May 5, 2018

Weekly preview

Short term view - one more high and pull back for inverted H&S.
Intermediate term view - higher in May.

We saw another zig-zag from a bigger double zig-zag and reversal.... it looks like the finished triangle the yellow one which I have shown the previous week. The problem is how the low occur - looking at indicators/market breadth/cycles I can not see important low... just some low, no fear, no oversold levels, nothing to suggest intermediate term low. So I do not think this is the pattern and I do not believe that wave V has begun.

Back to the charts which I have shown a few weeks ago - bullish triangle and 18 month cycle low in June or the top is behind us and multi month bearish pattern. See the weekly cycle charts for a long term perspective.
Nevertheless I am long because the indexes should move higher in May - double zig-zag lower is corrective pattern.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - double zig-zag lower which is corrective and reversal. One more high is needed for a finished impulse. I think we will see one more high, the daily MA50 will be tested with impulse and the neckline of inverted H&S to be formed, then a pullback for the right shoulder.


Intermediate term - the price is still trapped between MA50 and MA200. I expect test of MA50 which will be sold, but I expect higher low and unsuccessful attempt to push below MA200.
The histogram did not made a trough, just dipped below 0. I would say this is not important low just the low of corrective wave from a bigger leg up - most likely b of D.


Long term - one more rally higher.... I think the bullish scenario is more likely.


MARKET BREADTH INDICATORS
Market Breadth Indicators - nothing interesting, nothing to suggest important low, just turned up in the middle of the ranges.
McClellan Oscillator - above zero with series of higher lows.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - buy signal.
Bullish Percentage - turned up in the middle of the range.
Percent of Stocks above MA50 - turned up in the middle of the range.
Fear Indicator VIX - around 15... you can not register selling on this chart not to mention an important low.
Advance-Decline Issues - turned up in the middle of the range.


HURST CYCLES
Day 24, I think we have mid cycle low at day 23, it is too early for a 40 day cycle low.


Bearish view - logarithmic scale, the trend line is broken and it will be tested with some bearish pattern. We have 40 week cycle low and the next one is running, but weak and it will make lower high.


Bullish view - arithmetic scale, still in the trend lines and a bigger triangle to make a 18 month cycle low followed by final rally. I do not like how the RSI looks like and that the triangle will finish outside of the trend lines, but at the moment this scenario feels better.

44 comments:

  1. I am curious why you need a panic selling in this wave 4...this wave is not supposed to be as severe as previous major corrective waves like II and IV. It is only a minor 4 of V. We got an impulse last Friday after a third time testing of the 200 average line. And now we got an impulse on Friday with futures indicating continuation of the mood on Monday. So I kind of disagree that you need an important low with significant fear associated with it. If I look and compare this wave in other cycles I find that they were mostly lame, gentle and insignificant in severity. By the way, thank you for sharing your analysis, I always appreciate it.
    Kris

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    1. This is not the way an important low occurs. Not everything is waves, there is other tools which can help you to decide which count is wrong despite looking right. All other tools say this is just short term low and nothing more.
      For so many years I have not seen EW to trump all other tools.

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  2. Another question is it seems bond and stock have the similar path recently? Do you think bond will also reach short term peak and pullback along with stock? Thanks.

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    1. TNX should make one more higher high and TLT lower low.

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  3. How deep the pullback/correction could be? 2620? Thanks.

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    1. What number what number would that be on the S&P 500 50 to a 61.8 retracement

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    2. First to see the high, but somewhere 2630-2645

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  4. Not sure whether the current pullback is wave 4 or the peak has reached and another wave down to finish the pullback?

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    1. It looks corrective like wave 4.

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    2. If we do not see a rally today than the pullback is running, three days is too long for small wave 4.
      We have a lot of double zig-zags so it is possible that we have an a-b-c which reached the neckline pullback and another a-b-c to finish D.

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  5. The fact that Krasi is long is the only message of importance to me... We have a floor level to keep in mind. Now let's focus on the big picture.

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    1. Long but cautious we have only corrective waves.

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  6. Hi Krasi! if the a-b-c lower is finished, what is the target of the a-b-c higher to finish D? ma100 at around 2705 or your upside channel limit at around 2735? thx a lot!

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    1. We have to wait and see what happens today - it could be just a-b-c for double zig-zag or impulse for simple zig-zag. When we see how the first leg looks like we can measure the second one.

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    2. glad to see impulsive wave up! Does it mean the correction would be ABC and also quick and strong? Thanks.

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    3. Is it possible that the current wave up is just another leg up to finish wave D? It has tested 2700

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    4. Predicting corrections is very difficult. For such short term time frame and correction in corrective move... I would not try. Impulse means more to the upside, I do not want to see retracement bigger than 62% - that is all the information we have.

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    5. If you mean the final leg up of wave D is running - yes this is possible too.

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    6. Wouldn't the top of D have to be higher than the top of what was possibly a of D on 18th of April?

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    7. Yes it should be higher.

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  7. It seems GOLD have reached bottom? Three consecutive days and it still hold... Thanks?

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  8. Now top is there? Or another wave higher high... Thanks. VIX still low

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    Replies
    1. There is no top, wave D should be finished first.

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    2. I was noticing that if you draw a trend line from the Jan high, March 13th high, down towards today you get a line that would be just around $272 on the SPY. Do you think that could be the top for D?

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    3. I am not sure if it is D at all. The impulse is too long.

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    4. On the ^GSPC it looks like the downward trend has been broken. Off to the races?

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    5. Either it is not an impulse and c of D is running or this is 1 of V.

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    6. What is the likely turning point if it is c of D or 1 of V? Thanks.

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    7. Now extending further and looks more like another a-b-c for D.
      I would say 2730.

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    8. IWM looks like ED from daily chart. And current RSI for all index seems to be overbought, much higher than 70... It would be quick down to begin wave 2 or E or whatever the corrective wave? Thanks.

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    9. If it is 2 it will be quick. For wave E longer 2 weeks.

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  9. I don't like the extreme net short dealer positioning (-800k net contracts), it either plays out as in Feb or it will be an epic short squeeze
    https://www.barchart.com/futures/commitment-of-traders/technical-charts/ES*0

    Regards,

    Mily

    ReplyDelete
    Replies
    1. The pattern is ambiguous... both scenarios are possible.
      Wave V and short squeeze or 1-2 i-ii and iii of 3 plunge like February.
      We have now impulse higher, but too long challenging the April high which favors one of the above scenarios... wave D of a triangle does not look now so nice.
      I can not decide which one it is...

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    2. About plunge like Feb, you mean Feb 27? Thanks.

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  10. If it takes a turn down in the next 5-15 points what else is needed to believe this is the end of D? Extreme RSI? $NYAD > 1600 maybe?

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    1. I do not expect to see extremes this is the problem - market breadth indicators hovering around the middle of their ranges, strength is missing.
      NYAD with lower highs(MA10) is a sign of weakness.
      VIX below 13 is troubling too.... too much complacency again.

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  11. Replies
    1. Another corrective zig-zag, I took profits.

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    2. Do you mean you exit spx short position? Thanks.

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    3. No, I was long and took profits because I see zig-zag which is corrective pattern.

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