Intermediate term view - correction for 6-8 weeks.
We saw a move higher as expected.... no strong case either for bullish or bearish outcome, but I see more and more hints that the top is behind us. Europe looks like finished ED with reversal candle and RSI/MACD divergence, DJT with clear impulse lower, XLF you could count diagonal lower, RUT you can count an impulse lower. SPX on the daily chart RSI broke below the trend line and it is not recovering quickly just tested twice the broken trend line. It takes too long for the index to rally 7 trading days already. McClellan Oscillator - compared historically after a move below -80 the correction was already running, but it is so shallow that you do not think about correction. "Recovery" follows for 1-2 weeks but it is weak and reversal follows - for more than 2 weeks we have exactly the same price behavior. Higher high could not be ruled out, but I think the top is behind us.
TECHNICAL PICTURE and ELLIOTT WAVES
Short term - the price bounced from the support level as expected now waiting for the market to show it's intension. It looks to me that the trend line was broken and tested. The bearish outcome looks more likely.
Intermediate term - RSI shows bearish behavior. It broke below the trend line and it is not recovering, it is just testing the trend line....
Long term - no change, waiting for the wave from Feb.2016 to be finished. The indicators turned lower, waiting to see when the price will follow them.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - are pointing lower... we should see something lower for the indexes even if it is only a few percent.
McClellan Oscillator - recovered above the zero line.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - turned lower, but still above 70.
Percent of Stocks above MA50 - turned lower but still at higher levels.
Fear Indicator VIX - several higher lows, waiting to explode higher.
Advance-Decline Issues - in the middle of the range.
HURST CYCLES
Day 32 of the 40 day cycle. We are in the last quarter of the cycle... it is difficult to see a rally, only if the count is wrong.
Week 8 of the last 20 week cycle. The middle of the cycle, waiting for a turn lower and 18 month cycle low in late April.
Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
No price flip for a sell signal so far. The histogram looks bearish - second top and below the MA.
Thanks! Any comments on the GDXJ please?
ReplyDeleteNothing new, I still think this move higher is just corrective. The next two day(after FOMC) it failed to rally as expected. Probably the correction will be more complex than simple zig-zag and take more time, but eventually GDXJ should turn lower until June.
DeleteI recall April as a potential bottom or possibly GDXJ doesn't really begin to move until the end of summer. Could you explain why June and whether a lower low (below December 2016) appears in the cards at this point. Viva San. Giuseppe!
ReplyDeleteThe bearish cycle model looks now better. The next 12 and 24 week cycle low is in June. I have shown a chart with a green and red path. Now I am watching the red path.
DeleteHi Krasi,
ReplyDeleteI have been reading your communication about gdxj..please correct me about the following view:
Since 2011 it had been in the bearish trend..the in the beginning of 2016 it made the last low after which it made the first wave which lasted till august of 2016.. assuming it is actually the first wave it has eneterred a new bull market with a potentially completed wave 2 in dec 2016. Since then wave 3 started with a completed wave i and possibly ii, we just need confirmation of it now. It's quite probable wave iii of 3 is on the way now. If this wave count is correct I don't know why you say the bottom should be in June or that gdxj is in bearish cycle. Could you explain ? Thank you. Krisarnold
Your assumption is that PM entered a bull market. My view is commodities including PM are in a secular bear market and this is just a cyclical bull market for a few years. Look at long term charts commodities move 10 years higher with parabolic end(sounds familiar?) and 20 years lower. All the gloom and doom and how PM will go to the moon because they are safe haven... is wrong for me. I suppose many are loading like crazy PM sector(judging by so many comments) following false Prophets.
DeleteSo it is not 1-2 i-ii, it is some kind of a corrective pattern - we have A and now B is running. By the way if the bearish cycle is playing out June is just the next low and B should be finished in Oct-Nov.2017
I have been bearish on PM too but when does one change his mind about the trend? For an intermediate term, at least. In this case let's assume gdxj continues higher and reaches the top made in aug 2016. 2 questions follow: would that mean that gdxj were in wave 3? And wouldn't that move mean that a 5 wave cycle is on the way up? I just would like to figure out when the probability is higher that the trend reversed. And I thought that once wave 3 is on the way up we can expect the full cycle of 5 waves to complete. In any market. I appreciate your views on this. Thank you Krasi
DeleteKrisarnold
No it could be C. Five waves is not a guarantee for a full cycle. It could be just C and not 3.
DeleteIt will be a bull market if we see five waves higher above Aug.2016 for wave i of 3.
From Dec.2016 more likely three waves higher and five lower failing miserable at MA200 I can not see this.
Hi Krasi: Is the Nasdaq currently in a similar pattern as the S&P? Secondly, the markets essentially went no where for all of 2015 which set the stage for this huge mov off that bottom.. I wonder whether after a correction they could move up in an even stronger fashion over the next 2-3 years or is it your inclination that we have or are about to "top out" on a longer term basis. Do your charts support such a thesis with potential targets or too far off? The two indices that look most attractive (after a correction) is IBB (consolidating nicely after hefty gains) and SOXX (which is ways off from the all time highs).
ReplyDelete- I think yes.
Delete- No, this is the last move higher lasting months not years. After that bear market for 4-5 years.
- What charts are looking at????? SOXX is making all time highs with parabolic move higher, IBB is consolidating for another move lower.
Probably the two worst indexes to play the last move higher.
I was reviewing your January long term update and got the impression from your first two charts we could move up into 2018-19 but only after a significant correction starting later this year. Maybe (apparently) that's changed.
DeleteI have been following my biotech index as I have a large short position there. I don't believe you will want to go long after the coming correction. Biotech looks to resume its downward move that started in 2015. As I discussed with krasi, I am currently waiting for move C. After that looks like a bounce and another big leg lower.
