Jun 22, 2014

Weekly review

Short term view - another pullback lower expected.
Intermediate term view - when the short term moves finish I expect a correction to around 1900.

I was expecting a little bit more to the downside to finish 20 week cycle... well we saw only three red days and new marginal high as expected.

I still think that the indexes are following scenario 2 from the post Statistic.
We saw strength, profit taking and now we are seeing higher high with divergences MACD daily, RSI again above 70.
The short term picture is not very clear, but I think the indexes are topping than we should see a move to around 1900. Move bellow 1952 will confirm that something to the downside has begun.

Short term - I expect one final push higher before a drop to the trend line.... than test of the highs again.

Intermediate term - it looks like a wedge to me and wave 4 to 1900 should follow. The upper wedge line is tested for the second time with MACD divergence and RSI moved above 70 again. I do not think that it is time to buy.

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. Do not fall asleep, double MACD divergence on the weekly chart means expect something nasty...

The Market Breadth Indicators - starting to show divergences and hit overbought levels.
McClellan Oscillator - lower high and divergence.
McClellan Summation Index - buy signal, but still lower high and divergence.
Weekly Stochastic of the Summation Index - buy signal, but in overbought territory... the swing is topping?
Bullish Percentage - buy signal, but at levels where you see a top.
Percent of Stocks above MA50 - in overbought territory.
Fear Indicator VIX - at extreme low again
Advance-Decline Issues - do not confirm the move higher, another lower high. Obviously fewer and fewer stocks are moving higher.
Put/Call ratio - crazy levels, everybody bullish....

The cycles are not very clear at the moment. One possibility is that we saw 20 week cycle low at day 42... but only three red days and 200 points... The other possibility is that a move lower to 1900 starts soon than such low will look much better for a 20 week cycle low.

The cycles do not give us an edge at the moment, we will wait for a while and see what happens.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Combo on the daily chart and sell setup on the weekly chart have been finished as expected.
The problem with Tom Demark Sequential looking for an exhaustion and market on steroids is that it did not work many times just look at the weekly chart. That is not a normal market 30 months without normal 10% correction.

Sell setup finished but without a price flip there is nothing to sell:)

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