Intermediate term view - higher for 2-3 weeks then correction for 2 months.
This reversals surprised me.... but I do not think someone can predict them. I have not posted update because I was not sure about the pattern... second there is indexes with unfinished pattern(see the last chart) and I was not convinced that this is an important reversal. Currently I think we have stealth 20 week cycle low and the last wave up is running for 2-3 weeks before a bigger correction for 2 months. The indicators are turning up, market breadth is bearish but no problems for one final move for a few weeks,TomDemark sequential still with buy signal... so overall green light only waiting for confirmation. TECHNICAL PICTURE and ELLIOTT WAVES
Short term - this is the best I can come up with:) As long as the price does not move below the support area and finds support around MA200 the bulls are ok. DJ looks different so the pattern could be different... the indexes could just continue higher with simple pattern 1-2-3 running at the moment. As I said I am not 100% sure for the short term pattern.
Intermediate term - the indicators are turning up one final move up and divergences expected. I think that somewhere in this mess from the last two months there is wave 4 and 20 week cycle low(or it will come with the low for wave ii of the ED above).
Long term - no change, waiting for the wave from Feb.2016 to be finished.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - the big picture is bearish with divergences, but short term no strong sell signal another 1-2 weeks higher for the indexes is not a problem.
McClellan Oscillator - making lower highs, but still positive.
McClellan Summation Index - no sell signal.
Weekly Stochastic of the Summation Index - turned lower, sell signal.
Bullish Percentage - sell signal, but still above 70, expecting lower high below 74.
Percent of Stocks above MA50 - move lower to the middle of the range and turned up, expecting a divergence.
Fear Indicator VIX - a lot of complacency and very tight BB. Volatility will rise sharply soon.
Advance-Decline Issues - one final run to the overbought area will look great.
HURST CYCLES
The previous two 20 week cycles were longer than the average, which usually means to expect shorter cycles after that. Looking back when we see longer 40 week cycle (37-38 weeks) the following one is shorter 25-30 weeks so I am expecting cycles with 11-15 weeks length. If the indexes just continue higher the 20 week cycle is behind us at week 11. If we see the ED playing out, the low will be next week with length 14. I will leave the counts below as they are and adjust them later if necessary. It is not so important to pinpoint the low just keep in mind that we have stealth 20 week cycle low and the next high will be the high of the 18 month cycle.
Day 23 of the 40 day cycle.
Week 13 of the 20 week cycle.
Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Still no price flip(sell signal) on the weekly chart.
RUT - we have very choppy overlapping mess for almost two months. I do not see a way to twist this and say it is bearish we have a top and impulsive reversal. It is a classical "bull flag" and if I try to count the EW I would say this is iv of 3.
Thank you for the update. I'm wondering how PM trend fits into this general picture? Usually stock correction means PM up? Then how does it correspond to the March low? Thanks.
ReplyDeleteI do not think that there is such strong correlation between stocks and PM for the short or intermediate term (few weeks/months). There is many examples when they move in the same direction. The correlation is for the long term usually when stocks are in secular bull market commodities(PM) are in secular bear market and the opposite.
ReplyDeleteIf you search for correlation which works intermediate term too, look at USD/JPY.
PM are in cyclical bull market until sometime in 2018. From the low in December we have impulse higher and now I think it is time for a correction, then they should continue higher.
Thank you for the clarification. So for intermediate term, USD/JPY is opposite of PM. It seems both DXY and USDJPY should finish correction and move higher while PM finish the pulse to make correction along with the stock market. Do you think stock index would continue higher? It seems almost exhausted...
DeleteYes, this is the idea USD should move higher and PM correct.
DeleteI think the indexes should correct lower for roughly 2 months, then we should see another ATH.
hi Krasi....still of the opinion, we are going higher???? buyers are timid, looks like to me? what would make you change your mind? what level being breached?
ReplyDeleteI am waiting to see finished pattern for indexes like RUT and XLF or the price moving below 2250. Until then I expect move higher... not much higher 1-2 weeks 1%-2%.
DeleteHi Krasi and thanks a lot for Valuable information. Quick question, How do you predict the time? I see you show you EW on your charts and you draw value and times that they pick / bottom .and they are close to reality.thanks
ReplyDeleteI use Hurst cycles. I can not say in advance how long a move higher should last because I am counting from trough to trough, but for bottoms especially when the cycle is mature works good.
DeleteHi krasi,
ReplyDeleteThe seasonal charts show very bearish postelection pattern developing for February...
Be prepared...
Uncle bear Kali
Hi Kali,
DeleteI hope so... two months drought:) we need some volatility to make some money:)
Looks like we are getting that final record high just in time.
DeleteCheers,
Kali
It seems today the impulse wave from Jan reaches its extreme? Another questions is what's the relation between the MACD signals and MACD histogram? Sometimes, histogram shows bullish signal but MACD itself seems bearish, or vice versa. So which determines the long period and which tells short term view? I very appreciate your tutorial and have such questions after read both MACD and MACD histogram sections. And you said, when MACD below zero, the big trend is up, at this time, MACD histogram bullish means immediately taking positions? How about MACD histogram shows bullish but MACD shows bearish like, signal line go down to cross?
ReplyDeleteAt the moment I think the indexes will grind higher one more week.
DeleteThe relation between MACD and histogram is like the relation velocity and acceleration.
MACD shows you the velocity and direction of the move, the histogram if the price is accelerating in the direction of the move or slowing down.
Different signals between MACD and histogram - MACD shows you the direction up/down(long term), histogram in the opposite direction says the move is slowing down/accelerating (short term). It depends on at what stage this signals are appearing - it could be just a pause after a strong run or the beginning of a reversal.
