Oct 15, 2016

Weekly preview

Short term view - more likely lower, the indexes are not finished to the downside.
Intermediate term view - we have correction for two months which is not finished it will last a few more weeks.

We have the spike lower. It is not a surprise, I wrote for two weeks about the bearish price action around MA50.It is typical price behavior.
Than in the comments I was speculating about short term bottom in a day or two. Why? Because the whole structure from the top looks corrective. Now we have the move higher and "surprise" it is another a-b-c which hit resistance around 2145 and MA50 on the hourly chart.

Short term forecasts look ok... which does not help us with the big picture. We have more and more corrective waves and more combinations....
What we know - we have a move lower for two months already, which looks corrective. I do not see an impulse lower to suggest acceleration lower. I do not see fear and finished pattern to suggest that a low is in place. Market breadth is correcting and the indexes should be heading for a bottom, but not quite there yet. It could last a few weeks before a bottom.
Most likely the correction will continue for a few weeks.... the pattern I am not sure what pattern we have.

Short term - move lower and corrective reversal so far which hit resistance. If we see a continuation higher a move with the same size will hit the trend line and the pattern will look like triangle(yellow)- If we see continuation lower the whole pattern will look like huge zig-zag A-B-C (red).... now just waiting.

Intermediate term - waiting to see what pattern we have and to pinpoint the 40 week cycle low. The indexes should "attack" the ATH one more time before a move lower for a few months.

Long term - no change.

The Market Breadth Indicators - are showing mature correction, but no signs of a bottom. It could last a few weeks before we see reversal.
McClellan Oscillator - spending the last two months below zero. We have two troughs already with divergence.. I think we will see one more trough before a bottom.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal, in oversold territory for a while
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - close to oversold level one final spike below it will look great.
Fear Indicator VIX - some fear and level like 20 will be good for a low. I think it has started building divergences for an intermediate term top.
Advance-Decline Issues - nearing the oversold level.

Not very clear like EW, there is room for interpretation... so just waiting.

Russell2000 and Nasdaq look different. It is possible to count an impulse for a flat correction. The chart is from Thurday and we have a move higher for 4 so it works so far. You want to see MACD and RSI close to the trend lines and than making higher low when the indexes are making lower low.

I have posted this chart early July stating not to expect strong rally based on the historical behavior of the indicator.

As expected we saw second peek, the indicator is heading lower and the indexes are correcting for more than two months.
So far there is no signs for a low. If this is some kind of wave 4 we should see the indicator around zero when the indexes are making low.
If it is something more bearish it will move lower to the -400 -600 area.


  1. Hello.

    Great charts. What do you think about gold now ?
    Still 1300-1200/1160 then up.

    Thank you.

    1. At the moment it looks like a-b-c correction from the top in July. One final wave lower to 1220-1230 is missing to finish c.
      At week 20 gold is in the time window for 20 and 40 week cycle low and after a low it should move higher for 2-3 months.

  2. Thanks for the update Krasi. I had a question about your comment on the Russell 2000 'you want to see MACD and RSI close to the trend lines and than making higher low when the indexes are making lower low'. Looking at the Russell 2000 on the daily, the RSI made a lower low vs Sept, but the index made a higher low. Also it looks like we have a broken trend line on the RSI from the February low. Do either of these have any significance or how would you read it? (if at all)
    Thank you in advance!

    1. sorry, I meant to say the RSI trend line looks broken from January (not February)

    2. The hourly chart and the comment about RSI explains what should happen if this is the right count.

      On the daily chart there is 4 distinct moves(four waves) and you should watch the trend line for each move not as a whole from January. With a daily chart watching the move from January as one whole you should use RSI range - in bullish case moves lower should stay above 33(no weakness) in bearish case moves higher should stay below 66(no strength).
      There is such signal when an index makes lower high RSI higher high(the opposite for a bottom) I think it is called top/bottom failure.... not so interesting and I think the correction is not over the index will catch up.

      Considering the move as a whole and RSI trend line you should switch to the weekly chart than you see it as one wave. On the weekly chart the RSI trend line was broken and it is very significant. The move is dying, best case one final move higher with RSI divergence.
      Of course this is weekly chart and this "death" could last 4-5-6 weeks.

  3. Aside from the technicals and your case the charts, don't you think that the US elections is setting up the US stock market for a big move? I almost feel like whichever direction that market travels on it way to election day will end up being the turning point for a move in the opposite direction. Joe Granville used to say, "the obvious is obviously wrong." Great work you're doing!

    1. Exactly, I wrote several times what happens when you have important news. The big boys are pushing in one direction before the news just to see reversal after the news. They want to sell high or buy low this is how you make money. That is why this is repeating over and over. The last example was Brexit correcting for two months, gap after the news and reversal.
      Obviously the market is waiting. The move is lower and looks corrective so after the elections we should see move higher. The technicals confirms it.

  4. Hi Krasi, I was wondering if you could include another chart on the Russell 2000 in your weekly this weekend? thank you in advance!

  5. Chart is posted, nothing new the same like last week.