Apr 30, 2016

Weekly preview

Short term view - the current move lower should finish soon and one final move higher is expected.
Intermediate term view - one more move higher before the correction shows it's teeth. It could be a higher high or lower high. I do not know it depends on which scenario plays out.

The move higher before FOMC was weak and moved below the blue line. Now the question is - is this wave 4 (the red scenario from last week) or the top is behind us? No one can tell you, it is too early to say without confirmation.

The current move lower is only three waves so here it is how the two scenarios bullish and bearish should develop:
- bullish higher high - the price should move above 2081 before another lower low to produce overlapping waves. In this case higher high is more probable.
- bearish lower high - on Monday the price should turn lower and make one more lower low. Than we have 5 waves lower and the next move should be weak and make a lower high.

The price is well above MA50 on the daily chart so do not expect the index suddenly to accelerate lower. Even in the bearish scenario we will see the price "dancing" for a while down and up and around MA50 before a real sell off begins(see the second chart).

Short term - red is bearish one more move lower to confirm impulse and reaction higher with resistance the last minor high around 2100.
If next week the indexes continue higher and move above 2081 than we have only three waves lower or another corrective move. In this case we should see a higher high.

Intermediate term - MACD and RSI should bounce higher from the trend lines. In the bullish case we will see another lower high and divergences. In the bearish case they will turn up for a few days and break the trend lines. You can not say in advance what will happen.

MA50 is one of my favorite indicators. There is three phases:
- 1 moving higher, the price is above it and corrections are bouncing of it.
- 2 topping - the price bounce from MA50, but it is weak and makes lower high, moves below it and than tests it from below. I call this phase "the dance with MA50".
- 3 moving lower, the price is below MA50 and corrections find resistance around MA50.

Even in the bearish case we should see one more lower low to finish impulse finding support where? - right MA50 and than the indexes should move to the second phase dancing with MA50:)
Look at August and January when the sell of accelerates - when the price is below MA50.

Long term - no change.

The Market Breadth Indicators - look bearish with divergences, but not the case when you expect major reversal... rather a correction.
McClellan Oscillator - lower peak and divergences.
McClellan Summation Index - buy signal, no divergences.
Weekly Stochastic of the Summation Index - in overbought territory for weeks. It is time for a swing lower.
Bullish Percentage - sell signal, but still strong above 75.
Percent of Stocks above MA50 - is in a correction mode.
Fear Indicator VIX - turned up from oversold levels.
Advance-Decline Issues - lower high and divergences.

Day 16 of the current 40 day cycle. Week 11 of the 20 week cycle(average length is 14-16 weeks). We are nearing a top or even it is behind us.

Apr 24, 2016

Weekly preview

Short term view - I think we will see one more higher high.
Intermediate term view - the indexes should start toping next week.

The indexes squeezed one more push higher, SP500 "dancing" around 2100 and now pulling back - all this was expected.... now I think this is wave 5 it looks long enough. The Fibonacci targets are 2125/2150/2195.

The indexes are higher for 10-11 weeks the 20 week cycle should top soon. The indicators and market breadth with divergences. TomDemark sell setup finished on the weekly chart and sequential on the daily chart. No reversal signs so far, but all this makes me nervous:)
I do not think the indexes will just reverse and plunge lower, it does not work this way with such moves, but I would say it is time to think about exit plan.

Short term - the move is difficult to count and I do not know which path will play out, but I think we will see one more higher high.
From the top on Thursday the European indexes are showing only choppy corrective move and I favor the green scenario one more push higher before FOMC to finish wave 5 and the whole move since mid February.
Above the blue line is still bullish if it is broken a bigger pullback is running.

Intermediate term - the indicators does not look so good any more... to many divergences for my taste:)

Long term - no change.

The Market Breadth Indicators - look tired with divergences. For a bullish move this does not mean reversal and plunge lower, but there is not much left to the upside and a pullback should begin soon.
McClellan Oscillator - lower high and divergences.
McClellan Summation Index - buy signal.
Weekly Stochastic of the Summation Index - sell signal, turned lower at overbought levels.
Bullish Percentage - buy signal with small divergence.
Percent of Stocks above MA50 - still in the buy zone, but turned lower. The rally has less participants.
Fear Indicator VIX - double bottom at oversold levels.
Advance-Decline Issues - lower high and divergence.

Day 11 of the current 40 day cycle. Week 10 of the 20 week cycle(average length is 14-16 weeks).

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
TomDemark sell setup finished on the weekly chart and sequential on the daily chart. Wait for price flip - close below the close 4 days ago and this is currently 2073.

Apr 18, 2016

Secular trends

Before the next long term update in June some thoughts about secular markets and money flowing between stocks and commodities. This is longer than long term:) it concerns your whole "investment life" which last roughly 40 years.

