Intermediate term view - volatile September and important low in October.
The week was lower as expected now waiting to see what happens - lower low or higher low before the next move higher.
Such moves have similar dynamics scary sell off -> bounce 2-3 days -> test of the low(higher/lower low) -> rally 5-10 days -> another test of the low(higher/lower low) before important low. This two tests of the low with different combinations higher/lower low makes them look different.
At the moment the indexes should be working on the first test of the low after 2-3 days rally.
I think we will see a higher low, but I will lie to you if I say I am convinced. It is time for short term trading anyway so I would say just wait to see what happens with the opening next week.
I think the most important at the moment is the USD which will give the direction not only for the stocks. For example the DAX has very high correlation with EUR/USD for a long time and PM moves depend on USD too.
My forecast from the last months is working great so far... if it continue working we should see several more days higher which translates into indexes higher to finish a-b-c, PM lower to finish their moves lower. Than we have the FED rates decision...
- rates unchanged -> USD lower -> stocks lower into October/PM higher no surprise.
- raising rates -> USD higher EW/Cycles enough moves/time to count the correction finished -> stocks higher with higher low in October, PM lower.
The first scenario looks more probable at the moment...
TECHNICAL PICTURE
Short term - the scenarios which I see - triangle(white), a-b-c lower and one more leg higher(yellow) and the bearish scenario with lower low(red).
Intermediate term - test of the low and another move higher before important low in October.
Long term - I have circled moves lower which I think are similar to he current one. If history repeats we should see up and down for weeks and intermediate term bottom in October followed by the second leg of the correction.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - moved higher from the oversold levels, but it is way too early for a buy signal.
McClellan Oscillator - moved above zero after very oversold levels.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - bounced higher from very oversold levels.
Fear Indicator VIX - moving lower but still at elevated levels.
Advance-Decline Issues - back to zero after oversold levels.
HURST CYCLES
The Hurst cycles guy has an update... the same what I am talking about for a few weeks. There is several different scenarios so as I said just follow the short term cycles until the picture is clear.
Day 9 of the current 40 day cycle... another week higher to finish a-b-c will look great:)
We have to wait until the test of the low in October to see if it is higher or lower low before we can label the cycles.
Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Another price flip which is not a surprise and setup at 4.
The DAX has extremely high correlation with EUR/USD when EUR moves higher it moves lower and the opposite, so watch closely the EUR/USD charts.
At the moment I see a range, broken trend line and a test of the support level and the broken trend line. Instead of trying to guess the direction wait to see what happens:
- bearish (red) - gap below support or move higher failing to reach the upper range boundary followed by move below support.
- bullish (green) - move to the upper range boundary weak move lower probably to the middle of the range followed by break out higher.
Everybody counting the next plunge lower wave 5.... I am not convinced, I think it is the bullish scenario... just watch the signs above.
Gold and Silver charts does not look convincing for a move higher at the moment. I think there is more to the downside before a low. The gold is bullish as long as it stay above support 1100 around there c=a too. If it moves below 1100 it will not look very good.
GDXJ the same story the moves higher does not look convincing. From the top we have an impulse lower and corrective moves higher... the more bullish scenario for the short term is shown on the chart, there is more bearish too.... at the moment is only for short term trades.
Cant imagine a double bottom to be the end of this years downside, too much technical damage to have a simple double bottom, down in to 160s.
ReplyDeleteI suppose you mean SP500 1600 - yes there is more to the downside, but we will see such levels next year when the 4 and 9 year cycles bottom. Yes technical damages, but broken support/trend lines will be tested first before we see the next leg lower. Expect an yearly low and 18 month low... I can not say now or in October, I will not be surprised even if the low is behind us.
DeleteTA weekly indicators and market breadth at levels seen at important lows and it will last months to be "repaired".
It is a game of emotions greed and fear. Too much greed and 8-9 months distribution was a guarantee that we will see a correction and that this is not a continuation pattern. Now the pendulum moved to the other extreme, but way too much fear, way too fast. I can not find single bullish article, sentiment extreme bearish, too much media attention, headline "The Bear Market Everyone Saw Coming".
Make no mistake the correction has not begun now it was running for months, this was the culmination and now we are waiting the bottoming process - sellers are exhausted, buyers are scared. Than you need several months so that the traders forget the pain before the next leg lower starts. Even in 2008 was not different. I expect the same outcome because it is all about human emotions and they react always the same way.