Intermediate term view - I think we will see one more higher high, but first we should see confirmation for a short term bottom on Monday.
The pullback was not over as I have expected, but it takes too long and the short term picture should be updated.
It was easy so far with the 20 week cycle low, but we are getting closer and closer to an important top and it is getting more difficult to predict the short term moves...
I think the structure will look best as an ending diagonal and this will explain the bunch of corrective waves up and down. If you look at the hourly chart of Russell2000 and NYSE you will see a more clear picture with two legs lower of the same size. We need a short term bottom on Monday so that the move lower finishes as a corrective structure and as a part of a bigger wave 4 of an ED.
If the move continue lower for another day or two it will start looking like an impulse and the conclusion will be that a correction has already begun. We have all ingredients for that - cycles the right time to turn lower, EW could finish as an expanding flat(see Russell 2000 and the daily chart below), Market breadth long term divergences and turned lower on Friday, TA see the weekly charts and the divergences....
The next several days should give us the answer. Do not worry, there should be enough opportunities to go short if you want so patience.
TECHNICAL PICTURE
Short term - the indexes reached strong support level and should make a short term bottom on Monday. Than the structure will look like a zigzag(green). If the prices continue lower and break below support(red) this will be a signal for a weakness.... and the correction has probably begun.
Intermediate term - the ED wave 4 to around ~2040 and than wave 5 to ~2150(green). But we do not want to see a impulse lower or we should switch to the red scenario.
Long term - the short term moves has not changed the big picture, the next bigger move should be down.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - look bearish with long term divergences. It is not from this week, but now they have turned lower.
McClellan Oscillator - sharp move lower and bounce should be expected, but it is not a guarantee that another day or two sell off will not happen.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal. The next swing lower has begun?
Bullish Percentage - still on buy...
Percent of Stocks above MA50 - sell with multiple divergences.
Fear Indicator VIX - multiple divergences
Advance-Decline Issues - multiple divergences
Put/Call ratio - multiple divergences
NYSE New Highs-New Lows - multiple divergences
HURST CYCLES
Day 24... based only on cycles is difficult to say which scenario will play out.
Week 4 of the current 20 week cycle. Following closely the current 20 week cycle... it is definitely much weaker than previous 20 week cycles. We are nearing an important top.
Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Price flip an setup lower at 4. This is another sign of a weakness.
Russell 2000 hit 2043 the first target area... it is difficult to say if this was the top or one more move higher to the next extension 2153. It does not matter I think the next move will be to revisit the October low.
The DAX is the strongest index. It has decoupled so to speak and it is moving vertically... definitely a blow off phase. I think we should see a 7%-8% correction followed by wave 5 for a major top.
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