Intermediate term view - higher in the next 6-8 weeks.
We have the few days higher, but after a plunge 50 points on Monday and now the picture looks a little bit different.... because we have bullish weekly candle the weekly charts look bullish and on top of this I think Europe finished the first leg lower which begun in March.
The markets are out of sync a little bit at the moment - Russell2000 with lower low, SP500 testing the low, Nasdaq/DJI with 61,8% Fibo retracement from the September top, Europe probably finished the first leg lower of the correction.
The move from the top in May is only 3 waves, the move higher from the low in August corrective 3 waves, and from the top in September again only corrective. Cycles(intermediate term) are not very clear. Technicals weekly and daily after the move on Friday look bullish. TomDemark Sequential - first on the daily chart the two legs lower could not finish a setup and now on the weekly chart we have a price flip higher at week 8 and failed setup - big red flag for the bears and confirmation that the moves lower are corrective.
This corrective moves down and up confirm so far my long term view that we will see a correction (but not the end of the bull market) and this is only the first leg lower. But it is difficult to make a descent forecast for the short/intermediate term because corrections mutate all the time.
I see two scenarios - the August low was an important low(18 month cycle low/yearly low) and now we will see a corrective move higher for at least 6-8 weeks. This scenario looks more probable because the weekly charts look bullish at the moment and I think Europe finished the first leg lower.
The second scenario is one more corrective leg lower SP500 making marginal lower low, Nasdaq/DJ testing the low before 6-8 weeks higher.
I do not see another scary plunge lower because the move from the top in September is corrective, technical indicators weekly and market breadth are beaten down... this is not the environment which precede a sell off, we are not in a mature bear to expect such think.(see the previous post)
TECHNICAL PICTURE
Short term - the corrective moves make it difficult to say one more leg lower or not. From EW/Cycle perspective both are equally possible, the bullish weekly charts and Europe say green looks more probable, from historical perspective the red scenario will look better.
Intermediate term - with or without lower low I think the next bigger move should be a test of the 2040-2050 area.
Long term - 6 weeks later history repeats as suggested....
MARKET BREADTH INDICATORS
The Market Breadth Indicators - are around their bottoms, nothing like divergences, but the indexes did not made lower lows... so nothing convincing to say buy.
McClellan Oscillator - above the zero line.
McClellan Summation Index - sell signal
Weekly Stochastic of the Summation Index - buy signal.
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - moved higher from oversold level but nothing interesting.
Fear Indicator VIX - lower high... even if the indexes make lower low expect divergence and lower high for the VIX.
Advance-Decline Issues - close to the middle of the range with higher low, but the indexes made higher low too.
HURST CYCLES
I was talking about, that there is some confusion where to put the 40 week/18 month cycle lows. The chart below is another perspective monthly chart - many cycle guys are looking for yearly cycle low which corresponds to Hurst 18 month nominal cycle. Average length is roughly 15 months. The confusion comes from this sharp decline in October 2014 and it's amplitude (8? on the chart). It is well visible compared to the almost 9 months sideway move and some count it as a 18 month/yearly cycle low.
The options are - the previous cycle was 23 weeks long(not 15), we have a 18 month/yearly cycle only 8 months long or October 2014 was only 40 week cycle low and we have important low in August 19 months long cycle.
The choice is between cycle - 50% longer than the usual(23 months),only half size than the usual(8 months),3-4 months longer than the usual length(19 months). The most plausible choice is to pick the last option 19 month cycle low in August. The others are deviating way to much. I will work with this count now until proven wrong and the charts below are adjusted accordingly.
It is not perfect, it is a little bit stretched, but it is better than the other options.
I think we have half cycle low 24 days and now working on the next 20 days of the 40 day cycle.
Week 6 of the current 20 week cycle.
Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Price flip on the weekly chart and the setup lower has not been finished. Big red flag for the bears. Time is very important. For me trend means a move which continues long enough in time and not how big a decline is even if it is 10% for three days. I think TomDemark Sequential and Countdown uses time to measures exactly this if we have a trend (or not) and how strong it is. This move fails the time test for a trend.
DAX it looks like finished structure from the top v/5/C and we should see multi week move higher.
No comments:
Post a Comment