Dec 22, 2018

Weekly preview

Last week I have explained why the markets are in bearish mode and in bearish mode shit happens:) The indexes took the short cut and just plunged lower. The explanation is simple we do not have zig-zag Y it is impulse wave C namely bigger than expected - 1,618 extension. Inside the impulse the waves are almost at the 1,618 extension too so I think the indexes are close to the low for wave 3. I was expecting 1x1 measurement and a low in January and I did not get it right how exactly the down move will develop. Now the waves 4 and 5 will provide the missing time for a low in January. Next week we should see wave 4 and after the holidays wave 5.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - from early December we have impulsive price action and this week feels like third wave. It counts well as impulse plus 1,618 Fibo measurement so I expect a low next week and wave 4. It is the most difficult wave to forecast almost impossible. If we see strong bounce from oversold levels target is 2500, or it could burn time with flat or triangle.


Intermediate term - RSI,histogram oversold as expected for third wave, bounce and divergence expected. Now the price is stretched way too far form MA200. For now I prefer A-B-C count instead of 1-2-3, but let's see what will happen in the next two months.


Long term - MA200 will be tested, the histogram with very deep trough comparable only to 2008. I do not think this is the way a big bear market begins - extreme readings for market breadth and indicators. I will be really surprised if we do not see an intermediate term low in January.


MARKET BREADTH INDICATORS
Market Breadth Indicators - extremely oversold again, levels seen at important lows like 2008,2011,2015. Time for bottoming and divergences needed a few weeks.
McClellan Oscillator - extremely oversold.
McClellan Summation Index - sell signal, extremely oversold.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - extremely oversold.
Percent of Stocks above MA50 - extremely oversold.
Fear Indicator VIX - making a double top.
Advance-Decline Issues - extremely oversold.


HURST CYCLES
Day 19 for the second daily cycle.


Week 8 for the 20 week cycle.

42 comments:

  1. Perfect graphic, down in A of ABC... Or A of triangle medium term.
    Two posibilities.

    Indexes dj and nq go down to sma200 week... And sp 4%+- more down of sma200 week.

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    1. Yes, I think it is big corrective pattern and the markets are close to intermediate term low extremely oversold readings.

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  2. What is your view on dollar and Oil? Thanks

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    1. Not sure about the USD, Oil the first leg lower is finishing and correction higher for a few months.

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  3. Krasi what u think of gold is the correction higher completed

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    1. one more high v of C will look better for complete pattern.

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  4. Thanks for the answer and Merry Christmas to you and your family.

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  5. Thanks for the answer and Merry Christmas to you and your family

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  6. Which wave do you mean is the most difficult to forecast? 3 or 4?

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    1. Wave 4 it can take many different shapes, 3 just move up or down.

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  7. Looks like we'll be in the 2200's quite soon. We're dropping through a lot of your targets very fast... any update on when you think we may get that intermediate term low? Perhaps something else is going on here that technical analysis simply can't predict?

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    1. I remember you from previous posts... always calling for rallies. Haven't seen anything from you for the last couple weeks. Your longs must be getting crushed.

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    2. Look at the first chart - one more drop to the 1,618 extension needed. Open a chart and measure the Fibo level, take a look at weekly chart and where MA200 is. Look what happen on Monday and think about again if TA/EW does work or not.
      The numbers from Lombardi are very decent targets what to expect and where the pattern will be finished.
      And again open weekly chart in arithmetic scale and connect the lows 2009-2011-2016 with a trend line and and project one more low for 5 of C.... I will think twice if TA does not work.
      Do not let fear take control, do your analysis.

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    3. I think today's price action answers your question - Monday hit the Fibo measurement/MA200 weekly and today sharp reversal. A lesson for those who think TA/EW does not work... even with so much fear and waterfall very precise.

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  8. Th Ed problem with but Elliott wavers you don't sell

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    1. I am not sure I understand, but EW has nothing to do with the decision selling short or not. Some are scared and I see articles presenting it like something dangerous. I do not understand why. Personally I do not have problems selling short, I do it all the time.

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  9. Hi krasi! Merry Xmas !!
    Regarding 4, are you still inclined to think that we still need to see it, whatever shape it’ll take, or could it be we pretty reach 5’s target by year end (circa 2250) to see a more substantial and longer bounce in January?
    Thx and good luck trading to all!!

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    1. Merry Christmas!
      No change - Fibo measurement 1,618 reached on Monday for w3 next is wave 4.

