Weekly preview

The price was not responding to market breadth and US indexes looking like decoupled from the rest of the world.... and then for two days they caught up and price is at levels at which it is expected to be at the right time. My primary scenario was wave C lower and 18 month cycle low in October, but we saw continuation higher in September and I have started to doubt and consider the possibility of one more high.... then boom two day mini crash. I do not know how to predict them, but at least the tools tell me which is the right direction.

Now what to expect:
- short term the usual behavior when we see so much fear - strong bounce and test of the low. The pattern looks like an impulse so I expect lower low with divergences.
- intermediate term - we have a lot of fear Fear&Greed at 5(levels lower than February 2016 and 2018), market breadth is telling me to expect intermediate term low, RSI at 17, cycles at least 40 week low.... all this are signs to expect intermediate term low and multi month move higher.

What are the possible scenarios:
- the top is in, we have reversal and this is the first wave lower. In this case I expect to see corrective move higher in November... more likely until Christmas, the traders should forget the pain before continuation lower. This is the minimum which I expect, but I give it lower probability because bear markets usually start slowly and not with max fear to scare everybody for two days. This is typical for a bull market to purge greed after the traders getting too greedy.... do you remember the comments DJ 30k in 2017 and now?
- corrective structure a flat is finishing and one final high before a big correction - at the moment this is what I see from the charts. EW I have explained that I see corrective structure and you do not have a major top with wave B, cycles I think this is 18 month cycle low(more below), market breadth pointing to intermediate term low of higher magnitude, which will last for a while(months).


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - I see 1-2-3 lower, now strong bounce from oversold levels and one final move lower to finish impulse. If we see continuation to 2800 we will have a-b-c hitting resistance with c=a and 50% retracement. 2800 is very strong resistance(see the chart below) the price has nothing to do above this level if we have more to the downside.

Intermediate term - RSI with extreme so expect bounce higher and lower low with divergence. After that I expect minimum the price to visit the 2800-2850 resistance area and RSI testing the trend lines. In November the indexes should move higher and we will see if the move is weak or strong and we will know what is going on if we have a reversal(red count V->1-2) or to expect new ATH(green A-B-C->V).

Long term - preferred scenarios is C wave for a flat correction(green). This is what my tools are telling me.

MARKET BREADTH INDICATORS
Market Breadth Indicators - oversold but need some time for bottoming and divergences. The levels and behavior are pointing to intermediate term low which should last for a while... months.
McClellan Oscillator - very oversold bounce and higher low expected.
McClellan Summation Index - it will reach -500 soon, expect important intermediate term low.
Weekly Stochastic of the Summation Index - in oversold territory, it should bottom in the next 1-2 weeks and turn higher.
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - very oversold levels, bounce higher and higher low with divergences expected.
Fear Indicator VIX - too fast too high roughly 29, levels asociated with corrections of higher degree. Now it should make lower high and move lower making another higher low for multiple divergence.
Advance-Decline Issues - in oversold level.... it should stay there for a while and we should see at least one more low.


HURST CYCLES
I was following a cycle model for a long time which was expecting 18 month cycle low in October, but price was refusing to move lower. In September the market continued higher when it should have been topping and heading lower.... and I threw the towel:) switching to alternate model.
With the current price action the price is where it should be at the expected time.... how two days can make a difference.
I switched back to my cyclical model with 18 month cycle low in October expected in the next 1-2 weeks. At the moment it looks like we will see a bottom above the Feb-April lows which means low above the previous 40 week and 18 month cycle lows and according to the cycle theory the next 18 month cycle should make higher high.
The longer term cycle 4 year are influencing the shorter cycle 18 month cycle. Here is how the cycles with different length interact - the first cycle very strong, the second one starting strong and the second half sideway move, the third one should make higher high(the previous one making higher lows) in the first 1/3 of the cycle and then it should drop below the January low.

Day 24 or 42 depending how you count 2 or 3 daily cycles. In both cases we should see a low in the next 1-2 weeks.

Week 15 for the 20 week cycle, it is already mature and in the time window for a low.

SOX something to think about (BA from DJI index has the same chart) - why I am considering the possibility that we have only wave III from 2009 and the current pattern(2018) some kind of correction.
You can count finished impulse 1-2-3-4-5 from 2009 and in this case for a reversal you need impulse lower for confirmation. This means another two months lower to finish 3-4-5 at the moment it is only a-b-c....
I see long sideway move and the indicators resetting - MACD back from the moon to Earth(zero). I think it counts better as 4 and 5 to finish III and it fits perfect with cycles 4 year cycle highs and lows.