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.
MARKET BREADTH INDICATORS
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:)