Jul 6, 2014

Weekly review

Short term view - a dip which is a buy opportunity and final wave before a pullback.
Intermediate term view - pullback and final move higher before more significant correction.

Well I was wrong!!! I was expecting ending diagonal wave 4 and 20 week cycle low before another move higher.... all we have got was small wave 4 of a lower degree. The pattern which I was tracking has changed but not dramatically, the main idea stays the same.

What I think we will see is a dip and another high, followed by a pullback 3%-4%, another high and than more significant correction. The next 3-4 weeks should be ok for the bulls but after that in August we should be very cautious. I see wedges and waves 4 and 5 on all time frames... it is scary a little bit:) a correction lower should be very sharp.

Why the prediction above:
- Elliot waves - what I see is wave 4 and 5(the first chart) to finish wave 3 and than we should see 4 and 5 of a bigger degree(the second chart) to finish 3(or 5) of even bigger degree. Final waves higher on all time frames....
- Cycles - the low for last 20 week cycle was barely visible which means for me the bigger cycle the 40 week cycle is the dominant. It has average size 30-35 weeks with 4-5 weeks the phase to the downside. Currently it is 22 weeks old which means min 4-5 weeks and max 7-8 weeks higher. Another 4-5 weeks higher will fit with the EW analysis before significant correction and we will enter the period which is statistically the weakest - mid August-September to the end of October.
- Market breadth - short term I see weakness. SP500 moved 25 points higher and McClellan Oscillator 7,50 points lower and it is barely above zero - big red flag for the short term. Intermediate term some divergences were erased. My interpretation is that we should see a pullback and another high with divergences before a significant top. The same message repeats....
- Indicators - the price is still above MA50 on daily and weekly - the trend is still up. We see higher lows and higher highs - the up trend is intact.
We see MACD divergences on the daily and weekly chart. Weekly - it can last for a while before it kicks in so there is no problem to see a correction later and we should look for signs on the daily chart. The Daily chart - the MACD peaks are not far from each other. Most of the time such divergences are warnings for a top but not a significant top. In EW terms such divergence usually appear when wave 3 is finishing(expect 4 and 5). It is a warning sign but such a low tests MA50 and usually is been bought. After that if you see a lower high or higher high with even bigger divergence - this is the high which you should sell. Short said the same message like above....

That is what I see. I hope the information is helpful:)

Short term - MACD divergence.... good for a 10 points dip.

Intermediate term - still waiting for a pullback to MA50... or wave 4 in EW terms.

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 - "strong" week but the indicators has not really responded. It smells like a short term top. Intermediate term some divergences were erased.
McClellan Oscillator - moved lower for the week and it is barely above zero. Red flag
McClellan Summation Index - buy signal, divergence erased.
Weekly Stochastic of the Summation Index - in overbought territory... we should be near to a top.
Bullish Percentage - buy signal.
Percent of Stocks above MA50 - short term divergence appeared. Red flag
Fear Indicator VIX - complacency everywhere... No divergence, no signs for a significant top.
Advance-Decline Issues - do not confirm the move higher. Obviously fewer and fewer stocks are moving higher.
Percent of Stocks above MA200 - short term divergences erased.

At least a week to reach the middle of the current 40 day cycle. This aligns with the short term forecast.

The 20 week cycle low is barely visible - the 40 week cycle is the dominant. There is more upside. In mid August we will watch for a possible top for the current 20 week and 40 week cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
The countdown will be finished. Wait for a price flip, this should be a good entry if you want to trade the pullback.


  1. Buy in dip now... i guess this minor pull back is about to be finished sine Alcoa's earning beats estimate... given a reason for stock to rise! 2000 here we come!

    1. There will be something to the upside soon... but now I am not sure that we will see a higher high.
      The European index look ugly. I think they have begun there wave lower of a bigger degree....
      This move lower in the US indexes is deeper than expected and if we see another lower low we will have an impulse to the downside - not good for the bulls.
      So very cautious here.......