MACD above zero -> trend up -> the histogram turning up after a trough is bullish - in most cases pullback/correction is over.
Histogram bullish, but MACD signal line going down? - it should not happen. The histogram is the difference between MACD and the signal line. Signal line going dow means the histogram turned lower which is not bullish.
very nice comparison, thank you~
DeleteAnother situation is, MACD below zero and its slop is down, however, histogram shows bullish signal/even bullish divergence (neighboring trough smaller and smaller). So this means a correction (price up)? is it trend reversal or wait to see MACD itself shows divergence (change slope to up) to change the trend? Thank you.
DeleteYes, it means the MACD slope from down is flattening and something in the opposite direction is expected.
DeleteWill it be just a corrective move or reversal? - you can not say just because MACD is flat and the histogram shows divergence. You need more information - the pattern, where are the MAs etc.
With MACD divergence the probability for a reversal is higher, but I have seen enough occasions of a reversal without MACD divergence. There is no rule just probabilities.
Hi Krasi, are we in wave i or iii of your short term chart?
ReplyDeleteThis should be iii. Tops/bottoms are very difficult to nail. You start digging deeper into shorter time frames to count waves of smaller degree trying to find the top and most of the time the top/bottom surprises you.
DeleteWhat I want to say is - for trading you never wait until the "final small wave". You start preparing earlier... taking profits and even starting to build position in the opposite direction.
Great thank you!
Deleteis it a good time to short the market now ?
ReplyDeleteIt is ok to start building short position. Not full size right away, but something like 1/3.
DeleteYou have to be aware that there is no sell signal so far and there is a risk for a loss.
In general, it's better to short VIX or index itself? VIX seems to be attractive? But it's from such high and only correction, VIX may need time to blow up?
DeleteI suppose you mean long VIX instead of shorting the indexes. VIX is a difficult game, with not leveraged tools maybe it can work building a position. With leveraged tools like TVIX/UVXY you need extremely good timing. I do not find them very attractive because you are trading against the odds - most of the time 90%-95% they are moving lower. When a bear market begins probably they will be interesting.
DeleteNevertheless you should trade them only if you have a lot of experience and you know what you are doing.
Krasi,
ReplyDeleteHow long can the bulls contract the vixx before it explodes to revisit 20 resistance? :)
- kali
A friend of mine asks me the same for a long time because he is bearish for too long... my answer is always the same - until the pattern is finished:)
DeleteI told you, you have to be patient.
Vixx rising today... hmmm.
DeleteIt's time to party!!
-kali
Krasi,
DeleteCould we have completed the ending diagonal with peaks on Jan 6, Jan 26, feb 10th ? The pattern would fit perfectly esp with all the divergence.
Thanks,
Kali
Less likely, this does not fit for other indexes.
DeleteHas PM already been going down or still testing its impulsive wave high? It seems PM goes along with stock index in the sense that stock market up, PM down... In this sense, given market may grind another week, PM should be grind down? But clearly PM is still hanging on its high level and may grind another small up wave. Thanks.
ReplyDeleteAnother question is IWM, SPY and DIA, what's their relation during top and down. I recall some books said when market reaches its extreme, IWM will go down first, while DIA may gradually reach its high point. Once DIA begins down trend, IWM will accelerate its existing down trend. So if short the market, short the small sector seems better than large sector? And another ways is short aggressive sector like QQQ/Biotech first?
I do not think that there is such tight correlation on daily or weekly basis between PM and stocks. It looks like the USD made an impulse higher so I expect more to the upside and respectively lower for PM.
ReplyDeleteYes, I have read the same small cap turn first, but I would not say the deviation is so big. I would rather look at different US indexes for confirmation if I am tracking the right pattern.
I have posted such comparison a few weeks ago saying that there is more to the upside because RUT and XLF have not finished their patterns and we see now DJ and SP500 higher.
Yes, small cap and nasdaq are more volatile, the moves are bigger, and the profits are bigger.
I am trading only leveraged ETFs TNA/TZA and semiconductor SOXS/SOXL profits are much bigger, but the loses too. They are only for traders with experience which know what they are doing and with very good timing.
Hi Krasi, I've have obsessed with Russell 2000, and just wanted to share a couple charts with long term trend lines and this retracement I came up with when trying to make sense of the violent rally last few months :) am fascinated by current levels to see what happens. Not sure if this 200% retracement has any significance? probably nothing... and you're probably already on top of all these long term trendlines anyway, but wanted to share :)
ReplyDeleteWeekly 10 yr: https://postimg.org/image/8o131rwe1/
Monthly 15 yr: https://postimg.org/image/s3k327tcr/
Thanks!
DeleteImportant are the Fibonacci levels. I think there will be one more rally higher later this year. Now if you look at the second chart everything aligns perfect - one more wave to finish the EW pattern, Fibonacci level 2.236, the purple trend line overshot final mania just to hit the green trend line. It looks like 1500 will be an important level for RUT.
I've been following your blog for a couple months. It is well presented and uncluttered. I also checked your forecasts to actual market moves in the past and you have done an admirable job in a difficult field. (I realize perfect forecasting impossible). Interesting to note your attention to market breadth.
ReplyDeleteThe idea is to combine several tools, but to keep it simple - only basic concepts. This gives much better results than choosing one tool and digging very deep trying to become an expert.
DeleteYes, the forecasts are not perfect, but almost always on the right side so no heavy loses. This is good enough, because as a trader you get paid when you are on the right side and not for knowing where the index will be in one year.
Market breadth is very important. If you know how to read it's message you will know where the market is heading.