Jun 29, 2016


The price moved above the resistance zone for w4 of an impulse lower and it is clear that another move higher is running. No perfect count to fit cash index and futures so keep it simple 3 waves lower corrective and impulse higher bullish.
If this is the next big leg higher? - I think no it does not feel right. I will explain on the weekend. There should be more to the upside after a pullback so you can go long if you see three waves pullback and we see what happens.

Jun 27, 2016


The bears delivered the follow through... the pattern is the same we are in wave 3, but I admit, I am surprised from the strength. I suspect this is because we will see more important low as I thought till now(see below).
We are in wave 3 and we need series of 4-5 4-5 to finish the impulse C. At the moment it looks like it will finish around 1960 - 50% Fibo retracement.

This is important chart I think bonds are heading for MAJOR high so careful with bonds(more in two weeks in long term update). Check the dates of the highs - the indexes are making important lows when TLT is making important highs. With a lot of fear now, the correction heading for 50% Fibo retracement, and if I am right bonds with important high - it starts looking like intermediate term low wave 2 for the stock indexes.

Jun 25, 2016

Weekly preview

Short term view - there will be a bounce soon, but we should see one more lower low.
Intermediate term view - at least a week the waves to play out, after that we start watching for a bottom.

The market even the bookies were sure that the result from the referendum in UK will be "Remain" - well they were wrong. The futures made higher high and I was wondering if I am right, but even the alternate scenario was pointing lower. Now we are watching the pattern which I am talking for a few weeks - expanded flat. If this is the right pattern we need a move lower to 2000-2010(at least below 2020) for wave 3(futures did this) bounce higher wave 4 and one more weak move lower to 1980-1990 wave 5.

Yesterday I explained what I think. Short said I do not think that something has changed. If you have not noticed the correction has begun in April two months ago not yesterday... but I was missing the smell of fear - now we have it:) The August "crash" - the correction has not begun August it has begun three months earlier in Mai, the January "crash" - the correction has not begun in January it has begun two months earlier in November. It is the same game repeating over an over. Psycho games of greed and fear which you have to learn to play.

It will last for a while the dust to settle down and the waves to play out. No need to think about longs at the moment. What if I am wrong? - than the big bar is the beginning of a correction and the market will move lower for much longer.

With the gap is difficult to count short term waves. I think we are in wave 3... I have some suspicion that we can see a surprise on Monday, but first to see the opening.

First normal wave 3 impulse and one bigger bounce is expected later next week for wave 4, but first we should see SP500 below 2020.

Traders sleep on it this weekend and decide that it is not so bad. Than we can see surprise rally for wave 4 and later to visit 2000 or slightly below to finish ED. This will explain the overlapping I see(the triangle story). It looks better than the pattern above, but how to say on Monday we will see strong rally after 75 points lower:)

Intermediate term - the correction has begun two months ago, but now it is well visible. It has more to go at least until September.

Long term - no change. As I wrote the indicators need more time to reset and wave 2 has more to go.

The Market Breadth Indicators - not so bearish as I though, still have not reached oversold levels. Obviously it will last a few weeks before we see a bottom.
McClellan Oscillator - below zero has more to go lower before we see oversold levels.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - in the middle of the range.
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - sell signal, nearing oversold levels.
Fear Indicator VIX - now we see fear, another push higher to 28 will be great.
Advance-Decline Issues - still in the middle of the range, this will change next week.

Day 25 of the 40 day cycle. We need at least a week so that the cycle does not look too short. The waves need at least a week too.

Week 6 of the 20 week cycle. The M pattern looks even better now.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Price flip lower on the daily and weekly chart.
As you can see the histogram bellow it will last a few months before it moves lower and turn up for an intermediate term bottom.

Jun 24, 2016


This is why I did not want to post charts before the news:) I hope you was not long both patterns were pointing lower. As always before a news the price is pushed in one direction and than move in the opposite direction follows. That is the way it works. The market was pricing in "Stay" in this case sell the news lower to around 2030 and it was surprised with "Leave" and sell off - back to expanded flat the Fibonacci measurements are 1982-1993.

