Nov 9, 2013

Weekly review

Short term view - more upside for 2-3 days probably
Intermediate term view - the indicators tell me we should see an intermediate term top next week... but who can say how long a mania could last:)

The expected downside action this week was more like flat correction or sideway move. I thought we will see at least 2-3 days pullback... obviously not. The red scenario which I am showing for several weeks is intact and I continue following it.

This week has not changed a lot. A wrote two weeks ago that the indicators say we should see an important top... now they look worse - more bulls and more mania. Investors intelligence survey - 15% bears very very low reading, bull/bear ratio 3,5 extreme... everybody on one side of the boat. TomDemark sequential sell setup on the weekly finished. Cycles - 18 month cycle reached size and length where we see the top for the cycle. Marker breadth indicators turned lower saying internals are not ok, see below Percent of Stocks above MA200 awful.... where is the strength?
It is your choice - go all in expecting that this time is different and will never ever see a correction, party with the bulls but stay near the exit thinking that you are faster than the herd, or just watch from the sideline. I am not chasing it....

Short term - powerful reversal on Friday, but really awful internals. I think it was short covering. Probably we will see another attempt for a new ATH.
Intermediate term - either I am right and we will see an intermediate term top next week, or the indexes will go parabolic. What should I say... it is up until we see something else.

Short term - the bears were killed again and I think the indexes will drift higher probably making new ATH... but I think there is no buyers left too, the internals are awful.
- Triple cross(EMA10 and EMA20 crossing EMA50) - not clear MA50 is moving sideways

Intermediate term - the red scenario is playing out... not perfectly but it's what it is. I was expecting at least 2-3 red days and 1730, but obviously the bull mania is huge.
- Trend direction EMA50/MACD - the intermediate term trend is up.
- Momentum Histogram/RSI - momentum is trying to turn up.

Long term - The middle trend is tested one more time.... 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 indicators have turned lower saying, that this move is exhausted and should reverse.
McClellan Oscillator - huge rally yesterday... the oscillator hardly move higher. Any new ATH will produce even bigger divergence.
McClellan Summation Index - the signal flipped to sell.
Weekly Stochastic of the Summation Index - we will see a sell signal next week.
Bullish Percentage - sell signal and triple divergence
Percent of Stocks above MA50 - weakening and I think any new ATH will produce another divergence.
Fear Indicator VXO - building a bottom... a looot of complacency again.
Advance-Decline Issues - Very weak moving lower. There is a selling beneath the surface even when the price is not following for now.
Percent of Stocks above MA200 - Looks awful... When you have a strong and healthy move 85%-90% of the stocks are above their MA200. And now - after a parabolic move higher we have 65%. After a rally for an year without a pause you have only 2/3 of the stock above MA200. This is a joke.

The daily cycle continue to progress perfectly... lets see if the part to the downside will play out.

At week 51 of the 18 month cycle. It has reached size and length where we see the top for the 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.
We have completed the sell setup on the weekly chart. On the daily chart we have finished setup/combo/countdown and now both time frames say we should see a correction.
The index has completed TD Sequential 9-13-9 Sell Count, that is why I expect correction and not another rally.

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