May 19, 2019

Weekly preview

It looks like impulse lower and many are counting reversal.... with sharp third wave around the corner. Looking at different indexes,stocks, indicators and market breadth it is unlikely. It is a mixed picture I can not see neither strong bullish nor bearish case. If we have major reversal why DAX/RUT declined with a zig-zag? SOX/EEM close to finishing an impulse lower and retracement expected not third wave. BA has more to the downside but it should retrace first, or INTC it plunged but it should retrace first before continuing lower, or MSFT 11% from NDX it looks like wave i/5 for the missing final fifth.... there is many more examples. Market breadth - McClellan Oscillator below zero fo a month this is consistent with correction finishing not beginning. Cycles we should expect daily cycle low and 20 week cycle low.

What is the message from all that above? The extremes are not very likely. Bullish extreme the next leg higher begun is unlikely when some stocks/indexes reversed and other need final push higher to finish the pattern. Bearish extreme we have reversal and 1-2 with 3 coming next week 200 points lower does not look likely either when the stocks which reversed should retrace next or some are not done to the upside.

So what are the options - slightly bigger, but still wave 4 from ED shown last week or we have a reversal, but with zig-zag. I was showing on the weekly chart a zig-zag, which fits better because of time, inside this zig-zag wave a itself is a zig-zag(see daily chart). I prefer to see the first scenario with ED, it is always better to see clean finished pattern instead of struggling with some zig-zags.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - not sure, the move higher is corrective so which is it zig-zag higher or zig-zag lower..... no way to say until we see the next few days. If we see lower low I do not think it will be third wave more likely wave c of a bigger pattern.


Intermediate term - if we have reversal with impulse the next move is lower 200-250 points for w3(red). It should move very fast something like 2 weeks because RSI already touched 30 the oversold level and it does not really look like reversal just starting. The only way to override the message from the indicators and market breadth is waterfall decline. Looking at RSI the worst scenario I see is the circles with one more low and we are currently where the red arrow is. Usually this waterfall declines start form a higher levels - green arrows.
In green is shown the ED pattern from last week with 5=1,236x3 hitting the trend line around 2990-3000. In yellow is this zig-zag story.


Long term - one more leg lower to finish wave IV from 2009. If the decline already begun, zig-zag will fit better both time and pattern. If we see one more high decline in C wave impulse will look good - because of possible expanded flat B=1,236xA(see daily chart) and it will push the high a few weeks later.
I am not sure how to count this w1, but this is the alternative.


MARKET BREADTH INDICATORS
Market Breadth Indicators - signaling that the indexes are nearing intermediate term low, but no way to say one more low or not.
McClellan Oscillator - below zero for a long time.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal in oversold territory.
Bullish Percentage - pointing lower.
Percent of Stocks above MA50 - in the middle of the range.
Fear Indicator VIX - nervous markets one more lower possible so one more push higher.
Advance-Decline Issues - in the middle of the range.


HURST CYCLES
Day 44+4 close to a daily cycle low or already behind us.


Week 21, as I wrote last week my indicators are telling me this is 20 week cycle low.

28 comments:

  1. I think we are in b/B, look russell it is more clear

    ReplyDelete
    Replies
    1. I saw RUT zig-zag instead of impulse making lower low for expanded flat for b/B.
      I was watching ED for RUT last week and it looks like it confirmed the pattern.

      Delete
  2. Thanks for your input. I'm also considering a green week. Semis need a bounce and looks like they are about ready....

    ReplyDelete
    Replies
    1. Finishing the fifth wave today/tomorrow and retracement with zig-zag will fit perfect with the final zig-zag of ED for the major indexes.

      Delete
  3. Hi Krasi.. quoting your assumption: “Looking at RSI the worst scenario I see is the circles with one more low and we are currently where the red arrow is. Usually this waterfall declines start form a higher levels - green arrows.” I think you have missed a very important fact: the lower level of RSI now is a sign of a bigger fall coming next, bigger than the last one that ended in December. Notice that the first waterfall in Jan 2018 came from the overbought levels but the correction was not very deep. The second waterfall in September 2018 came from lower levels of RSI but the correction was deep. Now the waterfall should come from even lower level of RSI, I think in the next couple of days in wave 3 and the whole drop should be even deeper at the end of this correction. Wave 1 of this drop completed last Monday, the biggest 1 as compared to waves #1 in the last two corrections is an indicator of a prediction of much bigger malaise of the markets for the next few months. I am curious of your take on this. Thanks

    ReplyDelete
    Replies
    1. This is happening - see the weekly chart. I do not think daily is the right time frame to watch RSI for this.

