Apr 14, 2018

Weekly preview

Short term view - the next bigger move is lower, but it could take another week if a diagonal is running.
Intermediate term view - if we do not see one final sell of than a bigger corrective pattern is running.

Choppy move to the upside as expected. Nothing new the same patterns like last week - to see this move as bullish should be a diagonal and I hope to see one final sell off.
Indicators/market breadth are improving and resetting higher, but the price action is weak - overlapping, sideway action below MA50 for too long, the candles with shadows like the move up is used to unload shares, shrinking volume, TomDemark setup could not be finished... see DJ the last chart. All I see is weakness... only XBI/Europe look like impulse higher.

This low does not feel like important low - 40 week and wave IV low. No new lows, no final flush lower, two days sharp sell off and 3 weeks sideway price action, crappy reversal...
To see an impulse higher it should be a diagonal and in this case because of the reasons above, most likely it will be part of an a-b-c move from much bigger corrective move. I do not believe in wave IV bottom in this case.
Alternate we have corrective wave higher and we will see one final sell off to finish big W-X-Y correction for wave IV. I hope this scenario will play out - the indexes will be in sync, final flush lower and fear, finished pattern, great long entry.... everything will look much better not like the crap right now.

Short term - the two options are shown on the chart. I can not see important low and impulse higher at the moment.... As long as the RSI trend line holds a diagonal is running.

Intermediate term - the histogram is positive already. The price is still trapped between MA50 and M200. The "bullish case"(red) diagonal the price rejected at MA50 and tests one more time MA200 before a rally. The real bullish case(green) sudden sell of to finish wave IV and reversal.

Long term - the histogram with a higher bar, flattening has begun as expected, one more test of the low and strong rally. The histogram can not tell us which of the both scenarios above is more likely. Both will cause the histogram to do what it should do. In the previous two occasions we had 4-5 weeks choppy price moves final sell off and reversal(green bar with long tail). I hope this will repeat - currently week 3, red week 4 and final sell off and reversal.
Anyway at least one more rally is expected.

Market Breadth Indicators - turned up and look positive.... but nothing impressive so far.
McClellan Oscillator - above zero.
McClellan Summation Index - buy signal.
Weekly Stochastic of the Summation Index - still sell signal. I think we will see a buy signal for the phase with the strong rally even for a diagonal and higher low.
Bullish Percentage - buy signal.
Percent of Stocks above MA50 - turning up after divergences.
Fear Indicator VIX - making lower highs.
Advance-Decline Issues - strong but possible lower high and divergence(in line with both patterns).

A different view at cycles. This are not Hurst cycles, just my observations. Simple way to add time to your toolbox - no complex theory just counting from top-to-top and bottom-to-bottom on the daily and weekly chart. When the price is above MA10 the price is moving up and usually it will continue until it reaches the time window for a top, when it is below MA10 the price is moving lower and usually it will continue until it reaches the time window for a bottom. Two days closing above/below MA10 is a confirmation for reversal. It can be used as a trading system too - it is very simple and effective.

The daily chart - for the last two years the daily cycle has length 30+- few days. You can use trend lines, they are good sign for a reversal too or just watch MA10. Another useful info how - much time the price is spending moving up/down. For example in 2017 you can see the price moving 25-30 days higher and 5 days lower. This means strong right translated cycle and the next cycle will make higher high. The current one(green) spent 14 days or almost half of the cycle moving lower - nor very bullish
Currently at day 23(green) and nearing the time window for a top.

The weekly chart the length is 20 weeks+-few weeks. Exactly the same rules - MA10,trend lines, how much time the price is spending up/down.
Notice how until the top in January we had strong right translated cycles and the current one(green) - half of it is behind us and the price went nowhere. That is why we have bearish top-to-top cycle and as I wrote a month ago the top could be in....

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
The setup higher was interrupted at day 7, which is another sign for weakness... something what we knew after seeing only 3 waves higher.

Look at the candles and the price action - one strong bar and after that 7 sideway bars half of them red the other half with long shadows instead closing at the high all this on shrinking volume hitting MA50..... my feeling says this is corrective.


  1. great write up Krasi. thanks as always for ur hardwork.

    i took a step back this week and thought about things from the top down.

    as u have noted, seems like internals are improving and, while not perfect, the fear and greed index is still at extreme fear.


    also, im still getting emails from buddies on wall street with the latest 1987 crash analog thats beingpassed around amongst traders and they are definitely contra indicators.

    Lastly, think abt all the political stuff being thrown at the market - while theres been volatility, we have been grinding higher despite all that crap.

    if the political noise lets up a bit, the shorts might start to unwind and we could get a nice short squeeze to new highs.

    sometimes i get caught up in all the data and minutia so just trying to take a larger view and boil down the facts to the basics: internals improving and everyone still bearish.

    1. Yes, it is unlikely to see sudden acceleration lower with this market breadth and level of fear. More likely to see something higher at least in May before getting bearish.

  2. If there is a war, we will head substantially lower. Trump looks determined.

    1. I was worried too... until I saw the weak theater piece from yesterday. Now I do not worry about hot war any more.

    2. It is rather remarkable how well the markets have held up. If you count how quickly the first drop happened and how prolonged current drop has been, it’s hard to be bearish. The headline risks a last a few days and people seem to forget about it. Let’s see how high we can push this up over the next couple months.

  3. Thanks Krasi,

    Looking for a new corrective high above 2680 today/tomorrow , then down into 23-25 April . watch & wait...

    1. This is very likely. I think corrective a-b-c higher is running and currently wave c as an ED. One more high will finish it and then lower.