Jul 14, 2016
Update - the bullish scenario
I was asked "What would trigger you to change your view?" - and my answer is:
- if I see an impulse higher - the markets should rally well above 2200.
- indicators/market breadth - making higher highs and clear the divergences or reset lower with market hanging around burning time with a sideway move.
Current conditions two impulses higher with the same size(only zig-zag so far), market breadth at overbought levels with divergences.
Now trying to look all this with bullish glasses - two scenarios the indexes continue higher so that we have an impulse(green) market breadth clears the divergences, or this zig-zag is part of a diagonal(light green) and market breadth reset lower while the markets moving sideways. A move does not end with three waves higher so the only bearish scenario at the moment is that this is wave B of ugly expanded flat correction(my last forecast).
To be honest I like this diagonal scenario - it does not look so ugly like the expanded flat, cycles will look perfect, and with high probability market breadth will reset lower to levels I want to see... all conditions met. If you are bullish you do not want to see the green path this is not a healthy behavior.
And the chart visually how bullish moves should look like. After 2-3 weeks the picture should be clear what is going on... exactly when I am back from holiday:)
P.S.The blue lines is the area(2075-2100) where the very bullish scenario(green) is dead.
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Hi krasi,
ReplyDeleteExcellent analysis. Thanks so much.
I am considering a short position as market is due for a reversal. Any suggestions for entry points? Thanks.
Kali
It depends on from the trader.
DeleteThe move looks finished and the targets from the previous post were hit - you can say the indexes will be lower in two weeks so I do not care I am short - higher risk, wider stop.
The prudent approach is to wait for a lower high. The move has inertia I do not think it will just reverse and plunge all indicators are still pointing higher so the probability is high that we will see a secondary lower high - lower risk, tight stop, bigger position is possible.
Much appreciated! Thank you for your input. ����
DeleteFirst, let me say: thanks Krasi....this is excellent analysis.
ReplyDeleteSecond, Krasi, Kali, would you mind if I create a skype group so we can chat live and exchange ideas?
Third, what are you thoughts for RUT as always! Thanks :-)
let me know if you want me to create a skype group
I can find time to answer to messages mails/chat, but live chat is difficult... I have full time job and 10 weeks old baby at home which does not care what I want:) my free time is when I sleep and at work between the tasks to look at some charts.
DeleteKrasi, this is Jules again....teh RUT has been weakening. So you still hold to your view on July 12th? that would be nice and pull the SPX lower too giving us the light green picture....!!!!! You are right on one thing: we shall know soon
ReplyDeleteLet me know about the skype thing too....response are faster too
The futures pushed higher, but the cash indexes did not make higher high.
DeleteThe futures look like complete structures, but the cash indexes not...
So wave iv and one final small wave for v of c looks possible, but I would not hold my breath waiting for it.
In the next 2-3 week should be clear which pattern from the three is running because they have completely different structure.
I am also very interested in getting your thoughts on a Russell 2000 short entry point.
ReplyDeleteThanks,
Matt
See what I wrote to Kali - it is the same story.
DeleteAll indicators are still up, the price is well above MA50 on the hourly chart this could be just w4 and one small wave higher is still possible. In such situations my experience tells me to be patient and wait for a second lower high or higher high with divergences. In the long run this is the better decision. You will nail the top once and miss it the next five times.
Great, thank you for the advice Krasi. Enjoy your vacation!
DeleteMatt