Intermediate term view - waiting for the bottom of the move lower than we should see a rally.
The markets are waiting.... doing nothing. Probably the bottom will be around the US election which will be the catalyst for a rally. Usually when the markets are pushed lower expect move higher after the news/event.
The same like last week - two possible patterns triangle or zig-zag, nothing to suggest a bottom, the price is struggling for 8 days with resistance around 2145 and now MA20... not very bullish.
TECHNICAL PICTURE and ELLIOTT WAVES
Short term - I have not watch the charts this week, it is waste of time... just waiting. The two patterns are shown on the chart triangle yellow and bull flag(zig-zag red).
Intermediate term - the same shown on the daily chart. No signs of a bottom, no signs that this is something more than a corrective move. So waiting fo a bottom followed by a rally.
If the price manage to move above resistance and MA20 we will have a triangle if it fails I expect to see a bull flag.
Long term - the indicators do not look pretty and this should be the last move higher before 18 month cycle top and a bigger correction lower.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - the same like last week mature correction, but no signs of a bottom.
McClellan Oscillator - expect to see one more trough with divergences.
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 - in the middle of the range.
HURST CYCLES
Another two weeks will finish 40 day cycle.
It will look better if we see 40 week cycle with the low for this correction... but unusually long. Not so important we will adjust the count later if necessary.
TNA as a proxy for RUT - the same like last week. It looks like consolidation before a last move lower to finish an impulse from a flat correction. Watch for a divergence.
Hi Krasi,
ReplyDeleteThanks for your excellent analysis! I am concerned that with current moves, a drop to 2100 would not instill enough fear for expected reversal higher. Any chance that on the long term chart, your wave one is already finished and we are already in 2?
Thanks again,
Kali
I am thinking the same for several weeks.... something smells fishy.
ReplyDeleteFrom EW perspective there is very high probability that the waves will overlap(DJ overlap already), but it does not look like a diagonal any more.
From cycle perspective if we see a lower low in 2-3 weeks we will have 19+19(20) week cycles in one 40 week cycle which is very strange. Usually a longer cycle is followed by shorter one.
I have not posted this because it is not very clear and the pattern/cycles will be visible after the fact.... but from trading perspective it does not matter and it will make the analysis unnecessary complicated.
The move lower looks corrective 45 points for two months not interesting at all. The next tradable move should be higher and when we see it higher or lower high we will think about the pattern and if wave 2 is already running or not.... so just waiting.
Thanks for the quick reply.
DeleteThis almost feels like the brexit event. In fact the situations are almost entirely the same with "stay - Clinton" option favored over the "leave - trump" option. I would not be surprised by trump win with sharp sell off and potent reversal. But that would give the the panic and fear we need for the next leg higher. Almost feels like the technical analysis is predicting for a trump victory.
I have no political interest. Just interest in making money.
- Kali
I get the same feeling. A sharp drop on either Election Day, but most likely the day after. But a strong reversal after that. I'll have to look at the Brexit turn again and see if it turn around the day after and if it was at the opening or just after it opened on Day 2.
DeleteI vividly remember. The market dropped 300 points immediately following in the morning of the results were announced. Then another 300 points the following day, but during that day a sharp reversal occurred. It was like stuff of Hollywood movie !!
DeleteKali
Kali....Trump is trailing in the polls...FANG (facebook, Apple, Netflix, Google) have not reported yet. Netflix did but Amazon has not. So i think we might rally into election and then sell the news and a plunge with the December hike rhetoric. I sort of think Krasi charts are probably correct...one push higher and then we roll after election...
ReplyDeleteHello Krasi, Many Thanks again for information. If Market is rallying after election, that must be Hillary the winner. That is the way looks like (how ever I dont like her to win).
ReplyDeleteI did not want to mention it, but it looks so at the moment.
DeleteI do not like her to win too... this will mean more wars. Anything is better than war.
Hi Krasi, It looks like your yellow triangle scenario running...but isn't a descending triangle bearish? just looked at your chart patterns section, and curious why you had it stopping at 2112? or are you implying a different triangle? (not descending)
ReplyDeleteIt is not a problem to see the red scenario too. Yes, descending triangles are usually bearish, but if I see it when wave 4 is expected triangle is triangle.
DeleteWith that said this is not my favorite pattern. If you read the comments above we are discussing that something does not feel right.
To be honest I think a wave lower is already running, but the first part is very choppy so it is difficult to spot the pattern and there is a chance that I am wrong. The plan is just to wait and see what happens with the move lower. Since mid-July is anyway not tradable, waste of time.
Thanks Krasi, I'm surprised to hear you say it is not tradable since mid-July, because your charts have been so accurate and I've found your advice to be invaluable!
