Nov 2, 2013

Weekly review

Short term view - more downside next week.
Intermediate term view - so far it looks more like short term top.

Up until FOMC, SP500 has touched the upper trend line and than pullback has begun. Too predictable, it is not even interesting any more:)

This week has not changed anything. What I wrote last week stays valid. Only the more bullish scenario with one more push higher, has a higher probability for now because the indicators are "correcting" from extended levels, but the price has not followed them lower.

Short term - I think a pullback has begun. We have not seen much to the downside, but I think next week the price will follow the indicators lower. Next support and 38,2% is ~1730
- Triple cross(EMA10 and EMA20 crossing EMA50) - triple cross is positive, short term trend is still up.

Intermediate term - SP500 touched the trend line as expected and pulled back. The price action so far looks like a pullback so watch the red scenario(green is back up plan).
- Trend direction EMA50/MACD - the intermediate term trend is up.
- Momentum Histogram/RSI - momentum has turned down.

Long term - The middle trend is tested one more time - shooting star candle.... I think the bulls will fail again.
The pattern is still intact. We have a rally which lasts almost a year without a correction and I still think that this leads to excessive greed and the consequence is always a sharp correction to purge the greed from the system. This shows us the pattern and I do not think that this time is different. It is always the same and only the excuses are different.
- Trend direction EMA50/MACD - long term trend is up - the price above MA50 and MACD above zero. Watch out for the MACD divergence.
- Momentum Histogram/RSI - momentum has turned up, the intermediate term trend is up.

The Market Breadth Indicators - the oscillators hit extremes and reseting, the trend following indicators still on buy.
McClellan Oscillator - we saw divergence it plunged bellow zero. We are in a correction and the price should follow soon.
McClellan Summation Index - still on buy.
Weekly Stochastic of the Summation Index - still on buy.
Bullish Percentage - buy signal, but lower high and triple divergence.
Percent of Stocks above MA50 - small divergence and moved lower.
Fear Indicator VXO - building a bottom... a looot of complacency again.
Advance-Decline Issues - divergence as expected and moved lower. There is a selling beneath the surface even when the price is not following for now.
Put/Call Ratio - the traders are very bullish again... do you see the divergence now?

The 20 day cycle has topped out. I can not say it is the 40 day cycle top too. The price action says the high will be tested at least before something serious on the downside.

At week 50 of the 18 month cycle. Again the big picture - the 18 month cycle peaked at week 59/53/51 in the last 20 week cycle and a correction for 10/12/9 weeks has followed. I do not see a reason why this time should be different.
Do you believe that the rally will accelerate now when it is already one year old?

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Last week setup/countdown/combo has been finished. Price flip this week says we have short term trend change.
As expected the Setup will be finished(unless SP500 plunge 60 points and close bellow 1700). Price flip should confirm that the intermediate term trend has changed. We have already finished setup+combo followed by another setup, that is why I expect correction and not another rally.

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