Feb 16, 2019

Weekly preview

Instead of a pullback for 1-2 weeks and 40 day cycle low we saw another high. What changed - more divergences the oscillators with double divergences, the mainstream view impulse is dead, confirmed very very shallow and short b/B. It lasted only 6 days and less than 23,6%.... this is not how usually it behaves, but it is what it is. Everybody fooled counting w4... RSI was right again:)

Last week I wrote that I see some contradictions and I am confused... to sum it up:
- pullback for about a week needed to clear the oscillator divergences and 40 day cycle low.
- the next 40 day cycle should make higher high(explained last week), but after vertical first one it should not move much higher and the high should come earlier... like in middle of the cycle or earlier.
- Market breadth at very extended levels and it needs time to turn lower and build divergences. The price should move higher, but not in vertical manner.
- Impulsive pattern needed for c/B to finish the whole move from the December low. Usual extensions are 62% or 100%
- In a zig-zag a-b-c there is only one strong wave usually c, but if a is vertical c should be weak preferred 62% of a.
- Almost every share I looked at show clear corrective structure(explained last week) and namely mature and not like it just starting to accelerate higher.

The pattern which will satisfy all this conditions with no contradictions is shown on the daily chart. It is of course speculative at this point and needs confirmation next week, but it fits the best. What are the alternative possibilities:
- bearish - smaller ED already w3 or w5. In this case we will have very weak c with very short b and most likely it is monster a/B and not B.
- bullish - 1-2 i-ii count and it just starting accelerate higher and parabolic up to 3000.... this will look very strange with the indicators and market breadth, not to mention after vertical wave "a" parabolic "c" to follow...... usually it does not work this way.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - this is what I expect currently quick pullback and higher.
A lot of discussion if we have an impulse or not. No it does not count well as impulse despite the visual similarities. I use RSI pattern and trend lines to verify counts - it works very well. An impulse usually looks like the count shown on RSI - overbought level for 3, break of the trend line 4, divergences 5. With very strong impulses the overbought level comes with iii/3 and the the indicator oscillate between 50-80 until the impulse is finished.
If it was an impulse the high should have been last week. Now it looks like two distinct moves with very shallow b.


Intermediate term - it is risky bet on ED:), but this pattern fits the best at the moment. Going from vertical to parabolic is too much for me:)


Long term - wave B running for IV from 2009.


MARKET BREADTH INDICATORS
Market Breadth Indicators - now double divergences for the oscillators like A/D line and the McClellan Oscillator. The trend following indicators are still pointing up. Expect short living pullback and higher while market breadth building divergences.
McClellan Oscillator - now double divergences.
McClellan Summation Index - buy signal, very extended levels.
Weekly Stochastic of the Summation Index - buy signal, in overbought territory.
Bullish Percentage - buy signal.
Percent of Stocks above MA50 - overbought levels, looks like short term topping.
Fear Indicator VIX - expect pop up higher.
Advance-Decline Issues - now double divergences.


HURST CYCLES
Day 36 for the 40 day cycle, it is getting extended so the decline should be sharp and quick followed by higher high.


Week 8 for the 20 week cycle. If I am right about c/B we have shorter 18 month cycles which I repeat for a while and the 4 year cycle will be later this year not in 2020.


Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
I will not be surprised to see open higher on Tuesday for finished countdown and reversal.

20 comments:

  1. Thanks Krasi, what do you think of these options?
    It is a/B but B is a triangule
    It is not wave B, it is wave X

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    1. Triangle should burn time this move is too fast for me so I removed this option from the long term chart.
      X is ok if you count important top in January not September 2018, but it should take more time. Wave W almost a year and X only 8 weeks is too short for me. I do not bother so much with theory and labels if it is a-b-c or w-x-y the outcome is the same one more leg lower.

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  2. thanks for the update Krasi!

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  3. Looks like 281 on the s p y he's going to come

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  4. How about b low on 2/8 instead of 1/28?

    makes b longer and irregular flat ending at same level as starting point; provides more, less steep, options to return to highs in wave c/B

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    Replies
    1. C does not overlap with A.... I am not sure this is a valid running flat.

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  5. This move looks very similar to DAX March-Mai 2018 - 8 green weeks in a row, week 9 final higher high and reversal. Even the b wave was at the same time then and now week 5:))))
    Back then the "experts" were counting impulse of course... i/5 to the moon baby:)


    RUT has the same shape but different measurements. You can count clear a-b-c with impulses for a and c.
    a nice impulse with 3=,1618x1 not like SP500, c at fibo level c=0,618xa.

    I will not be surprised to see reversal today for a red week.

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    Replies
    1. The beginning of the wave C?

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    2. Too early to say, no confirmation.

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  6. Personally I think there is more to the upside, we need closure on "trade talks" narrative before the trend changes

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    Replies
    1. May be but nothing more than topping and sell the news.

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    2. Several money managers have said the trade war conclusion is a sell the news event that will focus investors on global growth, the EU, Brexit etc.

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  7. Agree...just saying imo I don't think you want to short this current dip, short the rip on whatever they say to keep the dream alive next...until then any new high will be like a magnet for the S&P

    ReplyDelete
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    1. Nothing to short yet. There is no complete pattern, but close.
      Oil/XOI with iv/v of c to finish a-b-c, NDX the same story, DAX looks ready with 3 down and 3 up to plunge with impulse to finish b... and many more.

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  8. Line a/d nyse anticipates new ath now or in a few weeks but we have triple divergences in McClellan, complicated...

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    1. This is the easy part:) triple divergences in McClellan and right translated 40 day cycle so quick and sharp drop 5-7 days and new high expected.... and that is the problem.
      I see so many shares which have clear corrective patterns and this should be the whole B wave, but market breadth and cycles say we should see higher high.... very confusing.

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  9. B strong to 2950-3000?

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    Replies
    1. Which factor wins/is most important historically in your experience, the pattern? or market breadth and cycles?it seems to me a corrective pattern can always mutate into something else, but am curious if you think mkt breadth and cycles should be more predictive. Thank you

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    2. Pattern always win, but my interpretation of the pattern could be wrong so I will not bet on either outcome, until I see what happens next.

      With such move and market breadth you have to assume that the market will continue higher until you see confirmation for the opposite.
      No need to make some risky bets.... patience. According to history(I will post charts) we should see now two months sideway move to clear the overbought conditions and 20 week cycle low. In this case we have a bullish pattern and buy signal. If we have corrective pattern we will see impulse lower and very likely deep retracement(I am sure many waiting to buy the dip) Then you build short position.

      No need of front running the market, wait for it to tell you the story and for low risk trade.

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