Jul 5, 2015

Weekly preview

Short term view - the move lower is not finished.
Intermediate term view - I expect final move higher before a significant correction.

I was expecting move lower to the 2065 area - we have it.... ok 7 points lower, but that is not the problem. The problem is the way the indexes moved lower, now there is a room for interpretation and we can not exclude the option that the top is behind us. Personally I do not believe it, but we should stick to the charts. Both US and European indexes, the move lower does not look finished and with the Greece referendum this weekend you do not want to be long.

You can interpret charts in different ways and justify both bullish and bearish scenario:
- Technical indicators look bearish, as long as the price is below 2090 the direction is down.
- EW - you can count 1-2-3 or a-b-c, you can not bet for sure on the bullish or bearish case.
- Cycles - the next low should be 40 weeks cycle low or the new 40 weeks cycle has topped out very early which is very bearish this second options looks strange to me but not impossible.....
- Market Breadth is bullish (intermediate term). The indicators are saying correction is running for weeks and we are seeing it's final stage. The problem is when there is fear in the market(the Greek drama) you do not want to rely on market breadth. It can become from oversold to crazy oversold. Fear is irrational emotion there is no logic.
- TomDemark Sequential - have shown signs of life:) setups running on the daily and weekly chart so the move lower has some strength.

I wrote that I still have some doubts - market breadth is bullish for me and when I look at European indexes and DJT I see overlapping corrective structures near completion currently at week 38 which is suggesting and intermediate term low and 40 weeks cycle low (see the last charts).
Plus we have a huge bar and three days later we still do not have follow trough and a new low. This is very strange for a wave 3 of 3 which is the strongest. It feels more like wave C of an A-B-C - maximum fear near to the end of a move. So I expect another move higher.

Short term - the move lower is not finished. One wave lower is missing, no divergences. Bearish scenario - we are still in wave 3 lower to support 2040 small bounces and lower again. Bullish scenario wave C one more wave lower to support 2040 to finish the the corrective move since May.

Intermediate term - both scenarios bearish and bullish. Now the ED/wedge looks much clearer.

Long term - significant correction after the move higher is over. Target - MA200/the support zone/the start of the wedge.

The Market Breadth Indicators - no buy signal, but at levels where usually we see the end of a correction.
McClellan Oscillator - expecting higher low and divergence.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal, but oversold - waiting for a bottom.
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - wedging too... close to levels where usually corrections are finishing.
Fear Indicator VIX - broke higher expecting higher low and divergence.
Advance-Decline Issues - higher low so far... you would expect to see it plunging with the huge bar lower from Monday.

Waiting to see which scenario will play out and adjust the cycles.

Waiting to see which scenario will play out and adjust the cycles.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Setup at 7. If we do no see a new low on Monday will be a very important hint that we see only a correction.

Setup at 6... let's see if the bears have the strength to finish it.

It looks like a triangle and wedge to me - corrective structure. Even the bearish case - wave C is in fact wave 1, expect at least deep retracement to resistance and MA200.

Corrective structure... expecting another push lower to finish zig zag Z and the whole zig-zag from the top.

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