Do not panic nothing has changed, news does not change a trend they cause volatility. In April I wrote a correction is starting, it is time only for traders and the next important low will come with the 40 week cycle low in September.... two months later I do not see a reason to change this statement even with 100 points bar lower.

Now some thoughts about the short term and intermediate term - it is all about psychology.
- short term - it will last a few days before all which have panicked sell their positions and buyers step in. This should finish wave C of expanded flat.
- intermediate term - do you remember what I wrote in August and February? Such moves are not sustainable they exhaust sellers too fast - I do not see trend change the correction has begun two months ago it is not starting now. Such panic moves cause a lot of fear and pain and usually are not the bottom - there is retracement(no more sellers) followed by another move lower caused by momentum traders and those who were trapped long but have not yet sold.

Combine all this with cycles which say it is too early for important low and I my forecast is for a double correction something similar like on the chart below.

The futures pushed higher to higher high probably confusing many tradedrs, but I think the pattern is the same. It is just were you place wave B - for the futures it is a bigger zig-zag for the cash index I stay with 1-2-3.

Jun 23, 2016


The move higher lasts too long and I think we have different pattern. I have this suspicion since two days, but I wanted to update the charts tomorrow when the volatility is behind us for more accurate charts.

I post them now so that you know roughly how the idea looks like (I receive questions what is going on) maybe it is better this way and I will adjust the charts if we have too much volatility.
The DAX is finishing impulse higher and correction lower is expected. EUR/USD is finishing zig-zag higher and should reverse. The signs are for a sell the news event, but not sell off.

The only chance I see for the expanded flat to play out is a surprise "Leave EU" today than we can see a sell off to 2000.

Jun 18, 2016

Weekly preview

Short term view - one more leg higher of a retracement expected.
Intermediate term view - lower in the next few weeks.

We have an impulse lower and the idea for wave C of an expanded flat looks good so far. After an impulse we should see a retracement and at least one more leg in the same direction so the move lower is not over. I do not know a pattern which points to a reversal after an initial impulse so... I do not see an alternate bullish scenario sudden reversal and higher highs.

Short term - I think we are somewhere in wave b of 2. We have a resistance zone and the Fibo levels between 2085-2105. One more leg higher into the resistance zone is expected.

Intermediate term - the trend line has been broken. Wave 2(from the chart above) should test it before the price continuing lower for wave 3.

Long term - all oscillators look bearish, the indexes are working on wave 2 lower.

The Market Breadth Indicators - divergences, but still no strong moves lower. This should change when the next wave lower begins.
McClellan Oscillator - slightly oversold and turned higher.
McClellan Summation Index - sell signal with divergence.
Weekly Stochastic of the Summation Index - buy signal in the middle of the range.
Bullish Percentage - sell signal with divergence.
Percent of Stocks above MA50 - in the middle of the range.
Fear Indicator VIX - making a pause after a sharp move higher.
Advance-Decline Issues - in the middle of the range after several tops.

Day 20 of the current 40 day cycle. You can split the 40 day cycle further 20 days, 10 days and so on. We are seeing a short term bottom for the 20 day cycle. It is well visible in the middle of the previous 40 day cycle too - the circles.

Week 5 of the 20 week cycle. It looks to me like M pattern which means that the 40 week cycle is the dominant and the next shorter cycles the 20 week are forming something like double top or "M". In this case we should see the right leg of the "M" into September-October.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Day 6 of a setup on the daily chart and still no price flip on the weekly chart. This should happen next week(unless we see a close above 2100) and than a steady move lower should begin.
The histogram looks bearish - divergence and heading lower.

And this is Russell2000 the measurement for expanded flat is 1070 around the 50% Fibo level.

