Feb 1, 2014

Weekly review

Short term view - rally for several days.
Intermediate term view - the correction to continue for another 2-4 weeks.

No surprises this week - lower low as expected and the indexes are trying to turn up now.

The market action is very choppy the easy part with the predictions is over... EW guided us great lower to the first support level. Now it is difficult I see to many options and I will concentrate only on TA:
- It looks like the price wants to make a turn but it takes time, you can not make U-turn with 100mph:) and this is the "fight" which we are seeing.
- Look at the daily chart - the Histogram reached oversold levels and we usually see a bounce from such levels.
- McClellan Oscillator making higher lows - seller are getting weaker.
- The pattern from August 2007 continue working 1:1 for now, I looked at the indicators and they are looking exactly the same way.

My conclusion - the hourly chart looks like it wants to move lower and Monday will probably start in the red, but after the low is in(it could be a lower low) a move to the upside should begin 1800 minimum and I expect something around ~1812.
How to trade it? - you can see clear the trading range 1770-1772 tested three times and 1794-1796 tested 3-4 times. Wait for the opening if the market fails to make lower low and turns up go long with stop bellow 1770 or if we see a lower low(probably 1760 next support) with MACD divergence on the hourly chart go long when the price get back above 1770 and put a stop bellow the low.

Short term - short living move lower on Monday, probably with lower low, should mark the low for the move from 1850 and rebound should begin. I will watch the 50% Fibo retracement around 1812.
- Triple cross(EMA10 and EMA20 crossing EMA50) - the short term trend is down.

Intermediate term - Look at the histogram... when we see such extremes a rebound for several days follows. Other indicators support the idea so the next bottom lower or not is a short term buy. I think that the broken middle trend line and MA50 will be tested and they are exactly at 50% Fibo retracement 1812...
- Trend direction EMA50/MACD - the intermediate term trend is down.
- Momentum Histogram/RSI - momentum is trying to turn up.

Long term - the weekly chart says we are in an intermediate term correction and it is early to expect a bottom.
- Trend direction EMA50/MACD - the long term trend is up - the price above MA50 and MACD above zero. There is scenario that this is the top for the bull market, do not worry there will be a second chance to get out of longs/load on shorts.
- Momentum Histogram/RSI - momentum is down, intermediate term trend is down.

The Market Breadth Indicators - the trend following indicators are on sell we are in a correction. Short term indicators say we should see a rebound.
McClellan Oscillator - is making second higher low and the sellers are looking exhausted.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - dropped bellow 70 for the firs time since June. I think that this time the correction is for real.
Percent of Stocks above MA50 - higher low... there is still room to the downside. We should see the indicator moving bellow 25 before this move is over.
Fear Indicator VIX - again outside it's BB, shooting star, hanging man, black candles - I think we will see a pullback which means a rebound for the stocks.
Advance-Decline Issues - moving lower after divergences, which is what you want to see... there is a lot of room to the downside.

The 40 day cycle working as expected. Come on... another 10-13 days to reach the same size like the previous one 47/46/46.

Another 2-3 weeks lower and the current 20 week cycle and the 18 month cycle will look very good.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Buy setup was invalidated at day 7. We have now a price flip which confirms that momentum tries to turn up.


  1. Well first of all... many thanks for your updates in last few days!! they are super awesome!!! and it's guided me thru this choppy trading moment. A BIG Thanks to you :-)

    And 2ndly, your advise for 'How to trade it' is exactly what I was thinking to do on Monday, thanks a lot for sharing your thoughts!! and keep up this wonderful blog!!!!

    Have a good weekend. Cheers