Jan 30, 2016

Weekly preview

Short term view - we will see 10-20 points higher, but than we have to wait and see what happens.
Intermediate term view - higher in the next 6-8 weeks.

One more leg higher as expected. Short term waiting for confirmation to see which pattern is playing out, but intermediate term the indexes should be higher in the next 6-8 weeks.

So far the move is only three waves and it is difficult to say what pattern we have.
If it is only corrective a-b-c than it should find resistance around 1950-1960 and turn lower.
If it is an impulse we should see the price in the 1980-2000 area next week.
I think we will see a top next week for a-b-c, but that is just a feeling no prove at the moment. Wait for confirmation if you want to short.

Short term - the bearish scenario(red) the price will test MA200 for a-b-c and turn lower to test the low. The bullish scenario - the price continue higher above MA200 and reaches the resistance zone.

Intermediate term - the both patterns. Next week we will know more, but in both cases I think there is more to the upside in the next several weeks.

Long term - another bullish week, the weekly chart does not look bad at the moment. No change - expecting move higher for at least several weeks.

The Market Breadth Indicators - turned up from very oversold levels. They are sending bullish message. Worst case the indexes making lower low and the indicators higher low with divergences.
McClellan Oscillator - strong move above zero.
McClellan Summation Index - buy signal.
Weekly Stochastic of the Summation Index - still in oversold territory, but ready to turn up.
Bullish Percentage - turned up above oversold level 25.
Percent of Stocks above MA50 - turned up above oversold level 25.
Fear Indicator VIX - turned lower and we have lower top with SPX making lower low.
Advance-Decline Issues - turned up from extremely oversold levels.

It looks like we have 20 week cycle low. If this is the case than the next 40 day cycle has begun.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Buy setup has been finished on the weekly chart. If next week we see a close above 1920 we will have a price flip to confirm bullish outlook for a few weeks.

The monthly chart and the comparison with the previous two bear markets. It develops exactly like in 2000 and 2007 - first leg lower, rally higher to test MA20(red arrow), second leg lower(green arrow),a pause for 2 months, than the real bear starts.
The differences - the weekly indicators are correcting lower for a long time saying we are in a mature correction not at the beginning and the moves lower are much more shallow. In 2000/2007 the two moves lower are 18%-20% now we have 12%-14%. You can see that the price could not move much below MA20. That is why I think this is a huge correction, but not a severe bear market which will cut the prices in a half like 2000 and 2007.

When I watch the charts EW,market breadth definitely we will see a move higher for two months like 2000/2007, so even if you are a big bear just have patience and wait until March.

Jan 23, 2016

Weekly preview

Short term view - more to the upside.
Intermediate term view - higher in the next 6-8 weeks.

We saw up and down days finishing a diagonal followed by a reversal, so no surprises. The big boys as always pushed hard lower more than 60 points before reversal. This is typical shaking weak hands. I hope you stayed calm and did not turn bearish at the lows - the pattern and market breadth were clear that we are close to a low.

I think the indexes hit an important low. We have reversal candles and divergences on the weekly charts. Probably February will be choppy so that the oscillators on the weekly chart turn up, for an example the histogram still points lower. The most bearish pattern I can see at the moment is a retest of the low with lower low even than a multi week move higher should follow.

The question is if we have correction single zig-zag and a move to new ATH should follow, or we will see something more complex - combination correction. I do not know what will happen at the moment, but in both cases we should see a move higher for 2-3 months so that the traders forget the pain from August and January.
My preferred scenario is a complex correction because looking at the DAX it looks like in the middle of something... it does not look like finished pattern.
Keep it simple trade on the long side and we see what happens and how the charts look like later in March.

Below you can see charts of the NIKEEI and DAX indexes. Again like Russell2000 I can not be bearish looking at this charts and market breadth hitting extremes(not just oversold) at the same time.

P.S. Crude Oil and emerging markets EEM/EWZ/RSX made an intermediate term bottom. It is very difficult to say if this is the BOTTOM or there will be one more move lower. Several weeks higher and one more push lower will look better. If you are interested in long term you can open some positions and add on the next lower/higher low(or take profits and enter again on the next low).

Short term - I expect at least one more leg higher. Red is the bearish scenario with a lower low. Even in this case short term we should see one more leg higher for an a-b-c.

Intermediate term - I think the indexes will move higher in the next 2-3 months. Than we will see which pattern is playing out - X for complex correction or just continuing higher.

Long term - no change. Bullish reversal candle from MA200 expecting move higher for a few weeks at least.

The Market Breadth Indicators - hit extremes and turning up.
McClellan Oscillator - sharp reversal from oversold levels.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - in oversold territory, ready to turn up.
Bullish Percentage - turning up from oversold levels.
Percent of Stocks above MA50 - turning up from extreme lows.
Fear Indicator VIX - turned lower and lower high compared to August
Advance-Decline Issues - turned up from extreme lows.