      Delete
    2. Yes that’s right...and weekly RSI shows that the correction started in Jan 2018 if we look at declining levels of subsequent tops.

      Delete
  4. lots of chop between 2820 and 2890....could make a case for a break of either , so max confusion.

    Would have to assume a break one way will be worth a few ..

    ReplyDelete
    Replies
    1. I think the break out will be higher - test of 2890-2895 pullback and higher to around 2970-2980.
      The risk to the downside is clear - below 2830

      Delete
  5. krasi short term target om market is where? and also where do you think we will be in july and thanx

    ReplyDelete
    Replies
    1. Short term preparing to move above resistance.... we will know soon in the next 1-2 days.
      The pattern which I follow is ending diagonal which should make a top in July around 3000.

      Delete
    2. So good time to accumulate longs above 2830? Assume the alternate scenario comes into play below 2770?

      Delete
    3. The bullish case is 100 points higher in choppy zig-zag for ED, which is not even confirmed.
      So I would not use the term accumulation... more like quick trade.
      If we see the gap filled today and the price turn higher there is setup for a long trade with target 2900-2920 and stop 2830.

      Delete
    4. Thanks man, it's been decent scalping market but tough to run conviction deltas either way...unlike 1Q

      Delete
  6. Krasi Do we bounce from 2830 or we go lower? Thats the question

    ReplyDelete
    Replies
    1. Nothing changed much - even if we have a reversal many stocks need retracement higher.
      So I think we have at least one more leg up to the resistance zone 2900-2920.
      Visual https://imgur.com/a/rEMYPef - zig-zag b from the top on 16.05 then at least c(white).

      The alternate(red) is 1-2 i-ii and waterfall.... I can not see a lot of evidence for that.

      Delete
    2. And after this white c, final C to 2720?

      Delete
    3. More likely third wave lower.... below 2700

      Delete
  7. Replies
    1. I do not trust this down move... from 16.05 two legs lower with the same size the recipe for corrective zig-zag. It has to accelerate lower for something bearish.

      Delete
  8. Trust this down move or not, once it actually accelerates lower it'll be too late and the short trade is done. The big risk of a tariff trade war that caused the selloff last year is now a reality and we're still hovering over last year's selloff resistance levels...what an amazing opportunity! The ego of at least one President has made last year's risk a reality that mutates to worse than expected everyday that goes by... If this ain't the catalyst for your long term chart move to sub-2300 I don't know what it could be...but I couldn't care less about a retest of last week's highs if you think we're going to sub-2300 next? Just look at FCX, copper, XOP, FXI, TRAN, GM, or SOXX.... some very strong leading indicators are screaming here, don't you agree?

    ReplyDelete
    Replies
    1. I agree, but I do not see a reason to sell at a low when I can sell at a high with lower risk.
      Most of the shares above like most of the share which I watch, are around the low of fifth wave so no need to sell the low.... concrete for SP500 no need to sell at 2800 when I can sell at 2900. I am not that type of trader buy/sell it will move to XXXX anyway.... because I believe it.

      I have serious doubts we will see 2300 in a straight line, I expect the first part of the sell off to be a zig-zag and in the middle it could easily test 2800 as resistance.

      News which is well known is not dangerous so I will not worry so much about trading wars.

      Delete
  9. I dont see a bearish impulse, so I think we will see 3100 in the next 20 week cycle

    ReplyDelete
    Replies
    1. Plenty of indexes and stocks with bearish impulse... banks and semiconductors look awful. I do not know how SPX will rally 300 points.

      Delete
    2. maybe c/b/B around 2700

      Delete
  10. would prefer a lower low to 2800 or a bit below , but that one more low looks elusive again....

    will start scaling short again above 2870 , as if this is a downtrend a shallower retrace would surprise the most

    ReplyDelete
    Replies
    1. One more lower low is possible.... a bit below 2800:)

      Delete