Intermediate term view - one more higher high expected before intermediate term top.
Small pullback as expected.... now waiting to see which scenario will play out - the pullback bottoms soon and makes one more higher high with divergences(wedge from the February bottom) or it moves another 30-40 points lower and than makes a higher high for a wedge from the June bottom. Now it is decision time because in the next 1-2 weeks the two patterns should move in different directions the first making final high around FOMC 14.12 the other making a low around FOMC followed by the final rally. All this is short term play, intermediate term I think the next high whenever it comes will be the high for the move from the February low and a correction for 2-3 months should follow. The same picture for Bonds,USD and precious metals - they all look like corrective pullback is running, one final low/high is expected than trend reversal for 2-3 months. So all markets suggest the same - waiting for a few weeks, than the trade should reverse for 2-3 months from "risk on"(stocks) to "risk off"(bonds and PM). TECHNICAL PICTURE and ELLIOTT WAVES
Short term - so far we have a small pullback heading for 20 day cycle low and the oscillators resetting on the daily chart. It is difficult to say which way the market will move. There is enough arguments for both patterns.
Intermediate term - the two scenarios how they should look like. Wedge from the February low(green) and A-B-C with a wedge for C from the June bottom(white).
Long term - no change, waiting for the final top and correction for 2-3 months.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - very weak for indexes which are making ATHs. This is what we want to see - the indicators resetting from oversold levels, but divergences and important top in a few weeks.
McClellan Oscillator - around zero.
McClellan Summation Index - buy signal.
Weekly Stochastic of the Summation Index - buy signal.
Bullish Percentage - buy signal.
Percent of Stocks above MA50 - around the middle of the range.
Fear Indicator VIX - building multiple divergences for the next important top.
Advance-Decline Issues - in the middle of the range.
HURST CYCLES
Heading lower for 20 day cycle after that we should see a higher high and the top of the 40 day cycle.
Week four of the next 20 week cycle. I think in a few weeks we should see a 20 week/40 week/18 month cycle top.
Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
After a combo finished at the previous top now we have finished countdown on the weekly chart too. Waiting for a price flip to signal a reversal lower.
Krasi,
ReplyDeleteFor the wedges, how did you arrive at the high of 2230 instead 2250-2280 for instance. I am still trying to figure this out :)
Appreciate your work,
Kali
Just to clarify my question. Looks like if this is a wedge from February bottom, the wedge top should be a lot higher with support line violated which extends from feb and June bottom. The wedge from June low and nov low looks more likely but the top should be 2218 level. Am I looking at this correctly?
DeleteKali
I have already wrote that the wedge from the February low looks strange. I do not even try to draw trend lines. Wave 3 can not be the shortest so 2240 is possible 2280 no the rule will be violated.
DeleteWave C as wedge from June looks better, just waiting for confirmation - we need deeper retracement. In this case yes the top should be around 2220-2230.
Thanks for your invaluable insight.
ReplyDeleteI agree the June wedge looks better now since the supportive trend line for the feb low is broken.
Looking at Nasdaq, do you see possible leg 3 forming?
Thanks.
Kali
Yes, it will look better. In fact many indexes will look much better as a finished pattern with a pullback and one more leg higher XLF,DAX,SOX which synchronizes perfect with my preferred scenario for SPX.
DeleteHi Krasi, Do you have any thoughts or targets on Russell 2000 or TNA which are exploding higher?
ReplyDeleteMy thoughts are that this is a top and the next move will be a correction for several months.
DeleteCurrent SPX price action shows the pattern leaning towards one more high and then 2-3 month correction. What do you think?
ReplyDeleteThe odds now are higher that this is the top, but even if we see a higher high it will be only a marginally higher 20-30 points. I do not think that we will see sudden reversal. I think the top will be tested. There should be enough opportunities to take profits or enter short.
DeleteKrasi,
ReplyDeleteWedge looks like resistance formed by tops in April and August and support formed by feb and June lows. If this holds, we could see 2270-2280 before the rally ends. That's almost the length of the wave 3 from the summer. What do you think?
Kali
I think 2280 will not be reached and yesterday was a buying climax.
DeleteIf you look at the RUT weekly chart, it closed today at the wedge resistance line from March 2014 with great force in a clear buy every dip mentality and fade ever bit of news...it will be interesting to see if it closes above the line because the next resistance line seems to start in April 2010 and takes us well into the 1500s. My explanation for this is that there is a narrative in the U.S. right now that no one will sell their winners in December because capital gains taxes will be lower in 2017 under the Trump administration. Having said all that, isn't it possible in your view that the resistance line for SPX should perhaps go back further than 2016? I say this in particular because CFTC net shorts on SPX futures reached Feb 2016 levels last week, which could add a lot of fuel to the fire should we continue to go higher. Whereas CFTC net long positioning in RUT is almost back up to 2007 highs, so it will be a bloodbath when it reverses imo.
ReplyDeleteI would say the charts confirm your observations, about taxes and traders holding their positions in December and bloodbath after that especially RUT.
DeleteFirst I do not think this move will continue much higher, but there will not be a sell off in December. Toping should begin any moment this is the first top and one more should follow.... probably slightly higher high with divergences for the most indexes.
Second I start changing my mind... I think this is not the final wave of the bull market and we are still in sideway consolidation move. This means the expected move lower should be deeper than most traders expect and than final mania phase follows.
Krasi,
ReplyDeleteThis is still a leading diagonal for wave 1 correct?
Thanks
Kali
This is one of the possible patterns. I do not focus so much on the pattern because all are pointing down.
DeleteThe recent move from Nov is the fifth wave of the larger degree third wave? and the next correction could be the real missing fourth wave? In this sense the correction in 2016 Jan/Feb may be only the fourth wave of the larger third wave? I'm not familiar with the cycle theory... is it possible that the next correction would be the 9 year cycle low? Thanks.
DeleteThis is another possible pattern:) which again points lower. About cycles some guys count it this way, but a lower low(below February low) for 9 year cycle low will be waaay too long. Since the 1980 the longest cycle was 7y8months. The cycles are running shorter 6.5-7.5 years so I doubt that we will see a low below February.
Delete