There is a lot of room for interpretation so I am showing the big picture. I have shown this charts already so nothing new - the two scenarios which make sense for me and the cycles match the average length of the 7 year cycle for SPX.

It is possible, but it does not feel natural...

It looks better and because of the DAX pattern this is my preferred scenario.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Week 8... the buy setup will be finished, I doubt that we will see a close above 2045 next week.

The previous three "crashes" - sharp reversal with bullish candle hammer followed by lower low, V shape bottom, higher low. It is never the same, but usually the bottom is tested. Given the very negative sentiment V shaped bottom has the lowest probability.

NIKKEI - like Russell2000 I can see only A-B-C...

DAX - looks like unfinished pattern. I think we are in a huge X wave. The index made lower low this week so you can not count 1-2 from October 2015 for the bullish scenario. I think it is a flat correction.

Jan 16, 2016

Weekly preview

Short term view - a few days up and down and bottoming starting next week.
Intermediate term view - important low in the next week or two.

Crazy week with a lot of reversals - we saw a bounce for two days, but it was weak and corrective. The waves had very clear structure so it was easy to call the next two days down and up - nice gains if you are a short term trader and traded the moves:)

Short term - Friday surprised me, probably we have a diagonal for wave 5 and we need one more move up and down to finish the whole move from the November high.
Intermediate term - so far from the top in 2015 I see only three waves lower, I suspect huge zigzag. Very bearish sentiment because of the two waterfall moves in a few months, selling fear everywhere. Market breadth extremely oversold levels comparable with the biggest correction since 2009 (21% in 2011). Despite all this we have so far only standard correction 6-10 weeks 10%-12% (see the cycle chart). For me it does not look and feel like a bear market (not a drop more than 20%, real bear market which cuts the prices in a half). More emotions than real results - no impulse, nothing more than simple correction.
Long term - there is several EW patterns and cycle counts, so the picture is not very clear... I do not think that bear has market begun or after this zigzag is finished the bull market will resume. I think we will see a complex correction combination - the first zigzag should finish soon than we should see a strong move higher for the connecting wave X, followed by another move lower which should be bigger than this 10%.

All this is wrong and I am wrong if a rally could not move above 1980 followed by another plunge lower. In this case we will have impulse lower which will mean that we have a reversal and the bull market is over.

Short term - only three waves lower so probably a diagonal. Europe have only three waves lower too, so we should see one more up and down before it is over.

Intermediate term - so far the moves consist only from three waves so the main scenario is a zigzag followed by a connecting wave X to at least 2000-2020.
The alternate scenarios are - green bullish this correction is wave 4 and wave 5 starts to new ATH, or bearish we have truncated wave 5 and reversal with impulse lower(need more waves lower to be confirmed).

Long term - no change, this is the scenario which I follow - combination correction.

The Market Breadth Indicators - are very oversold comparable with the biggest correction since the beginning of the bull market(2011), only in 2008 were the indicators more extreme. A lot of emotions, extreme bearishness, despite all this there is no confirmation that this is more than a huge correction because the 7 year cycle topped out.
McClellan Oscillator - extreme oversold with divergences.
McClellan Summation Index - sell signal, close to very oversold levels.
Weekly Stochastic of the Summation Index - turned lower, I expect higher low.
Bullish Percentage - very oversold levels.
Percent of Stocks above MA50 - very oversold levels.
Fear Indicator VIX - do not mirror the "panic", well below the August level.
Advance-Decline Issues - very oversold levels.
Put/Call ratio - extreme bearish levels.
NYSE New Highs-New Lows - very oversold levels, divergence with August.
Percent of Stocks above MA200 - extreme bearishness.

Not really clear just waiting like in August. I think we have a longer cycle lasting 21 weeks and the next 20 week cycle should begin soon.
I have marked all corrections since 2009. Interesting is that 80%-90% of the loses are made for 5-6 weeks and the typical size of a correction is 10%-12%. The current move looks and feels like a typical correction despite all the gloom and doom.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Buy setup was finished on the daily chart as expected. I think a buy setup will be finished on the weekly chart too.
Looking at the histogram it will take some time to see a reversal. Probably several weeks up and down in February(like September) and retest of the bottom before any substantial move higher.

Here is Russell2000 weekly chart - I can not be bearish looking the pattern and the indicator. It looks like clear corrective move - we have three waves lower so far with a=c. RSI is oversold at 30 and way too far from the trend line which usually means expect a snap back.
Even if it is a bear market EW and RSI are saying the first leg lower is finishing. Look at RSI in 2008 and now - two pushes lower to oversold levels and snap back to the trend line.