It is the most important chart you should know(the first one). This chart SP500 priced in gold is showing very clear - first when you have secular bull market in stocks and when you have secular bull market in gold and second that roughly every 20 years the money flow changes its direction from stock in gold and from gold in stocks.

It is very very important especially for non-active traders to know where you should park your money so that it brings you more value. All you need is the chart below no need of complicated economical/fundamental/chart analysis or to listen some "investment guru".

David Hickson has every two weeks webinars talking about Hurst cycles. In one of his webinars he was discussing SP500 priced in gold. I searched in Internet for a chart SP500 priced in gold and I have found this page where you can check almost everything priced in gold not only SP500.
I would say the chart is eye-opening. It confirms my expectation for one more cyclical market for stocks/gold before a secular trend change and now I am even more confident in my forecast. The most important conclusions:
- Expect one more cyclical bull market in gold and one more cyclical bear market for stocks.
- If history repeats we will see higher low for SP500 in nominal values, but lower low priced in gold/inflationary adjusted.
- Expect secular trend change around 2020-2022. I think the secular trend change will be a process lasting a few years with different assets bottoming/topping in a time-span of 2-3 years. I expect double top for gold (lower high 2022), important low for stocks around 2020 and lower low with divergences 2022 and end of the bond bull between 2020-2022.

Long term chart SP500 priced in gold - the secular markets are very well visible. We have great looking cycles for the secular trends roughly 40 years - 1898-1942 / 1942-1982 / 1982-2022. The next important secular trend change is coming in 2020-2022, but now you should be prepared for the next 40 years, knowing where to put your money for the rest of your "investment life":)
Stock bears usually bottom at 5-10 grams gold. Interesting is that the secular bull/bear markets are getting longer and the amplitude is bigger. I do not know why.... I suppose because of CB's interventions we have bigger moves higher and bigger crashes.
- bear market in stocks 1929-1942 - 13 years.
- bull market in stocks 1942-1966 - 14 years.
- bear market in stocks 1966-1982 - 16 years.
- bull market in stocks 1982-2000 - 18 years.
- bear market in stocks 2000-2022(expected) - 22 years - continues the trend of secular trends lasting longer.

DJIA long term chart in nominal values. The difference is that bear markets end with higher low in nominal values, but lower lows priced in gold. My current cycle calculations are pointing to 2022 as a low. This will be the third cyclical bear market to finish the secular bear market. I highly doubt that we will see a 80% drop for a lower low. I expect the price to be cut in a half as always.

A closer look shows 20 year cycle from 1980-1999, very nice M pattern - bottom of the first cycle and the top of the next cycle and the next 20 year cycle moving lower. It looks like the same pattern as in 1980 - one more cyclical move for stocks and gold to finish the secular trends.

I think the indexes will make higher low in nominal values. I expect the bear market to look like 2000-2003 lasting longer 3-4-5 years with two legs lower. It will feel worse compared to 2008 because it will last longer with very bearish sentiment expecting never ending bear below 666.

Gold with cycle analysis using tops instead bottoms(purple 8 year cycle high, gray 4 year cycle high). Gold should be hitting 4 year cycle high and the "baby bull market" should hibernate for 6-12 months waiting for major USD and Stocks high. The next 4 and 8 year cycle highs are around 2020 which should be the bottom of the first leg lower for stocks and 4 year cycle low(2016+4). Roughly estimates SP500 bottom at 1250 and sp500/gold ratio 10 gram means gold should triple and top around 3500.
And because stocks should bottom later I expect some kind of double top before the secular trends kick in.

Yields long term chart - it is interesting that yields are pointing to a major low around the same time like gold major top and stocks major low. It can not be a coincidence... I would rather bet on secular trend changes in different assets.
Look at the previous cycles - they vary from 5 to 7 years. Low in 2015 and if you add another 5-7 years the next major low is 2020-2022 probably the end of the bond bull market.

And back to reality what to trade in the next few years - I think cyclical trend transition has begun. Gold bottomed as expected before USD, but it should hibernate for a while. In the next 9-12 months USD/stocks should move higher to a major top with gold making higher low. This will be the second chance to jump on board on the new bull market for precious metals.
As I wrote gold and USD tops/bottoms are not synchronized, but do not expect major move in gold without major move in USD. Look at the chart below to see what I mean.
Gold bottomed in 1999 but made a higher low in 2001 when USD made its major top than the bull market for the precious metals begun.
The USD bottomed in 2008 and made a higher low in 2011. The bear market for gold started in 2011 when the USD really took off.
If history repeats you can not expect gold to continue moving higher without a major top for the USD and I do not think we saw it.

Apr 16, 2016

Weekly preview

Short term view - slightly higher high and another pullback lower.
Intermediate term view - another 2-3 week before an intermediate term top.

