Weekly preview

Short term view - another high then down next week.
Intermediate term view - up and down for several weeks and 20 week cycle low in July.

Boring sideway week... technically nothing has changed and we have the same patterns like last week. The bulls see wave 3 just warming up for strong rally, the bears see finishing 2 and big sell off around the corner. The problem is I do not really like any pattern. Something does not feel right I see a-b-c finished early April. When I look at cycles and market breadth I think it should be something else. This week I am showing different pattern which fits very good - impulse after finished a-b-c for wave IV, cycles are ok with it, it explains the market breadth strength and the expected weakness, it is in sync with NDX/RUT, it explains why the index is sold on strength all the way up(big boys are unloading already). The only problem I see is you have to assume that the move in April is wave 1 and not some corrective crap.

So if this is the pattern what should happen - sideway move for 3-5 weeks with one more high to finish wave 3 then wave 4 with 20 week cycle low second half of July. In the mean time market breadth should deteriorate rapidly(this is the crucial part). Then July-August final rally with poor market breadth and new ATH 2900+ to trap the herd.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - one more wave up to finish impulse from the last low. This will kill the diagonal(see previous week) and we will have only the very bullish or very bearish scenario.... or the alternate one which I am suggesting:)

Intermediate term - the a-b-c is not so obvious masked with higher low, but if you look at NDX/XBI for example it is very well visible as a flat. The caveat is this some ugly wedge for wave 1 in April or is it just some corrective crap.
I am watching now this scenario and alternate is wave B/X and another sell off begins. As long as the index stays above 2740 it is bullish, if price starts overlapping forget about impulses.

Long term - MA 50 tested twice, I think this should be wave 4 and this is the last rally. Waiting to see if this is wave V - it looks good with divergences.

MARKET BREADTH INDICATORS
The previous week I have explained about cycles and now my problem with the bullish/bearish scenario and market breadth.
McClellan Summation index - the usual behavior is after important low we see sharp move to 1000-1200 deep correction then highs in the range 800-900. Currently the indicator reached 750 and the third wave has not even really started... in this case we will see 1000 and above, which does not make sense. This should be the final wave and important top showing weakness not extraordinary strength. On the other hand 750 is sign for a strength, important tops occur usually at lower levels 500-600 with divergences. The bearish case does not make sense either.
So neither very bullish nor very bearish scenario fit very well... the same story with A/D issues.
What could it be? Corrective move not so much visible as price, but market breadth dropping heavily(this will confirm money flow and selling on strength). Then final rally on poor market breadth and divergences. This will be classical top - topping for 6 months, distribution on the way up and final rally with poor market breadth and indicators to trap the herd.

McClellan Oscillator - dropped to the zero line after several lower highs.
McClellan Summation Index - buy signal.
Weekly Stochastic of the Summation Index - buy signal, in overbought territory for several weeks.
Bullish Percentage - buy signal... but not showing much strength so far.
Percent of Stocks above MA50 - touched overbought level.
Fear Indicator VIX - around 12 I doubt wave 3 is just starting.
Advance-Decline Issues - several highs in overbought territory and now turned lower.


HURST CYCLES
Day 13 for the 40 day cycle. Mid cycle low with wave iv of 3 and 20 week cycle low with wave 4?

Week 10 for the 20 week cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Finished sell setup on the daily and weekly chart, now waiting to see what happens to the downside.