ReplyDeletePersonally, I think that without Brexit the indexes would not have gone as high as they did a) because of the selloff panic to oversold levels; but b) because without Brexit the BoE wouldn't have launched their QE program and other Central Banks wouldn't have leaned so dovish/U.S. might have raised rates already (i.e., a Trump victory = Central Banks more dovish).
This recent selloff is election jitters, but also just as much driven by the USD strength and the back up in rates (justification for high valuations was low rates); all to say TA of the German, Japanese and US 30,10,2yr yields could serve as a leading indicator.
I'm looking at the R2K and how close it is to its 'strong' 1190 support level; and how far off the Dow and S&P are from their recent lows and support levels...isn't the R2K supposed to be a leading indicator? nowadays it's a lagging indicator?? I read your Moving Averages tutorial and as of today we have a triple cross for R2K. I really don't want to short this stupidly (I have a mandatory 72hr holding period), so my question is, if R2K breaks below 1190 - is that level then going to be resistance in your opinion? or would you then wait to short it at MA20/EMA50?
Krasi thank you for your patience...Qualities of a great father!
Forgot to share this headline from Bloomberg published last night:
DeleteS&P Bulls Fare Better a Year After U.S. Presidents Take Office
(Bloomberg) -- The S&P 500 Index normally starts to rally four to six quarters after a U.S. presidential election, history shows.The benchmark tends to plateau or fall during the first year of a new term, technical patterns dating back almost a century demonstrate.
DeleteI have important projects at work until mid-2017. The baby needs more and more attention, but it is a lot of fun with her:) and I do not want to miss it.
I have read a few interesting articles about cycles and I rework all my cycle analysis for all markets. I think this will lead to even more accurate forecasts.
The reason - I am trying to start trading all markets not only stock indexes and I am in a process of switching to trades lasting a few weeks or longer.
So time is luxury which I do not have at the moment:) Looking from this angle 20-30 points for 1-2 days and market changing the direction all the time in 50 points(SPX 2%-3%) range for months is not interesting for me.
There is always some "reason" for a move, but it is too subjective trying to find an explanation. I have stopped looking for a reason long time ago... just looking the charts, no time to watch TV or read the press:)
R2K - I would not short it at the moment support zone 1990-1200, 1995 is 38% Fibo retracement from the June low, looks like an impulse finishing from the last top and divergence building.
Test of MA50 is more likely than a plunge lower. If it fails to move above MA50 than it is time for a short. Of course if it moves below 1990 it will look very bearish and the levels becomes resistance.
Thanks Krasi...appreciate you taking the time to answer questions given your busy schedule and admire the fact that you are looking to change the strategy to longer term trades. I'd be very interested in these articles if you have the links.
ReplyDeleteR2K - I thought it would at least bounce off the 1190 level, but nothing.. and it closed inches below support...makes me question how significant a level this really is. Nikkei very strong, S&P and Dow showed almost no fear... I don't know what to do now (no panic in R2K futures after hours) and daily RSI at 34.5... probably not a whole lot of downside from here? would you be surprised if it ripped right through the 1190 tomorrow on its way to test the 50 day MA? (I realize you said levels now become resistance; but if it's so obvious R2K futures wouldn't just be hanging around 1186 and it would take a long time for MA50 to get anywhere close to 1190)
R2K - moves on it's own, but it should not show huge deviation from the other indexes. I still think we need some fear for a bottom than a rally.
DeleteTranslating this for RUT and looking at the chart it lookes like a double zig-zag and at the moment I think we should see a move higher to 1205 to test resistance and MA50 on the hourly chart than move lower to around 1175 for a intermediate term low. If I am wrong it should spend one day at this levels and plunge on Monday.
The articles are cycle analysis of commodities. Not interesting for most traders, but with huge implication for me.
Contrary to the theory (waves with different lengths have synchronized bottoms and make a top at different time) commodities have consistent cycles counting from top to top.
I had problems with cycles for NatGas,Crude Oil, emerging markets (EEM/EWZ related to commodities), EUR/USD - it just has not working. Now counting from top to top works great.... like a clock:)
And for indexes,bonds,gold counting both top to top and bottom to bottom seems to work great. This way I have a better picture when to expect important tops and bottoms.
I have no choice except to move to longer time frames and more trades by trading more markets so this was really very important for me.
Here the links if someone is interested in commodities and/or cycles:
NATGAS - http://hurstcycles.com/natural-gas-ng-and-qg/
GOLD/MINERS - https://www.youtube.com/watch?v=sFmWerwLHrU
Crude Oil - http://www.marketoracle.co.uk/Article56316.html