Two choppy days and the indexes turned up making another higher high. That what easy to forecast. The question is are we near the top of the move since mid February or this is just the top of wave 3, which means expect bigger pullback(wave 4) and test of the ATH(wave 5).

It is difficult to say. We have the minimum for a finished wave higher, but there is no problem to see another pullback and move higher with technical indicators and market breadth making bigger divergences.
We have ECB 21.04 and FOMC 27.04.... it will be strange to see a reversal and strong sell off before the CBs meetings.
I think we will see the more bullish scenario(green on the first chart), but if you do not like the risk take half of the profits next week and the other half on the next high or confirmed reversal averaging the exit price.

Short term - I think it is wave 3 with one more higher high late April(green). The current wave looks too short for wave 5 and in Europe the indexes have just begun a move higher.
Of course I can confirm this when we see the move lower if it is corrective or not.

Intermediate term - still bullish price action and indicators. Again preferred scenario bullish(green) and the only way to count this impulse as bearish is a huge expanded flat a-b-c/B(red)

Long term - no change.

The Market Breadth Indicators - building divergences, but probably only short term divergences for a bigger pullback wave 4.
McClellan Oscillator - oscillating around the zero line.
McClellan Summation Index - short term divergence - pullback expected.
Weekly Stochastic of the Summation Index - sell signal, turned lower at overbought levels.
Bullish Percentage - short term divergence - pullback expected.
Percent of Stocks above MA50 - short term divergence - pullback expected.
Fear Indicator VIX - short term divergence - pullback expected.
Advance-Decline Issues - divergences the move is tired.

Probably we have the 40 day low at day 38, but it can stretch a little bit if the next pullback makes lower low.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
We have finished countdown and combo for the first time since 2014. It looks like strength to me the market is trending for the first time since 2014.

On the weekly chart SP500 finished a sell setup.
Now I have noticed that if my preferred scenario plays out we will have an inverted H&S with target 2400.

Apr 14, 2016


The pullback has finished just as a-b-c. The brake above the trend line signaled that it is over. Now it is time to think about taking money of the table at the next high. It is not a bad idea to book half of the profits. The more bullish scenario is that this is the top of 3 and to expect waves 4/5. Even so than you can book the another half of the profits.
Russell2000 for example looks like finished pattern ED for wave 5, market breadth is working on divergences, so do not get too greedy chasing the last 20 points. The move could be over in a few days.

Emerging markets (RSX,EWZ), USD/RUB, Energy(XLE), Silver/GDX/GDX with finished 5 waves - expect moves in the opposite direction for crude oil and gold and the USD moving higher. Obviously we are close to reversal in the intermediate term trends for different assets not only stocks.

Apr 12, 2016


Last week I wrote that a double zig-zag lower to support will look much better. Now it looks even more like the most probable pattern. Break above the trend line and the pullback is over and a move above 2060(the blue line) is the confirmation at the moment.
The move is corrective with overlapping waves so we should see a higher high after it is over.

Apr 9, 2016

Weekly preview

Short term view - not sure for the exact path, but I expect a few more days up and down before the pullback is over
Intermediate term view - after the pullback is finished, I expect another move higher to test the ATH.

Nothing new - we have some kind of a pullback. The move is corrective with overlapping waves. Short term I can not say if this iv of 3 or 4.
Intermediate term - last week I switched to the bullish scenario. Now I want to see a confirmation, which means after the pullback is finished another leg higher to test the ATHs. Then we will have an impulse and bullish right translated 20 week cycle.

Short term - it looks more like 4(red), but we need more price action for confirmation that it is not iv with v/3 to follow(green)

Intermediate term - waiting to see confirmation that we have an impulse. We need one more move higher. Red is the bearish scenario double top in summer and lower until October.

Long term - the bullish scenario should test the ATHs with an impulsive move and continue higher in 2017. For the bearish scenario... it could be flat correction for B with C lower to follow.

The Market Breadth Indicators - are showing that a pullback is running and they are preparing for divergences later.
McClellan Oscillator - spending time below 0.
McClellan Summation Index - technically sell signal, but I think you should wait for divergence.
Weekly Stochastic of the Summation Index - at overbought territory for a while I think it will last another 2-3 weeks before it is time for a sell signal.
Bullish Percentage - turned lower
Percent of Stocks above MA50 - resetting lower after very overbought levels.
Fear Indicator VIX - bounced from oversold levels... wait for divergence.
Advance-Decline Issues - in the middle of the range, pullback is running.

Day 39 of the 40 day cycle waiting for the bottom of the pullback. On the weekly chart at week 9.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
On the weekly chart at week 8 of a sell setup. We need a close at 2050 or higher for finished setup. On the daily chart we need one more higher high to finish countdown and combo.

Apr 8, 2016


This is CFD chart of SP500. The price bounced from support (the blue line) made a lower high and broke below it. The bearish H&S does not look so bearish... instead continuing lower the price is now above the neckline and overlapping with the previous waves. It looks like corrective move two impulses lower with the same size.

