Aug 1, 2015

Weekly preview

Short term view - correcting lower.
Intermediate term view - their is more to the upside...

SP500 bottomed and rallied strongly.... I was confused for a while, the move lower was too deep and it was not fitting in the pattern. But if we assume that SP500 is in a triangle and w4 from the ED is not finished than everything fits perfect. So until the SP500 stays above 2065 this will be the scenario I am following.

Overall no change I do not think that the pattern is finished. The difference is it has become even more complicated and the different indexes SP500,DJI,DJT,Nasdaq,NYSE,Russell2000 all have different patterns now.... Russell2000 I do not even have an idea what is going on, DJI with lower low looks like the top is already behind us and it has finished LD lower for wave 1 and now wave 2 is running... the mess has become even more messy.
I will just follow SP500 and the European indexes trying to identify the end of the pattern. Below some charts and thoughts about gold/gdxj/DAX.

Short term - we should see a move lower... it will be perfect to see SP500 at support and 61,8% Fibo around 2085.

Intermediate term - adjusted for a triangle.

Long term - significant correction after the move higher is over. Target - MA200/the support zone/the start of the wedge. Adjusted for lower high, but is should be very close to the previous highs.

The Market Breadth Indicators - not very helpful at the moment... I would say rather close to a bottom than to another move lower.
McClellan Oscillator - above zero after oversold levels.
McClellan Summation Index - sell signal, but it looks like it is bottoming.
Weekly Stochastic of the Summation Index - buy signal.
Bullish Percentage - sell signal, but it should be bottoming too.
Percent of Stocks above MA50 - in the middle of the range.
Fear Indicator VIX - at support from the last months around 12.
Advance-Decline Issues - secondary oversold trough.

Day 19 of the current 40 day cycle.... I know DJI made lower low and it does not look right, but I will just follow the cycle higher instead of swaping the chart with SP500.

Week 3 of the current 20/40 week cycles.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Another price flip what a surprise at day 3 of a setup... if it is really a triangle we will see a lot of price flips in the next weeks.

So far there is no much interest from the buyers and triangles for gdx/gdxj which are usually wave B or 4 seldom w2, that is why I will give a little higher probability to the scenario that we will see one more move lower for a bottoming process instead of a reversal and a low behind us. On the charts is shown the more bearish scenario with lower low... prepare for the worst:) so you can not be surprised.
It is all about the trading plan you must be comfortable with it and be prepared so you do not need to make decisions at the moment driven by emotions.
What we do not know is if we have bottom or not. Definitely there will be reaction lower around gdxj 21 and gold 1130. I can not guarantee if we see lower low(loses if holding a position) or higher low(missing profits if you close the position).
Possible plans - pick one which fits you and your risk level:
- I do not care what happens in 2-3 weeks rather in 2-3 months I will hold my position and even add more when I see another low.
- I do not like losses I will liquidate 100% collecting my profit so far, there will be a reaction anyway on gold around 1130 and I load up again.
- I will close 50% around resistance collecting profits and add again at higher low. If I see gdjx below 19,30 and gold 1090, I will close the rest of the position and load up again at lower low with divergences.

The charts - gdx/gdxj we have an impulse higher and a triangle so another move higher should follow.

The bearish scenario a-b-c for wave 4 and last final move lower. Around 21-21,20 the gap will be closed, a=c of w4, 38,2% Fibo level, MA200 so I expect at least a reaction lower.

Similar for gold bearish scenario wave 4 and 5 to finish c of B. A lot of bulls holding losses because of the broken support waiting to cover and a lot of bears just waiting to short. Even if the bottom is behind us I can not imagine that gold will just continue higher without reaction.

And for traders trading European indexes - it is something ugly:).
As I wrote bears should pray for last final move lower - it did not happen. The indicators say the move is too large for w4 it is from a higher degree plus if you look at CAC40 it is already in the territory of w1 of the supposed impulse lower. So the bearish case looks done.... best case one more a-b-c lower.
When it is not bearish it should be bullish... it should be expanding leading diagonal for wave 1 there is such thing I look at in Internet:) on the CAC it looks better, closer to the patterns shown in Internet. So the plan is as long as the DAX stays above the previous low ~11030 this is w1 and it should move lower synchronously with SP500 for w2.

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