Jun 17, 2016


Sometimes it plays out perfect - slightly higher to finish wave 4, after FOMC lower low with divergences and on top of that w5 hit the Fibonacci projection with less than 1 point deviation.

The reversal is sharp with bullish candle so the retracement should last a few days. The indexes will probably squeeze a few points higher, but we have resistance / MA50 / Fibo 50% retracement and we should see a pullback followed by another leg higher into the resistance zone. Above 2105 will look bad for the bears.

Jun 15, 2016


Question from KALI - The technicals and cycles are starting to look like a bounce will occur in few days, and perhaps the move lower or higher as you indicated. At what point would you look to enter or short the market?

It will be easier to explain it with charts - yes it looks like bounce is coming. Long entry - if a see one more lower low with divergences, short entry - wait for a zig-zag higher to retrace part of the sell off.

On Friday the move looked like impulse and I was expecting bounce before FOMC..... wrong, the pattern changed but not the bigger picture which remains bearish. That is why day trading is difficult:) the patterns change too often.
With that said the short term charts below look ok because we start seeing confirmation on longer time frames and the indicators.

The bullish scenario is more like trying to fit it to the charts... and let's say ok for SP500, but for other indexes it does not look ok at all.
The bearish scenario... nothing against it. Russell2000,Nasdaq,DAX all look the same and easy to count no need to fit anything. Wave 4 expected and one more lower low with divergences for wave 5. The McClellan Oscillator at -55 sending the same message - we are near to a short term bottom.

This is a try to see bullish scenario. Two impulses lower with the same size to finish a corrective zig-zag.

Looking at the other indexes this one has much higher probability.

Russell2000 looks easier to count - it looks like impulse with 4 in progress.

Nasdaq the same story even the DAX is currently in wave 4. So one more move lower is expected and than higher for a few days.

Jun 11, 2016

Weekly preview

Short term view - bounce and lower again.
Intermediate term view - lower for a few weeks.

I was wrong about the short term.... yes move lower has started, but I think the pattern which I was expecting zig-zag higher is finished. The SP500 just had very strong first leg than shallow move lower and weak second leg... no chance to ride the second leg and confusion if this is wave 5. Comparing with other indexes I do not think that this is wave 5 and looking at the indicators and market breadth I do not think we will see a short pullback and another move higher.

All three scenarios I see:
- short pullback and another move higher - looking at the indicators, market breadth and the finished TomDemark Sequential 9-13-9 sell count it is very hard to imagine continuation higher.
- this is wave 5 - comparing with other indexes(last chart) and looking at the indicators(second chart) I will give it very low probability. For trading it does not matter because the outcome will be exactly the same like the scenario below.
- finished zigzag higher - looking the price behavior from different angles (TomDemark, Market breadth, TA, other indexes) this is the scenario which looks the best so I will follow this one.

Short said either zig-zag to around 2070 or impulse lower to around the lows from May(looks more likely to me). I suspect a lot of volatility around FOMC and Brexit in the next two weeks... personally I will make trades only for 1-2 days until this events are behind us.

Short term - all scenarios are labeled on the chart. First the move lower looks like impulse which means we will see more to the downside. I suspect bounce before FOMC and another leg lower.
Red is what I follow impulse lower for expanded flat. Yellow labels for finished 5 and impulse lower(the same like red).
What if I am wrong - than we should see one more leg lower to finish a zig-zag around 2070 and the price should turn higher from the support level(green).

Intermediate term - again the scenarios on the daily chart I think it will be the red one. Why I do not think that this is wave v/1 yellow is the behavior of the indicators... even the green scenario has higher probability.
How MACD/RSI behave in a normal impulse-correction sequence - moving higher -> small divergence between waves iii/3 and v/3 -> short move lower for wave 4 -> bigger divergence between waves 3 and 5 -> broken trend line and move lower for the first leg of the correction -> bounce higher trying to test the trend line -> another move lower for the second leg of the correction.
Below you see text book behavior from MACD which points to a running correction despite the new high. The surprise could be higher low and a break of the trend line for the green scenario.

