Intermediate term view - after the final move higher correction for a few weeks.
I thought we will see more action after MLK day... no the sideway move continues and the analysis has not changed. I wrote many times that the pattern is ambiguous. It is easy to say it is moving higher it is so bullish iii of 3 of III.... but I can not get rid of this feeling that the move since Feb.2016 has corrective DNA. That is not all, there is too many red flags - some divergences on the weekly charts, market breadth indicators with double divergencies, TomDemark 9-13-9 finished on the weekly chart. You do not see such conditions in iii of 3 rather when you expect correction... bigger one 10% not just pullback 3%-5%. The market does not make a top with an A-B-C move higher... so which pattern has corrective DNA, but ends as an impulse? Which pattern will allow 200 points drop followed by another ATH? The pattern which satisfies all conditions is expanding ending diagonal. It is shown on the second chart and on the last chart DAX it is even better visible. I would say right away this is the pattern if it was not so crazy 10% lower followed by 25% higher:) Now I am waiting and I am very curious what will happen in the February-March-April time frame. TECHNICAL PICTURE and ELLIOTT WAVES
Short term - the same like last week except that the bearish case(red) has much lower probability now(it was not my favorite anyway). After the last top it is difficult to see impulsive reversal.
Intermediate term - the bullish pattern is clear the price should move higher in series of iii-iv/3-4. The difference between the two is how wave 4 and the 18 month cycle will look like. The new pattern(red) suggest very bearish February-April time frame followed by final mania phase 25% higher for the last wave... exactly what you want to see for an important bull market top.As a trader I pray that it plays out, with the sideway move(green) you can not squeeze a lot of profits.
Long term - no change, waiting for the wave from Feb.2016 to be finished.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - the same like last week. Short term no reversal signs, but double divergences on some indicators suggesting that something bearish is around the corner.
McClellan Oscillator - a third lower high will look great for double divergence.
McClellan Summation Index - buy signal.
Weekly Stochastic of the Summation Index - buy signal, in overbought territory for a while.
Bullish Percentage - buy signal.
Percent of Stocks above MA50 - showing weakness already, one lower high for short term divergence will look great.
Fear Indicator VIX - very tight BB again and complacency.... volatility will rise soon.
Advance-Decline Issues - in the middle of the range, one final spike to overbought territory will look good for a top.
HURST CYCLES
Day 13 of the second 40 day cycle.
Week 11 of the 20 week cycle... the indexes should be nearing a top.
Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
9-13-9 finished two weeks ago, but no price flip so far.... no sell signal.
The same pattern for the DAX - it is even better visible. We see series of expanding a-b-c moves. It looks much better than some iii of 3 of III count.
Hi Krasi,
ReplyDeleteGreat analysis. Can you explain why the short term scenario is so bullish? I am not seeing this.
Thanks,
Kali
The other question is comparison of Dax with S&P. The Dax looks to be more ending diagonal with abc whereas S&P looks like beginning diagonal with typical 1,3,5 waves. Wouldn't it make sense DAX to have a bigger downside move than S&P?
DeleteThanks.
Kali
Short term - many indexes with missing final wave which is confirmed from the indicators which are resetting for a long time without the price moving lower.
DeleteYes for the DAX it is easier to spot the pattern. The size of the down move - it is all about overlapping with wave 1. The Dax is more volatile the moves are bigger and this one is 15% to overlap with wave 1, SP500 needs 10%(which is the usual size of a correction).
Thanks for quick response.
ReplyDeleteAs you point out, I have been waiting for that final move up but as of now, this cycle would have over extended the period by which we would have made the move higher. It will be interesting how this plays out. I am of the opinion that we may have a move up but not passed 2287. The hourly indicators showing strength fading not rising into the recent wedge. With Fomc around the corner, unlikely for high conviction move up. If anything reversal more likely.
Cheers,
Kali
what a move today!!! That was insane....here come the push Krasi has been talking about. One question: how high do you guys see the RUT?
ReplyDeleteI am not sure what pattern we have that is why it is difficult to measure target for the move.
DeleteI expect higher high and the move should not last more than 2 weeks(max 3 with this week).
So I am just waiting to see finished pattern(5 waves) to the upside.
So is it fair to say you wouldn't short SPX at 2307? or was this comment only in reference to RUT?
DeleteNow there is a short term pattern to work with. When I look at SP500 and the DAX I see the same pattern - the indexes are in wave iii of 3. There is more to the upside and it is premature to short. I expect something between 2330-2350, but first we have to see waves 3 and 4 finished for accurate measurement.
DeleteHi krasi. quick question, when you say 2330-2350, are you taking about iii of 3 upside target level, or the target for v of 3, ie after the february correction? thank you.
DeleteI mean the whole move up from January the top of wave 5. After that we should see a correction for a few weeks.
Deleteokay....thank you Krasi. I appreciate your site! Thank you for the updates
ReplyDeleteHi Krasi, Thank you for the updates! I'm still learning EW theory, and had a question regarding your short term chart. I thought Wave 2 was always a deep retracement of at least 50%? Your Wave 2 on the short term chart only seems to retrace 23.6% or so. Am I wrong to assume wave 2 always has to retrace at least 50%? Thank you!
ReplyDeleteThere is no rule which says wave 2 should be at least 50% retracement. For such waves of lower degree do not expect much retracement. In the bullish case on the daily charts this is (ii) of iii of 3... you will not even notice it in the most bullish part of the wave.
DeleteExpect deeper retracement when the trend reverses and it is still not well established. The traders are still not sure if the trend has reversed or not.
Thank you Krasi
Delete