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.
MARKET BREADTH INDICATORS
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.