Oct 19, 2014

Weekly review

Short term view - revisiting the low
Intermediate term view - after that a move higher for several weeks

I was expecting a bottom earlier... the problem is the dynamic of the market has changed. Two years with shallow pullbacks every time when the indicators hit oversold level we had a reversal - normal for a bull market. But now the indicators need more time, more oversold levels, divergences and panic sell off before we see a bottom - typical for down trend. Two years trained like Pavlov's dog I knew that we have a top but I have forgotten that the dynamics of the market in a down trend is little bit different.
The daily updates were spot on, weak bounce suggesting more selling, the panic sell off finished near to support as expected than we saw strong move higher to the middle of the resistance zone 1885-1905. I hope I am in sync with the market again.
For those with strong nerves that was a great trading week:) I am still working on that....

For the SP500 EW pattern could be argued if it is an impulse or corrective structure, the DAX and Russel2000 look to me like they finished 5 wave impulse lower. It is irrelevant who is right. It is important to be on the right side. My experience says after a panic sell off the low is revisited.
Market Breadth - before the correction I has said this time is different, the indicators were much weaker. Now they need more time and move to more oversold levels before a bottom is hit. This is a confirmation that the market has changed and I think the prevailing trend now is down.
Cycles - at week 11, average length 14 so another 1-2 weeks to revisit the low will look perfect.

To sum it up - I think the indexes will revisit the lows, than a move higher for 3-4-5 weeks should begin (the traders must forget the pain), but the prevailing trend is down now and we should see a lower high and another move lower.

Short term - one scenario as an impulse, infect the proportions are perfect so far:) But if the indexes do not reverse on Monday and we see another green candle higher, than this is definitely not wave 4(we have already 50% retracement) and probably we will see higher low. This will not surprise me at all.

Intermediate term - my target was the trend line and support.... SP500 hit them but took another path without a bounce first.

Long term - the forecast plays out so far... The indicators still point down no reason to change it.

The Market Breadth Indicators - beaten down, at levels which we have not seen since the plunge in 2011. I think this time is not the time for buy the dip and expect new highs.
McClellan Oscillator - moved above the zero line.. confirming that there is buying.
McClellan Summation Index - this levels we saw in 2011 at the bottom.
Weekly Stochastic of the Summation Index - sell signal, but in the oversold zone. The time for a swing higher is coming.
Bullish Percentage - the lowest level since 2011... something has changed.
Percent of Stocks above MA50 - moved to levels which are typical for down trend. Usually when the stocks are so beaten down you wait for divergence.
Fear Indicator VIX - moved much higher compared with the last several highs. >this correction should be bigger.
Advance-Decline Issues - several lows - we should be near to a bottom or even we saw it.

The indexes should visit the low to finish the cycles 40 and 80 days.

Week 11 - another week or two lower two finish the cycle will look perfect.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Countdown at 8.... with this huge candles I am not sure it will be finished.

1 comment:

  1. Carnap:
    Hey KRASI,
    congrats for your update.
    As you said the indicators need more time to relax and we had extremes on the contrarian level and on fear indicators. We saw a break out of US Dollar and yields a still under pressure, bullish T-Bond, Emerging markets are declining, oil and commodities the same. A guess there is a risk for a deflationary shock and I think the market condition will continue for further weeks or month.
    The correction is running on cycle degree (SPX). That means we will see a retracement of the move since the low at 1343. The target area for a correction on the degree is 1860-1761 in worst case 1681. We are in this area already. The move from the correction low turned out to be a ZZ. A further ZZ above the level 1950 could follow, but I expect a wave down to min 1950 as a b-wave. A b-wave can be time consuming depending on the complexity of the internal structure. Thereafter a further up move is expected to minimum 1943 (End Nov/beginning Dec.).