Short term view - pullback to begin next week.
Intermediate term view - a few weeks higher.
I was expecting impulse lower for a few days to finish expanded flat with measurements 1982 and 1993 and possible surprise on Monday. What happened - expanded flat(was it a flat??) finished with only three waves, target hit 1991 and the "surprise" reversal was on Tuesday. Very close to the forecast, but as always extremely difficult to predict the exact path and to trade it. At least we knew not to go long at the top before Brexit and short at the low after the news.
Now is this the bottom of wave 2 and the beginning of the next bullish leg higher? Looking at the charts they do not look ready for wave 3.
Cycles, TA indicators, Market breadth does not look ready for a 25% rally for at least 6 months. TA indicators has not been reset, Market breadth no signs of an important low, and time(cycle) if this is wave i of 3 of V how long it will last to finish V? The end of the year? The bull market should continue another 12-18 months at least not another 6 months.
For bullish vertical moves is valid the same like for bearish - you need depressed levels time and/or price and vertical move giving birth of a new trend. If this conditions are not met the move is unsustainable and it exhausts the buyers too fast. Two day vertically lower and 4 days vertically higher qualify as volatility caused by an event/news, short sellers covering and momentum traders riding it.
Keep in mind what I wrote above, but this is a case where trading takes precedence over analysis. DO NOT TRADE 2-3 STEPS AHEAD OF THE MARKET. Do not to try to outsmart it trade step by step following the market. I keep it simple - we have a strong move higher which looks like an impulse and if we see corrective move lower it is a buying opportunity. Than we watch if the rally fails or not. We have a strong move from a 20 week cycle low so it should last 3-4 weeks it will not just reverse lower.
TECHNICAL PICTURE and ELLIOTT WAVES
Short term - the move higher looks like impulse so a pullback and another move higher is expected.
Intermediate term - the target was hit, 38,2% Fibo hit, reversal from the support zone - is not a surprise that we saw a bottom.
Long term - no change. When the correction is over wave 3 should begin. I can not say if it has begun or not but the price is finding support at MA50 and as long it stays above it is bullish price action.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - some oscillators are pointing to a bottom as it should be, we have a-b-c correction finished, other indicators have stayed at elevated levels no signs of resetting at all. I do not see signs for an important low. If this is wave 3 it should move vertically higher when the indicators are useless... and this does not fit with seasonality and cycles.
McClellan Oscillator - higher lows at levels where you see short term bottoms.
McClellan Summation Index - buy signal above 700 no signs of retracement at all.
Weekly Stochastic of the Summation Index - too much volatility for a weekly indicator.
Bullish Percentage - in the middle of the range, at levels where you see short term bottoms.
Percent of Stocks above MA50 - hit the lower range a sign for a short term bottom at least.
Fear Indicator VIX - hit 27 where correction find bottom.
Advance-Decline Issues - moved only to the middle of the range.
NYSE New Highs-New Lows - one of the highest levels since the bull market begun.
With this sharp sell off and reversal the odds are much higher that this is the 20 week cycle low with length 19 weeks and the 40 week cycle low is pushed a few weeks later in the first half of October.
The cycles adjusted accordingly - the next 40 day cycle is running at day 4.
The next 20 week cycle is running at week 1.
I think the next important bottom will come as usual in October period. We will know later if I am right. First we need to see a pullback and weak second leg higher for the current move only than we watch this charts.
McClellan Oscillator is one of the greatest market breadth indicators.
The blue ellipse is wave III(the strongest) of this bull market and the red circles mark the lows of internal waves of different degree. For corrections of lower degree we see the McClellan Oscillator around 0 and correction of bigger degree move from -400 to -600. Than the next bullish leg moves to the 1000-1200 area. The current correction moved to.... 700 and this should be important low????? How high should it move if we are in wave 3 - 2000?? forget it. I think we will see the same like the black circles a second top and move lower to at least the zero line.
Emerging markets - the pattern looks the same like the US indexes(impulse and correction) but more clear shape. EEM the first leg lower is an impulse and the leg higher corrective which means to expect more to the downside.
Russell2000 H&S with two left and right shoulders.
NYSE - February was a higher low and this is an alternate count with correction which begun with Brexit.
DAX - corrective mess. Before Brexit we had a-b-c lower than rally just before the news probably wave B and another a-b-c is running.
SP500 speculative pattern at the moment. Maybe the expanding flat is much bigger.