Jun 29, 2014

Weekly review

Short term view - green Monday, on Tuesday the second leg down should begin
Intermediate term view - pullback is running... probably another week or max two. Just the next dip to buy.

Ok as expected final push higher and something to the downside begun. The SP500 is of course the strongest index, we saw only 20 points drop:)

Choppy week, nothing has really changed. EW - I think this should be a wave 4, Cycles - one or two weeks to finish a pullback for 20 week cycle low, Indicators - we saw divergences and they are reseting from overbought levels.
Looking at the DAX and the US indexes on Friday I think the first leg of the pullback is over now we should be in wave B up. Add to this that Monday is the end of the quarter...
Based on the weak action for the first leg down the target for the second is the trend line and support around 1930 (see the first chart).

Trading - I do not know if it is worth to chase 20-30 points against the trend. This is wave 4 which means shallow and choppy move against the trend (that is what we see). It is much smarter to spot the low of the pullback and add to long position.
I will try to post as soon as possible if I see something like the end of wave B and the beginning of the next leg lower.... if some one is interested:) but do not short SP500 find the weakest index, DJ is better for example.

Short term - the trend line looks like the obvious target for this pullback....

Intermediate term - no change, we have a wedge and in EW terms this should be wave 4.

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 - are saying we are near to a top... that does not mean the indexes should reverse tomorrow. It is perfectly acceptable to see a pullback and higher high through the summer. It means do not expect huge rally rather a weak one before a reversal.
McClellan Oscillator - moved above the zero line.
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 higher is topping?
Bullish Percentage - buy signal.
Percent of Stocks above MA50 - dropped a little bit but still strong.
Fear Indicator VIX - complacency is very high, the BB are getting very narrow...
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 buying calls....

The cycles will look much better if the indexes finish the pullback as expected. The other possibility is I am wrong and the low is behind us.

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.
Nothing interesting after a choppy week..... only a price flip on the daily chart.

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