Short term view - 1-2 days bottoming before a relief move higher.
Intermediate term view - I think a multi month move lower has begun.
We have a top, but I was expecting the move to develop differently - 2-3 weeks topping up and down during the holidays... the huge candle on the weekly charts says a move lower has begun. I do not know if it is because of the crashing energy sector, but I think the intermediate term correction which I was expecting in Q1 2015 has begun.
Short term - we are nearing oversold levels on different indicators and markets... probably 1-2 days before we see a short term bottom. The next move up will show us if I am right, but I think it will be a lower high. The alternate scenario is the indexes to continue plunging lower... usually that does not happen at this time of the year and when they are above MA50. It is more logical to see a relief move higher during the holidays. Plus Crude oil, EEM and energy sector look oversold - XLE it looks to me like 5 waves lower with MACD divergence.
Long term - I will post something about the long term later.
- EW - is not very clear on the major indexes, but indexes like DAX and EEM looks like wave C lower has begun. We should see a similar move on the SP500 and DJIA. I will post later charts.
- Cycles - top of the 20 week cycle. This is the third from four 20 week cycles of the 18 month cycle. That means a high probability that the 40 week and 18 month cycle topped out too.
- Technicals - huge weekly bar wiping out the previous 5 weeks gains. Huge bars appear near or at the beginning/the end of a move. It is not the end of a move it has just started:) Plus the MACD divergences which we see for a long time.
- TomDemark - failed setup and price flip on the weekly chart.
- Market breadth - support an intermediate move lower.
- Reversal in different markets - the energy sector is crashing, emerging markets look bad EEM has started it's wave three lower and more important I think major currencies USD/EUR USD/JPY are reversing. The market's dynamic is changing....
My conclusion - we should see a correction for 2-3 months, not a surprise it has just arrived 2-3 weeks earlier. As I wrote it was a good idea to take profits and unfortunately the holidays will not be as calm as expected. The next high will be a opportunity to sell longs if you have some and enter short positions.
Short term - waiting for a short term bottom and relief move higher. When I look at different markets I think we should see a lower high(red).
So far it could be A-B-C (the alternate scenario green) but it will have a chance only if we see a strong reversal next week and a move to at least 2060 so that the huge bar is negated.
Intermediate term - at support and MA50 as expected... I think we will see a bounce but the green scenario is now the preferred one.
Long term - no change, moving as expected.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - short term bottom is expected, long term the indicators are saying a move lower has begun.
McClellan Oscillator - near oversold levels and outside the BB. Usually that means a bounce - small bounce and lower low on the indexes before a short term bottom?
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - sell signal with long term divergence.
Percent of Stocks above MA50 - sell signal moved bellow 75.
Fear Indicator VIX - huge spike. I told you expect the volatility to rise, but I did not expect to happen so soon.
Advance-Decline Issues - nearing the oversold level, but not there yet.
Percent of Stocks above MA200 - ugly, only at 45%, we know the internals are weak.
41 days for the current 40 day cycle... we should see a bottom soon.
I think we saw the top of the current 20 week cycle. This is the third from four 20 week cycles of the 18 month cycle. That means there is a high probability that the 40 week and 18 month cycle topped out too.
Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Failed setup and price flip on the weekly chart. After finished sequence a setup is running day 5.