Short term view - one final push higher and than a reversal.
Intermediate term view - lower for 2-3 weeks after a reversal, at the moment I think we have the second wave of a flat.
This time I could not spot the right pattern. It is a double zigzag, but at "a of Y" I saw two waves higher(the first from the August low) with a mess in the middle and I though this is the first zigzag and we should see a pullback 2 weeks in October. This was the wrong pattern the second zigzag was running already. Corrective patterns are tricky and often you have the right one when it is close to completion.
One important lesson - a short signal was never triggered. The price stayed all the time above MA50 on the hourly chart, no lower high or higher high with divergences. As I wrote many times trading system rules always take precedence over forecasts.... no exceptions.
What to expect in the future:
- EW says we should see a wave lower for either flat correction or a triangle. Surprise pattern will be higher high after a pullback - maybe a larger zigzag for expanded flat or impulse higher... somehow it does not fit with the bigger pattern and cycles, but will see first how the next move looks like.
- Cycles - we have strong bullish 20 week cycle. Usually in this case the next one should make higher high. The problem is the 4 and 9 year cycles are pulling the prices lower. So I think the next 20 week cycle should top earlier but with prices close to the previous high. The cycle guys call it M pattern because the cycles of higher degree are dominant and the chart looks like double top or deep retracement.
- Some thoughts - I do not see a reason why the big boys should start a sell off in the November/December period. I read a lot "this is low quality rally". Maybe but the big boys will not miss the opportunity to write some nice numbers in their books for 2015. Take for example 2007 the start of the scary bear market - negative November followed by deep retracement in December and we will worry about bear markets later. I do not see a reason why this time should be different.
Based on the observations above I see two possible scenarios - preferred move lower for 2-3 weeks in November to finish the 20 week cycle and deep retracement in December(at least until FOMC) and second one with higher high. We will know more when we see a move lower, how deep it is and how it looks like.
Short term - still above MA50 probably one more push left higher... I do not lower high or higher high. Minor support is now the 2080-2085 area and break below it is confirmation that something to the downside has begun.
The area 2000-2020 is support and in the same time 38,2%-50% Fibo retracement. I think any move lower should find support in this area.
Intermediate term - how a flat should look like(red) and surprise 5 waves higher(green).
Long term - adjusted for a flat, one more test of the support zone and MA200.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - in the upper ranges, but not heavily overbought or with divergences. Many are not following the prices higher...
McClellan Oscillator - even more divergences.
McClellan Summation Index - buy signal.
Weekly Stochastic of the Summation Index - reached overbought levels, which is usually a signal that a move in the opposite direction should follow.
Bullish Percentage - buy signal.
Percent of Stocks above MA50 - turned lower.
Fear Indicator VIX - bottoming??? Very narrow BB which means expect a strong move soon.
Advance-Decline Issues - in the middle of the range does not follow the indexes for weeks. Probably a few shares are dragging the market higher.
Day 29 of the 40 day cycle.
Week 11 of the 20 week cycle. If we see a confirmation for a flat correction I will swap the chart with the one with shorter cycles from the previous post.
Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Sell Setup has been finished, but still there is no price flip to signal a reversal.