Sep 21, 2014

Weekly review

Short term view - short term top expected a move bellow the last minor low 1980.
Intermediate term view - I think that we will see a pullback and another high before something more serious.

No surprise this week. FOMC and traders are already trained like Pavlov's dog, so it was an easy bet that we will see a move higher.

Now what to expect... to be honest I am not sure. Enough signs for a trouble and important top but something does not feel right. The pattern does not feel right for a top. The more I watch the charts the more I think the red scenario is developing(chart 1 and 2). The market will kill the bears one more time than the bulls and correction will start - perfect as the big boys like it.
So instead guessing and trying to be smart I will keep it simple. What we have - higher high with MACD divergence daily, 40 day cycle at day 30 time for a top, Market breadth looking awful, bearish candle on Friday. I said this should be some kind of a top, at least a short term top and we will see a pullback.
For trading it does not matter wait for a lower high and open short position. If it is an important top great, if it short term top small profit... I can live with that:)

Short term - reversal candle and the move lower looks like a 5 wave. The safe bet is to wait for a bounce from MA50. The price is above it and all MAs point up so I am pretty sure we should see a descent bounce from MA50.

Intermediate term - Bounce near MA50 and MACD divergence as we wanted... but something does not feel right. I do not like the pattern and the waves for a top. If the indexes start moving lower I will watch what happens around 1960.

Long term - no change just more divergences. The short term uncertainty does not change anything.

The Market Breadth Indicators - look awful. A lot of weakness and divergences... everywhere. We have not seen this at previous tops so it is different this time:)
McClellan Oscillator - could not make it above the zero.. very weak.
McClellan Summation Index - sell signal
Weekly Stochastic of the Summation Index - sell signal
Bullish Percentage - making lower highs
Percent of Stocks above MA50 - new ATH and only 62% are above MA50. How strong is that?
Fear Indicator VIX - another higher low.
Advance-Decline Issues cumulative - divergence lower high with 5 waves lower.
New Highs-New Lows - another lower high
Percent of Stocks above MA200 - new ATH and only 60% are above MA200. Divergences and weakness.

40 day cycle at day 30. I think it is time for the cycle to turn lower.

Waiting for the 20 week cycle to top.... currently at week 7.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
At 8 from a countdown... probably the move up is not finished.


  1. Carnap:
    Hm, it is getting to become more complicate.
    My thoughts are as foolows.
    SPX w 39:
    See below the S&P500 hourly chart. The S&P500 is still running within wave 5 on Minor degree which is the most probable interpretation actually. The black trend line represents a so called 0-(2) line proceeding from the starting point of wave (1) through the low of wave (2). A break of the line will give the confirmation that the wave (3) has ended on the other hand a break of the 0-(2) line is not mandatory for the ending of the wave (3) on Intermediate degree. It therefore means if the line become broken then minimum wave (3) on Intermediate degree has ended – no more, no less.
    That means as long as the 0-(2) line remain intact the impulse wave one degree lower at Minor degree could be still on the way. If I would zoom in you could see that the low of wave 4 on Minor degree is above the trend line shortly and doesn´t touch the line.
    Picture 1: SP500 hourly chart running 5 at Minor degree

    ... since the signs are here limited
    The side will be open for 24h.

    1. Yes, a lot of room for interpretation and possible scenarios..... I like it simple and in such moments I put aside EW and trade simple technical analysis. Later when the picture is clear again I label the moves:)

  2. Carnap:
    Yes, as you said the situation isn´t definite and obvious. In such a situation EW can be compared with playing a game of chess. If the market has done a move will in best case eliminate one of the now as possible regareded scenarios or in the worst case will offer additional possibilities without eleminating older ones.
    Therefore most important are the so called MoB´s, that is break of a 0-2 or 2-4 line or break of an retracement level that restrict/confirm a possible scenario and gives confirmation one of the scenarios is selected by the market.

  3. great analysis as always. I agree something else may be playing out if we do not top, the following link is a alternative bull count with one more 4 and 5

    1. Interesting:)
      I am curious now how the move lower will develop. This will give us a lot of information.

  4. Carnap:
    hello alberto, that is more or less what I have counted in chart 2 the running impulse wave on Primary degree. But please consider the chart you mentioned is a daily chart and what we are discussiong is the start of wave (4) on Primary degree that we are waiting for.
    That correction will continue min. to Q2 2015 after initiation. That means the mentioned correction from krasi is running min. two degrees lower.