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).
TECHNICAL PICTURE
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.
MARKET BREADTH INDICATORS
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.
HURST CYCLES
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.
very nice work,agree
ReplyDelete