May 18, 2014

Weekly review

Short term view - green on Monday
Intermediate term view - waiting the choppy move to finish and a correction for 2-4 weeks.

The choppy move since mid April continue... The facts - the indicators look ugly, the move continue making higher lows and higher highs and finds support at MA50(see the second chart). Looking beyond the short term action and the choppiness, intermediate term you should prepare for a move lower to around 1800 at least.

I see some conflicting signals if I look at the DJ and SP500 I would say expect lower high H&S and move lower(red scenario), but if I look at other indexes I see one more move up is missing(green scenario) - Russell2000 made another lower low with RSI and MACD divergences, DAX is missing wave 5 of an Ending diagonal....

Such choppy moves always finish the same way - at one moment you will see lower high/higher low. Instead speculating if the move has finished I will wait for such sign. Until than the trade remains long... for the short term.
Around 1890 if we see a bearish candle - short with stop above the high for the day. If we do not see a follow trough to the downside on the next day, instead we see another higher low, we will switch again to the long side. You must be flexible:)

Short term - It think the indexes will try to move higher on Monday and than we will see what happens - H&S or some kind of a choppy ED.
- Triple cross(EMA10 and EMA20 crossing EMA50) - not clear

Intermediate term - Dancing around the middle trend line and MA50.... the move does not show strength, but we still have no confirmation for a reversal - lower high.
- Trend direction EMA50/MACD - still up, but very weak.
- Momentum Histogram/RSI - momentum turned lower.

Long term - I do not think that any move higher will clear the MACD divergence and start another long lasting rally. I think the next big move will be lower, but it could last months until we reach this point.
- Trend direction EMA50/MACD - the long term trend is up - the price above MA50 and MACD above zero. The MACD divergence should make you worry, that the long term trend is topping.
- Momentum Histogram/RSI - not clear direction.

The Market Breadth Indicators - serious divergences everywhere....
McClellan Oscillator - could not make higher high and moved bellow the lower BB... now we are seeing a bounce as expected.
McClellan Summation Index - sell signal with divergence.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - massive divergences, but short term still above 75... sell signal not triggered.
Percent of Stocks above MA50 - can not move up to 75... internals veeery weak
Fear Indicator VIX - high complacency again... in a territory where we see a bottom usually.
Advance-Decline Issues - in the middle of the range.... internals veeery weak
NYSE New Highs-New Lows - massive divergences....
Percent of Stocks above MA200 - diverging again...

Looking at the chart I would say the second 40 day cycle topped out at day 21 in the middle of the cycle and correction to finish the 40day and 80 day cycle should follow.

Waiting for a correction to finish the 20 week cycle....

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
We have a price flip and 1-2 of a setup... next week we will know if this is the real deal.

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