Sep 27, 2014

Weekly review

Short term view - I think we have a short term bottom and next week will be green.
Intermediate term view - waiting 2-3 weeks to finish the move up and correction to begin.

Very busy week down-up-down-up crazy:) We have a top and I think it is a short term top as I have expected. Now waiting for confirmation that the pullback is over.

With the reversal on Friday I think we have only a three wave decline. The move from the low looks like an impulse. The market breadth indicators and cycles are pointing to a bottom. So my forecast is that we saw the bottom and now we are waiting for confirmation - higher low and move above MA50 hourly chart and resistance 2000. If I am wrong this is 1-2 1-2 and plunge should follow... till now such count has never worked.

We are chasing the short term but do not lose sight of the big picture - look at the weekly chart, cycles weekly, and the last chart the monthly chart. They look bearish and 2-3-4 weeks short term bullish action will not change the long term.

Short term - this chart is for the trading plan. It looks like an impulse to me... one more high to confirm it. For short position I would put a stop at break even and if we see a higher low close them and open long position. If I am wrong and we see a plunge you still hold the short position.
Still a lot of bears and the price is below MA50(see below) so I do not expect the indexes to start moving straight up. We should have enough time to position on the right side.

This are the two scenarios which I see - the move lower was either wave 4 or wave 2 of an ED.

Intermediate term - no change, I am waiting wave 5 to finish. SP500 closed back above MA50 which is bullish. Now the histogram should turn up and should be followed by MACD at the zero line.
Below support 1960 is where I am definitely wrong.

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

The Market Breadth Indicators - the oscillators are pointing to a bottom but the long term indicators look bad. My interpretation - we have a short term bottom but do not expect long lasting rally.
McClellan Oscillator - strong bounce near oversold levels.
McClellan Summation Index - sell signal
Weekly Stochastic of the Summation Index - sell signal
Bullish Percentage - sell signal but still above 70
Percent of Stocks above MA50 - did not make it to the oversold level, but we have only a pullback and this is normal level for a pullback.
Fear Indicator VIX - looks bearish after moving outside the BB.
Advance-Decline Issues - reversing from oversold levels?
NYSE New Highs-New Lows - reversing from oversold levels?
Percent of Stocks above MA200 - 40 points below ATH and only 50% of the stocks are above MA200.... how healthy is the market?

I think this was a 40 day cycle bottom and the next one has begun.

Week 8 of the 20 week cycle... probably another 2-3 weeks to finish the move up and the indexes should turn lower for several weeks.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
A lot of up and down.... the buy setup is still in tact. The bulls should proof that we have a reversal and produce a price flip.

The long term.... I think September would stay red and if we see a reversal in October(another red month) the finished countdown will look perfect:)
The histogram does not look good, RSI starts breaking below the trend line.... the trend starts looking exhausted.


  1. Carnap:
    Congrats to the update. As always worth reading.

  2. Krasi, is EEM due for a bounce? If so, any targets. Looking for a short entry. Thx.

    1. Yes it looks good for a bounce.
      It looks like a corrective move with two down legs of the same size, RSI and Histogram small divergence, 38,2% FIbo retracement, support level and MA200.

      The move since Feb 2014 looks like an impulse... I am not sure if it has finished or this is wave 4.
      I guess it follows the major indexes than it should not make some huge rally rather a retracement to 44.50-45.00