Short term view - lower prices for a day or two
Intermediate term view - next week we will know if the correction is running or we have another 2-3 weeks higher.
Based on cycles I was expecting short term bottom and move higher... it came a little bit earlier, but overall not a surprise. You should not nave been caught on the wrong side shorting the fake break out lower.
The price moved higher to resistance and it is still in the range. As long as there is no convincing break out we have to keep an eye on both bullish and bearish scenario.
Indicators look positive, market breadth - I would say new swing higher has begun, EW - impulse higher, cycles - 40 day and 20 week cycle low. I would keep it simple and say we should see at least another impulse higher after a pullback. BUT the move should show strength and any pullback should stay above 2020-2025.
Now what if I am wrong:
- the prices move much higher than I expect - we are on the right side, I was wrong and I will adjust the forecast/charts. Not really a problem.
- the impulse was wave C of a corrective move(the whole sideway mess), which has finished on Friday, and the next wave lower has begun - it is possible. I will watch carefully how the pullback look like and the 2020-2025 area - the gap , 50% Fibo retracement and support. If this is the case the move lower should be impulsive and move fast below this level.
Short term - the bullish scenario(green) and the bearish scenario(red). I am leaning more to the bullish scenario but watching carefully the bearish one. Next week we will have the answer.
Intermediate term - the same on the daily chart. MACD is still around zero and bellow the trend line, so we do not have confirmation for a bullish outcome.
Long term - no change. Momentum turned up - another 2-3 weeks higher?.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - I would say new swing higher has begun, but we do not have confirmation or something convincing at the moment.
McClellan Oscillator - above zero... nothing interesting.
McClellan Summation Index - buy signal.
Weekly Stochastic of the Summation Index - buy signal.
Bullish Percentage - buy signal.
Percent of Stocks above MA50 - nothing interesting near the middle of the range.
Fear Indicator VIX - series of lower highs and higher lows....
Advance-Decline Issues - series of lower highs and higher lows....
At day 5 after 40 day and 20 week cycle low.
Low at week 16... perfect right on time. Following closely the current 20 week cycle... when it tops the indexes should move lower to 18 month cycle low and the low for the year.
Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Nothing interesting but to take a look at strength from another angle - previous cycle lows were followed by finished countdown, setup at 7, and the current one is at 4.
If the indexes want to move higher they should print choppy pullback - on Monday bar 5 of the setup should close above 2050(bar 1). If we see another price flip on Monday at day 4(close below 2050) that would mean weakness and I would not expect this rally to last very long.