Aug 22, 2015

Weekly preview

Short term view - oversold bounce and lower again.
Intermediate term view - intermediate term low in a few weeks.

I always fall in the same trap around tops:) It looks like a corrective move is running and one final move is missing... and than boom!!! I fell in the trap again:)
But do not say I did not warn you. I wrote several times to take profits like in May(the best one at the top:) and the rest is short term trading.

The ED is now history, the last "bullish soldier" SP500 has fallen:) As I wrote below 2044 is bad, open space and you see what happens with air pockets....
I am sure a lot of bears are celebrating... but why did you kill all the bulls for two days. Such moves are not sustainable and they get exhausted very fast.
Now instead a nice correction running for a while I see a bottoming in the next 1-3 weeks and intermediate term low. I think this is the "15 minutes of fame" for this correction.
It smells like stretched 40 week cycle and the next shorting opportunity October/November this year. DJT correcting for 9 months, Europe for 6 months and US stealth correction since May. For me this is not a move which have just begun it is the end of the first leg of a much bigger move lower. It has the necessary DNA - moving lower for a while -> panic sell off (wave 3/c) -> fear -> exhaustion(waiting). You need this around intermediate lows.

But let us concentrate on the presence - of course the correction is not over, from EW perspective it has to work on 4th/5th waves of different degrees and panic lows are not THE LOW.

Short term - we have to start with the shorter time frame 10 min... waiting for the never ending 3 to finish. You have to admit 1-2/1-2/1-2 counts perfect.

Than longer time frame 1 hour - 4/5 of higher degree.

Intermediate term - It does not matter where you put the 5th, we are just tracking the move lower.

Long term - significant correction with target - MA200/the support zone/the start of the wedge.
Oscillators pushed to extremes at the weekly chart. Expecting intermediate term low in the next few weeks.

The Market Breadth Indicators - the beginning of the end of an intermediate term correction. Wait a few weeks for reversal/divergences. The same levels like the October 2014 correction.
McClellan Oscillator - oversold waiting for bounce and divergence.
McClellan Summation Index - sell signal, bottoming??
Weekly Stochastic of the Summation Index - sell signal, higher low??
Bullish Percentage - sell signal, levels where usually intermediate term corrections end.
Percent of Stocks above MA50 - oversold waiting for a bottom/divergence
Fear Indicator VIX - levels where usually corrections bottom.
Advance-Decline Issues - higher low so far, divergence developing??
Put/Call ratio - the lowest level since the corrections in 2011-2012
NYSE New Highs-New Lows - extremes like Oct. 2014
DAX Stocks above MA50 - 2SD nearing a bottom.

Cycles usually help us to find the right EW count and the magnitude of a move/low... but after such a long and crappy move it is difficult to spot important lows and there is only confusion now.
First the cycle guys are arguing if October 2014 is 40 week or 18 month cycle low - both counts has problems. I have swapped my chart, but now the old one looks better.
Now confusion about the 40 week cycle low - was it in July or the low of the current move when it is over. It is important to know what to expect.
I have to rely on EW/TA for a while until the picture is clearer. At the moment I think to count the next low as the 40 week low and I will revert to my old chart for the 18 month low. This way the cycle count will fit better with EW/TA and expected important low 9 year cycle low next year.

The two options are shown:
- July as a low and the current 40 week cycle toped out very early which is very bearish. This way the length of the previous cycle is perfect, but only 5-6 days higher from 40 week low... and in hindsight this is not an important low just something in the middle. Somehow it does not look right.
- the next low will be the bottom of the 40 week cycle a little bit longer, but not something extraordinary.

I prefer the second option at the moment - it fits with technical indicators and market breadth.

I think my old count looks better.... I will wait for a while until we have clearer picture.

GDXJ finished it's five waves now it is time for a correction. Around 20.30 looks interesting 50% Fibo/gap/support/MA200. Gold made 5 waves too, but now Silver is weaker and making only corrective waves. It is not a problem for me because my forecast is that this is not the low for the bear market anyway.

Last week I was talking about the indicators on the weekly chart of DJI. Now look at the chart and the indicators for the DAX. It is clear it is bearish, but watching the indicators what would bet on - continuation or oscillators reset? It will last months the oscillators to be reseted. I would rather bet on that the first leg of a much bigger correction is nearing a bottom. The alternate scenarios full blown market crash.

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