Jan 12, 2014

Weekly review

Short term view - the pullback could not be finished, but I think we will see one more push higher...
Intermediate term view - soon after that I expect an intermediate term top(or the TOP) and strong move lower...

Boring two weeks, very choppy move... probably corrective with a lot of fake outs. Even if the pullback is not over, the low is/will be a short term buy for one last push higher.

Short term - the move is a mess and I thinks it is corrective. I have posted DJ hourly chart instead of SP500. It looks more clear. I think we are seeing an impulse with one last wave missing. Wave three is extended so wave 5 should be small and if it has the same size like wave 1 we should see at best marginal new high, a few points about the last high.For the SP500 this should be something between 1850-1860 - my old target before the holidays.
Intermediate term - no change, I expect very sharp correction or top for the bull market. The topping pattern was aborted(see the weekly chart) which means we should expect blow off top. John Hampson wrote more about that if you want to read.
We will just follow the market and let it tell us what it wants to do....

Short term - the chart says it all. One final wave is missing. It should be weak and short living... we should see another MACD divergence and sharp reversal.
- Triple cross(EMA10 and EMA20 crossing EMA50) - the short term trend is not clear.....

Intermediate term - sp500 is moving according to the plan. Now waiting to see if the reversal from the trend line will occur. Multiple MACD and histogram divergences say yes we will see it.
- Trend direction EMA50/MACD - the intermediate term trend is up, but we are seeing now double MACD divergence. Watch out for a trend reversal.
- Momentum Histogram/RSI - momentum is weak, short term trend is not clear.

Long term - I wrote in November and December that if the markets does not reverse we will see blow off top and not a topping process.... well I think now it is official. The problem is the divergences are still here and the bullish sentiment is through the roof...

John Hampson - it is the second largest and third longest equities bull of the last 80 years, where margin debt and investor credit spiked to dot.com peak levels (highest ever), where Market Cap to GDP valuation reached the second highest ever (first: the dot.com peak), where we printed some all-time record sentiment readings, including the highest ever II bull/bear spread, and stocks rose into their peak in a compressing parabolic, chasing price without earnings for 2 years into the peak.
- Trend direction EMA50/MACD - long term trend is up - the price above MA50 and MACD above zero. Watch out for the MACD divergence - something bad could happen.
- Momentum Histogram/RSI - the histogram made lower bar... momentum is reversing?

The Market Breadth Indicators - positive for the short term and more divergences long term....
McClellan Oscillator - positive the wave up is not finished probably we will see a divergence when the move is over.
McClellan Summation Index - buy signal, it is rising but I expect another lower high
Weekly Stochastic of the Summation Index - buy signal, it has reached the overbought area.
Bullish Percentage - probably we will see another lower high.
Percent of Stocks above MA50 - weaker than expected, probably we will see another lower high.
Fear Indicator VIX - again a lot of complacency, at levels where we see a bottom whole year which means top for the stocks.
Advance-Decline Issues - weakness... I expect another lower high.
Put/Call ratio - the traders are very very very excited.... like before the top in 2011.

Almost reached the half of the time for a 40 day cycle... reversal around the corner?

The move is already very stretched in time matching the initial rally in 2009 and the size is the same like the previous two 18 month cycle tops. In the last 7 weeks sp500 has not moved significantly higher.... I think it is time to see the top for this 18 month cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Finished 9-13-9 sequence - reversal around the corner? The weekly chart is near to a sell signal too... both time frames flashing sell in sync...
One final higher high will finish the combo and that fits perfect with EW and technical analysis... interesting.

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