Jan 13, 2016


Short term one push lower v of 5 today before a bigger move higher. Below is the big picture...

Three waves lower and three waves higher the options are triangle(yellow), flat correction(red) or some combination

And if you remember this cycle charts

If we see a finished pattern flat correction, there is an option that wave 4 is finishing. I think this scenario has lower probability.

And the triangle or combination scenario.


This is SP500 CFD it looks like wave 4 - overlapping and taking too much time. The cash index should squeeze higher high today for a-b-c. The bull's hope is that we see 20-30 points rally today.

Jan 10, 2016

Weekly preview

Short term view - bounce higher next week
Intermediate term view - bottoming for a few weeks

It is stunning - the move is developing exactly like the move in August. 2/3 months corrective move followed by a plunge for 6 days and China yuan devaluation is the excuse again.
I do not see a reason for a different conclusion than the one in August - this is not a bear market, expect several weeks bottoming and a move higher.
In the first phase of a bear market the prices are moving slowly lower for a long time - there is no "crashes" let alone two for a few months, everybody buying the dips and talking how much money they will make. Such "crashes" exhaust the bearish energy too fast, the traders get scared too fast.... this is typical for a correction in a bull market and not the beginning of a bear market. Look around in Internet everybody talking about bear market. In a real bear market this should happen in the second phase when the market really crashes 30%-40% of the top, now SPX is less than 10% lower from the top. My conclusion stays the same - the 7 year cycle is dragging the prices lower and the correction which begun in 2015 will continue in 2016, but this will not be a bear market which cuts the prices in a half.
The alternate scenarios are very bullish after this correction the bull continues higher or very bearish the markets continue plunging lower. I think they have low probability.

After a plunge what follows is a sharp bounce higher and retest of the low. The retest could be a higher low(like in August) or lower low. It is difficult to say in advance, so I see two options(see the second chart daily):
- retest with higher low like in August - than the move will be again only corrective three waves like in August. In this case I suspect this is wave b of B(green) of a huge expanded flat.
- retest with lower low - probably waves 4/5 and this will be an impulse which will finish a flat correction(red) from the top in 2015.

Short term - waiting the next week to see how it will develop. No bottoming signals at the moment.

Intermediate term - here are the two scenarios. Red - several weeks to finish an impulse for a flat correction and wave X higher. Green - reversal higher which means only three waves lower and probably higher high for expanded flat.

Long term - probably more complex correction, but the same idea correcting in 2016.

The Market Breadth Indicators - oversold and some of them with divergences. I think market breadth says we are close to a bottom...
McClellan Oscillator - divergence, expect bounce higher.
McClellan Summation Index - sell signal, but divergence.
Weekly Stochastic of the Summation Index - buy signal.
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - oversold like October 2014 and August 2015.
Fear Indicator VIX - level where usually corrections finish.. outside the BB expect move in the opposite direction.
Advance-Decline Issues - oversold and divergences.

Like in August we will know the right count later when the move plays out. It could bottom now and this is the 20 week cycle low or continue bottoming for a few weeks which will mean this is the next cycle.

The same story it depends on how it will play out. Two shorter 20 week cycles or one longer.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Very high probability that the setup will be finished unless SPX closes above 1980 in the next two days.

For the first time in more than a year we have something on the weekly chart. If SPX stays below 2045 in the next 3 weeks we will have finished setup on the weekly chart.
P.S - The previous plunge was followed by 6 weeks of bottoming process with higher low.

Jan 7, 2016


Looks like another 5 waves lower to me and the whole move from the top like a-b-c....

I do not know what kind of pattern this is... I know it is a very ugly thing:)
- very bearish - some ugly 1-2 1-2 1-2.... I doubt it
- "less bearish" (red) - some ugly diagonal, we have now 5 waves lower. Retracement to the resistance level expected.
- bullish(green) - ugly double zig-zag the W-X-Y on the chart.

Waiting to see what will happen in the next few days...


Ok we have exactly the same story like in August(well visible on the DAX), but a little bit more mild.
A "crash" or severe sell off lasts 5-8 days. In August 6 days in row with 4 gaps now we have so far 5 days in a row with 3 gaps.
The move starts as a corrective and than we have a waterfall. The same problems China stocks and currency devaluation.

I did not like the bearish scenario in August because such moves scare the traders way too much way too fast. I do not like some very bearish scenario again because of the same reason plus the move from the top is three waves a-b-c with a=c.

I read everywhere bear market.... call me idiot, but I think this is just wave b of X. This scenario looks much better as an EW pattern and from cycle perspective.
If I am right we should see bottoming today and tomorrow. That does not mean to go long wait for confirmation.
Even in the bearish case(red) I think we will see at least a bounce from the trend line and some gaps closed before continuing lower.