DeleteI am very bearish biotech. Krasi, let me know if you don't agree.
Thanks,
Kali
Hi Krasi, do we have confirmation on SPX in your view?
DeleteLooks like we're going to get a weekly price flip to confirm the top.
DeleteYes, correction is running. The weekend I wrote, that we have too many hints for a move lower.
DeleteYes you did, great call sir! I was asking because I remember you saying that you normally go to 100% when we get 100% confirmation and was curious if you normally wait to see the closing price below yellow line or intraday break of yellow line is OK. Thanks for your great work!
DeleteUsually I enter earlier... I am not so patient. Intraday break of the yellow line is ok. The problem now is that this is a trade against the market against wave 3, not some huge correction. Expected something like 100-150 points and the entry will be with 50 points already behind us... In this case I would enter at "c" the test of the trend line(first chart), the stop is very tight the ATH so it is not a problem.
DeletePersonally I entered short the DAX last week because of the clear pattern.
Thank you, and well said, that makes a lot of sense to me - the balance of power has shifted from bulls to bears at the test and failure of the previous uptrend line.... Well done!
Deletep.s., regarding your comment on SOXX...and pls forgive me/ignore this if I'm telling you something that you already knew, but although SOXX ETF made ATH this week (created in 2001), the SOX index on which it is based on made its all time high March 14th, 2000 at 1362.1 vs current cycle high of 1017...I think you were just trying to make a point in that comment, but in the 0.01% chance it has any impact on long term/wave count analysis I needed to say it! sorry :) pls ignore me/this post if it has 0 impact and thank you for your great work and answers! As always, you are the man Krasi!
Thanks for clarification. To be honest I did not pay attention. I avoid such long long term counts, but I think I will have to look at them after this bull market is over.
DeleteLol, mutually hope you're right on last 4 words ;)
DeleteFor the record by lol, I'm just giggling to finally have a 1%+ down day for any index!!! Finally
DeleteAppreciate the insight.
ReplyDeleteHi Krasi,
ReplyDeleteWhat's your price expectation for the correction on the S&P? I'm enjoying your updates.
It is still too early. We need finished waves a and b to measure the target for wave c. I expect at least 2280 in April.
DeleteYes, I'm wondering if we get a deeply oversold reading that it's time to get back in for a Wave 5 move up. It seems like we need another rally to suck in all the people who missed this Trump Bump.
ReplyDeleteYes, this is 100% sure for the big picture... even short term my new alternate scenario is one more higher high in the next few weeks before a bigger correction.
DeleteKrasi
ReplyDeleteI'm currently short the DJIA the trade is doing well. Was wondering your price target for the drop. From what I'm reading now your of the mindset that there could be another run up before the larger correction. What would you want to see to validate or invalidate this move as the larger correction?
Best
This move lower should develop as an impulse, which means at least another week lower to around 20200-20300. This will validate my preferred scenario(correction 6-8 weeks). The signs are looking good, when I look XLF,DJT,DAX they develop as an impulse.
DeleteThe price forecasting on this blog is unbelievable! Keep up the great work!
ReplyDeleteWell done Krasi! Great insights as usual.
ReplyDeleteTo clarfiy, you expect wave a to reach around 20200-20300? Roughly speaking, if wave a reach say 20300, how about wave b and c?
Good luck all. Jd
If I am right about the correction for several weeks, I want to see a confirmation and this is DJ making the next short term bottom in this area 20200-20300 (with impulse). If this occurs wave b 50% retracement and c around 19800 +-100 points. But this is two steps ahead:) a little bit too early.
ReplyDeleteKrasi, what is your projection on Nasdaq composite?
ReplyDelete- Kali
Something around 5650... I think for Nasdaq this is iv of 3.
DeleteLooking at the S&P and Dow, couldn't you make the argument they are both in iv of 3? That wave from June 16 could be i of 3. No?
DeleteThanks
Kali
Yes, I have changed my alternate scenario. This weekend you will see the charts including Nasdaq.
DeleteBoth scenarios are not much different in terms of the direction for the next 2-3 moves only the wave degree is different.
Looking forward to that update then Krasi! Do you a larger downside, or a briefer correction ?
ReplyDeleteThe potential for wave a is kind of hard to read, there hasnt been any real flush/impulse yet, but the market has been buying the dip relentlessly for so long...
This is typical for the first part of a correction especially after such strong move - the sellers are not confident enough and there is still buyers. It retraces more time than price... it is running already for more than three weeks.
DeleteYes, most of the indexes do not show impulsive structure exception is XLF/DJT. I think we will see finished impulse in a few days and deep retracement, then a well visible sell off in April.
It appears that PM/GDXJ has negative relation to SPX: spx down, PM up... So what's to be expected for spx and GDXJ? If SPX goes down for small wave 5 to finish the recent impulsive down, how about GDXJ? move up again for lower high? It looks like GDXJ is also weak and due to correction... Thanks.
ReplyDeleteI do not see such correlation. SPX and GDXJ 9-16.March both up and 16-22.March both down.
ReplyDeleteI wrote several times do not look for such correlation it does not exist. The correlation is between USDJPY and PM and even in this case such small waves forget it. Do not base your trading on such things. This is only a crosscheck on weekly time frame confirmation for important top/bottom.
Thank you~ So GDXJ is also weak in the next few days, along with the SPX? Clearly GDXJ is now in consolidation, but the next direction could be?
DeleteShort term it looks like a few days lower. After that I do not know... I think it will try another move higher, but just part of the correction, the bigger trend is lower for me.
Delete