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  10. Merry Christmas Krasi.. quick question regarding your wave 4 of C count.. if S&P goes past 2600 straight from here would you assume that the correction is over and wave 5 behind us? Apparently wave 1 of C ended below 2600 so it would violate the EW rules. So is 2600 level a threshold which would force you to recount the current C wave structure?

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    1. I would have to revise the count much earlier - If this is w4 it has nothing to do above 2520... 50% retracement.

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    2. From the hourly chart 2578 would be the bottom of wave one, am I correct? I might not understand this but I thought the EW rule saying that wave 4 should not cross wave 1 area applies to corrective waves too. If wave 4 ends just below 2578 it would not violate the rule and the index should still go down with wave 5. Can you please explain where I am wrong? Thank you Krasi.

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    3. Yes, this one of the core rules to confirm impulse structure. This does not mean that anything below 1578 is wave 4. Wave 4 should have corrective structure, retrace 38%(max 50%) around the area of the previous wave 4 of lower degree. All this plus resistance and MA50 hourly is in the 2500-2520 area.
      Anything above that will have impulsive structure and retrace too much.

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  11. I'm curious why is wave 4 the hardest to predict if the line in the sand is 2520 vs your target of 2500ish? We know wave 3 just ended so wave 5 should be the easiest to make money? (I would think wave 2 is hardest). Also would you go long if we go through 2520?
    Thanks for your help!

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    1. The easiest wave to make money is 3 not 5 and the most difficult wave is 4 not 2.
      Wave 4 can take many different shapes and is shallow. It is very difficult to trade and predict exactly how it will develop.
      Wave 3 just move lower, wave 5 is shorter and ends the trend and you can not nail bottoms/tops all the time.
      No, I will not go long because I do not see complete pattern.

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  12. This "wave 4" is very suspicious... this is not the way w4 should look like 5% in one day.
    If we see further gains the bottom is in with my initial pattern two zig-zags lower and "exaggerated" wave c=1,618xa for the second zig-zag.
    If you look at NDX if we have a bottom there is two zig-zags lower with the same size... the pattern which I was following for SPX too.

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  13. Hello Krasi! What a bounce.... but but.. just to argue, the wave 2 lasted 50 hours, and was made of one move higher, 50% retracement of that move, and one final move to make a higher high,a move of 105 points all in 2 days, before starting wave 3 straight away.... still, are you suspicious of yesterday’s move? Is it because if we see further gain after such a powerful move up, it means the move has got momentum? Or are you still favouring circa 2520 as the proverbial line in the sand? So far your chart is spot on, so I don’t understand your doubts...
    Good luck trading!! And many thx

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    1. I prefer to see one more lower low for better looking pattern, but if the move continue higher it will look like impulse. It is not so much the level, it is the shape if you look at the futures another move higher and the pattern will be five waves which is impulse.

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  14. If we go straight down to 2270 , that would be give a decent long entry & a simple plan !. At the moment , we seem to be in no -mans land with some folks looking for such fresh lows within a week or so & others assuming an abc is done to the downside and we have a bigger b/1 up in progress.

    break of 2350 or 2520 would seem to be the tell...

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    1. So far I see only two legs up with the same size and no continuation today so the bearish case has high probability. At the moment I think this is b of 4.

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  15. Nice... what is your target zone for c of 4?

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    1. Second leg with the same size points to 2520:) what a coincidence my line in the sand for w4.

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    2. :) beautiful target Krasi

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  16. Hi Krasi, there are so many comments (inclu one recently from Stanley Druckenmiller-who souncds like a technical trader) that algo hss changed the trading landscape to the extent that what was used to be effective setup has now rendered not so effective. Do you observe the same? Thanks

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    1. The setups work fine, but I think they develop faster and get exaggerated in both directions. Because of that you have the feeling the trend never ends and nothing works any more.

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  17. Krasi.. if S&P goes past 2520 what would be your upside target? Would 2650-2700 become new strong resistance? Thanks

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    1. Extrapolate impulse higher and the target is 2700.... it is way too fast. What to expect in January? new ATH:)

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    2. Based on your long term chart you expect ATH... the question is if it’s going to be at a faster or slower pace.

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    3. Not necessarily and even i this case not for 3 weeks more like for 3 months.

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  18. I see, ok. Thank you Krasi

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  19. I look forward to seeing your charts this weekend. I wonder if you see a top coming next week like in this last short-term chart.

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