intermediate term correction should have several more weeks to go.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
At 4 of a setup. If SP500 does not close bellow 1627 on Tuesday we will have another price flip..... and short term bottom?
No change the next week of the setup currently at three.

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