Oct 14, 2018

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.

44 comments:

  1. Always look forward to your updates. Thanks Krasi.

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  3. Well done Krasi! I'm a cycle guy and I remembered discussing with you before on the possibility that the 18 months cycle low could be counted at Feb'18. Well you have proven me wrong! - an 18 months cycle low in Aug'17 would fit everything perfectly now. Thanks again for all the work that you do.

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  4. Hi Krasi... looking at your first chart and your comments from last week you are expecting a running flat correction with 5 of C = .618 of 3 of C. However, with wave B ending significantly higher than January top we cannot exclude an expanding flat, I suppose. That means wave C could be 1.618 of A, a drop of 528 points to 2412 in the snp. It also means that wave 5 of C would be approximately 400 in length ( assuming it starts at 2800) a double of wave 3 of C. My question is why you have not mentioned such a possibility? I think expanding flat would be much more scarier than a running flat and make most people believe the market turned bearish. Thanks again for sharing your analysis. Kris

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    1. I was thinking about expanded flat until we saw this first wave which is way too long and caused way too much fear. If you project now expanded flat wave C it will move very low below 2300 and will last too long(fear needs time to be forgotten).
      I see two options impulse and running flat or instead of 3-3-5 W-X-Y(3-3-3) correction so this impulse is a of Y sharp bounce which fails and one more low with divergences for c of Y.
      It depends on time how fast is the price moving. It needs some time for a bottom so that all sellers to sell. If it moves too fast and finishes the impulse next week for example, then I think we will see one more wave lower.

      From previous comments chart from Manuel https://prnt.sc/l0ggzj

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  5. Ok Krasi.

    Like me my abcxabc or your 3-3-3.
    Twin ideas.

    Manuel is my friend of Spain, but in short term ideas you and Manuel win... Go downin abcxabc, por 3-3-3, or fucking bird of Manuel.

    Spain traders is good trademark... Jiiiijij!!!

    Gold in 1230 and eurusd in 1,165 as inflexión point to go down to 1130-1150 and 1,08... If up up up bad analisys.

    Bye.

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  6. I'm looking at 2855-60 as a point of resistance and possible reversal.

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    1. With a push above this region I think we close in on 3000 pretty quickly.

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    2. Calm down the correction is not over and you are dreaming of 3000.

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  7. Hi Krasi.. if we are observing wave C then this wave 4 of C should not cross and go above 2863 in s&p500. If it does and goes higher then what kind of correction did we have? A zigzag? Thanks. Kris

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  8. Not quite sure sure I understand. Are you able to draw it or show a picture? Thanks. Kris

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    1. I can count perfect impulse.... there is high probability this is b and not 4 - https://imgur.com/a/p5J8dd4

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    2. Either way s&p should still make a lower low according to this. Thanks Krasi.

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    3. Hi Krasi, I'm trying to figure out how this lines up with RUT count? RUT sell off is more advanced and hasn't even retraced 38% yet vs SPX almost 50% retracement already. Is it possible that RUT is still in wave 4 with 5 to come and SPX is already in b? If you have a chart for RUT would be greatly appreciated. Thanks again for all your great work!

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    4. It is more likely that RUT is in wave b too. I think the indexes follow the same path.

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  9. One chart for those who are mega bullish:) corresponding to the SOX chart above - https://imgur.com/a/zBEHf7o

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  10. Looks like they will drop this to fill yesterday's gap at 2750 for maybe b or b of a . Then a rally in c to the 2820 area .

    No complaints about the lack of volatility...

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    1. I would say (a) of b, zig-zag higher the first leg higher.

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    2. Maybe now they go on to fill the gap in b of b...

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  11. Thanks Krasi - guilty of counting too fast !
    Do you have a count on the ftse from the May 7900 high ? It looks more like a complete or near complete ABC , but that's so out of sync with every other index and would imply new highs , which seem a tall order from here. Maybe you see something I can't !

    Thanks

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    1. I would say iii of 3(1 late June, 2 August and now i-ii-iii of 3) or double zig-zag - a-b-c May to September X end of September and now a finished with b and c to follow.
      The size of the bounce higher should make the difference between the two scenarios - b should be stronger.
      In both cases I suspect important low synchronized with the US indexes in November.

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  12. That's really helpful - thanks very much for your thoughts

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  13. Hi Krasi! if you see the october bottom at around 2660 for the spx, where do you see the intermediate term bottom of november? thank you!!

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    1. At the moment looks like the first wave lower has finished. We have to see where the move up will finish to measure the target lower. I suppose 2840-2850 than the targets are 2690 and 2610.

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    2. So do you mean the current move up is wave B and it should get another leg up to 2840/2850? Thanks.

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    3. Yes, I think it is b wave retracement.

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    4. Krasi, Important follow-up/clarification question bc I'm confused. is your gut saying b is still running to 2840-2850? or do you think b is over and c is running?

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    5. Way too early to be finished and c to begin. If wee see a lower low either the first leg is finishing with 4/5 or flat correction for b.

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    6. Too early? If we look at the Feb correction it took 3 days from the low of a to the low of c. See your Feb10th short term chart. Also short term momentum indicators have reset and turned lower again...ugh I hope you're wrong. Behemoths report next week and midterms Nov6th so we likely see selling before those risks and buying after events (I think)

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    7. Market breadth barely turned up from oversold levels, it is too early for another 8-10% sell off. It does not work this way.

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    8. Thanks for responding Krasi, I highly respect your views. I was actually just looking for a 3% correction from here but RUT looks like it is just 20pts from my target already....so I may not be bearish enough. We will see

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    9. When I say 3% correction, c is running, I meant it would look something like this in February (after the 50% retracement we saw then/and that we just saw last week). Is that possible?
      https://3.bp.blogspot.com/-DJFApHf3DPE/Wn6a1jXEfaI/AAAAAAAAH6k/ExwRCaxgp9oQIVQ51BXqYgwUlP3u_yiMwCLcBGAs/s1600/w325-1.png

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  14. Hi Krasi,

    Quick question on 10Y & TNX, I see small abc up of either B or 2 down, Looking at RSI trendlines, the move up from 22 Aug is over and I guess we have to wait and see how the move down plays out (i.e. if RSI trendline from 29 May is broken)

    Regards,

    Mily

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    1. BTW Liquidity in Spoos is diabolical

      http://nanex.net/NxResearch/NxLiquidity/

      Regards,

      Mily

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    2. I would count A-B-C and currently 4 of C.
      A from September 2017 to May 2018, then B and now C running with target around 3,4% where C=0,618xA the same target like 5 of C.
      It fits with stocks - b wave and one more sell off then important high for yields and low for stocks.

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  15. Krasi, can you look at WFC, does it go much lower, thank you.

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    1. The same pattern like the indexes - higher and then another leg lower target around 46-48

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  16. Krasi, Russell 2000 usually leads whether the direction is up or down. Looks like a double bottom with last week after today. Close to a bottom yet? Thank you.

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    1. Yes, the direction is up for a while, but I do not think we have important low already.

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