The pullback could be finished with this A-B-C zig-zag and at day 40 with stealth 40 day cycle low, or it could last another 2-3 days for a double zigzag wave 4. I do not rely on waves in the last weeks the move is too choppy watch support/resistance levels.

Around 2010 there is support, 38,2% Fibo retracement level, MA200 and MA50 on the daily chart... for a swing trade it will be much better to see the price at this levels - more clear structure and clear stop level. Let's hope that we will see the price around there:)

Apr 6, 2016


On Monday the CFD/futures made higher high the cash index small double top and on Tuesday we have the move lower an impulse to support level - the blue line from the hourly chart which I have shown last week(this is the 10min chart with the same support level).
It could be just a flat correction and another higher high(green) or expect a lower high and another leg lower(red) or we have a double correction a flat is finished X wave with lower high and another zig-zag lower.
It is very difficult to count this move since February... it is guessing and as I wrote wait for lower high and move below support if you want to short.
I do not expect huge pullback McClellan Oscillator is already at -40 and oscillators are nearing oversold levels.

Apr 2, 2016

Weekly preview

Short term view - waiting the current wave up to finish followed by a pullback.
Intermediate term view - pullback and another move higher, I do not expect a reversal in April.

More of the same - shallow pullback and another move higher. Again waiting this move higher to finish and see if a bigger pullback will follow. When you have such moves, crawling steadily higher despite overbought conditions for weeks, the best way is to wait for a lower high and broken support.

About the long term - since the lows I follow two possible scenarios wave X and another zig-zag lower or important low and impulse higher running.
Both scenarios say prices should move higher, but the two waves should have different behavior/personality:
- wave X - the last 18 month cycle of a 9 year cycle should be bearish and wave X should "burn" time. In Other words important low, but it should produce a move which is retracing more time than price because the most bearish wave is upon us.
- impulse higher - 9 year nominal cycle low (7-7,5 years for US indexes) major low and strong move higher.
What we have now is almost vertical move for 7-8 weeks and SP500 is less than 3% below ATH. Question - Which personality has this wave?

Last week I wrote that technical indicators,cycles,market breadth, TomDemark sequential are pointing to the bullish scenario. EW - some still count 1-2 1-2 or a-b-c an imminent reversal and 1929 style decline. I am not sure what the count is, but for me this wave has different personality and such comparison with 1929 are ridiculous.
The only way at the moment to see something bearish is to force some EW count, ignore the price action and dictate the market what to do next.
Trying to be ahead of the market and not following it, is one of the biggest mistakes you can do.
I am switching to the bullish scenario as a primary, we follow the market and we see what happens. If we see something wrong we will put the bearish suit again.

Short term - probably a day or two to finish the move higher. If we see the price below the blue line we have the expected pullback. It should be shallow around 2000-2010 support(the yellow line), MA200 and 23,6% Fibo.

Intermediate term - the oscillators look tired with divergences. A pullback for 5-8 trading days and 40 day cycle low will look perfect. Than I expect the high to be tested.

Long term - the change is that the bullish scenario is my preferred one now, but we will watch closely the "bearish" path, I do not want to be surprised.

The Market Breadth Indicators - no change like the previous weeks overbought with some divergences.
McClellan Oscillator - triple divergence already, we should see a pullback soon.
McClellan Summation Index - buy signal, above 1000 which means strength and bullish move.
Weekly Stochastic of the Summation Index - at overbought territory waiting for the next swing lower.
Bullish Percentage - turned lower, but still buy signal.
Percent of Stocks above MA50 - very overbought, short term divergence.
Fear Indicator VIX - still moving lower, at 13 a lot of complacency.
Advance-Decline Issues - divergences, we should see a pullback soon.

Bullish 40 day cycle at day 34. The move lower should produce only a shallow pullback.

Last week I have shown the bearish path for the cycles. This is the bullish chart with nominal 9 year cycle low in February and length 7 years which is typical length for the US indexes.
Two years higher, final mania phase higher wave 5, toping one year and 3-4 years bear market to finish 18 year cycle low and the secular bear market.
(Purple is 4 year cycle low, gray is 18 month cycle low. On the chart is shown only the first 4 year cycle of the next 9 year cycle, there is one more 4 year cycle lower to around 2023 for the final low not shown on the chart)

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Week 7 of a sell setup on the weekly chart. As I wrote last weeks the market is trending for the fist time since 18 months. This should be bullish. One more higher high and combo will be finished, for countdown we need two more days.

The comparison with 2000/20008. March is behind us as and expected it was a green month. Again the time and path are the same, but as you can see the price is above MA20 and in 2000/2008 it was well below MA20. In April we should see a pullback and test of the high so candle with small range body... the bears should start praying for a plunge after that like in 2001 and 2008:)