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.
MARKET BREADTH INDICATORS
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.