Long term - no change. The bearish scenario(red) is dying slowly - it needs strong reversal for impulsive wave C and 7 weeks already we are discussing zig-zags.

The Market Breadth Indicators - are making lower highs and look more and more like we are at an intermediate term top. Yesterday we saw only 1% lower but the indicators are reacting heavily.
McClellan Oscillator - turned lower below zero.
McClellan Summation Index - lower high with divergence.
Weekly Stochastic of the Summation Index - the only one which have a buy signal.
Bullish Percentage - lower high.
Percent of Stocks above MA50 - lower high.
Fear Indicator VIX - now really reacting to lower prices. This leg lower should show some fear. Expect it between 28-30 for an intermediate term bottom.
Advance-Decline Issues - lower highs.

Day 15 of the 40 day cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
We have finished TomDemark Sequential 9-13-9 sell count which points to a bigger correction on the way. We saw a price flip on Friday which should be the beginning of a move lower.

This is chart of NYSE index. On this charts it looks clear to me where wave 5 is. After that I see two zig-zags with slightly higher high which points to a flat correction. Pullback and another leg higher to 10800-10900 will look very unproportional for expanded flat when we already have a higher high.

Jun 7, 2016


A slight change, obviously the mess from last week was wave 4 and wave 5 is running.... it has either finished or it will be completed today. We have five waves higher, price struggling with the resistance zone and MACD/RSI divergences - the plan stays the same pullback for a few days.
From trading perspective no change, only the area for the pullback is now 5 points higher 2075-2080 around the trend line and MA200.
If the price moves below 2070 / 50% Fibo / the lower trend line / MA200 something more bearish is developing. The danger is that this is the top of the move which begun in February, but we will watch how the decline develops and second the stop is very tight so the risk is not so high.

Jun 4, 2016

Weekly preview

Short term view - expecting the pullback to finish early next week.
Intermediate term view - higher for a few weeks in June than lower until September.

Very choppy week.... waste of time. The pullback is shallow and overlapping which confirms corrective move. The forecast stays the same. The price is around the highs and burning time in some ugly overlapping structure which increases the probability that the analysis is right - 20 week cycle low behind us and one more higher high testing the ATH.

Short term - I think we should see one final move lower to finish the pullback before continuing higher. Any move lower should stay above support - the lower blue lines/MA200.

Intermediate term - I think we are in wave B of expanding flat and we should see one more leg higher. The pullback should not break below the trend line and MA50 or it will trigger something bearish.

Long term - no change. I think the bearish scenario(red) is dead, but I will wait to be 100% sure.

The Market Breadth Indicators - heading higher for a second top with divergences, hinting to expect intermediate term top in the next few weeks.
McClellan Oscillator - above zero, building bigger divergencies.
McClellan Summation Index - buy signal, second lower top?
Weekly Stochastic of the Summation Index - turning up from oversold levels.
Bullish Percentage - weaker move higher for a second lower top.
Percent of Stocks above MA50 - moving higher for a second lower top.
Fear Indicator VIX - no fear, nothing interesting
Advance-Decline Issues - expecting to see divergences building in the next weeks.

Day 10 of the next 40 day cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Sell setup finished on Friday. A few days lower will look good.

Jun 3, 2016


The move lower looks corrective, it is shallow staying around the highs which so far confirms the plan 20 week cycle low behind us and higher for a few weeks. I think NFP will be the trigger for the final leg lower of this pullback lasting another 2-3 days.

DJIA looks more clear - zig-zag with target around 17600.

SP500 where is the correction it is making new highs:) It looks like expanded flat with a target 2080-2075. It should find support at MA200.
It does not look like it will break above resistance an go to the moon, a tight stop could be placed 10-15 points so lets hope that it will play out and we will have a nice entry on Monday/Tuesday.