Jun 1, 2019

Weekly preview

Lower but no acceleration as expected. What happened this week - the patten is slowly taking shape and it looks like zig-zag, the monthly candle looks very bad - big red reversal candle... constant selling from day one until the end of the month.

The same thoughts - we need to see the indicators/market breadth reset first before continuation lower. What to do with this zig-zag?
- bearish we have reversal - the final wave lower(for wave IV weekly) should play out as a big zig-zag and the first wave itself is a zig-zag.
- bullish - zig-zag is corrective structure and the door is still open for another leg higher. In this case I would count it as b/B with another rally to 3040 for c/B and big expanded flat. With many shares which already reversed and this ugly monthly candle the odds are low, but who knows.

I will watch closely for a long entry next week. If we see the price 300 points higher great, if it is weak and we see only 100 points higher I can live with that:) This is simple trading plan with low risk.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - I see two legs lower with the same size or zig-zag which should be finished soon.... after that the target should be at least the resistance zone is 2860-2890.
The bearish count is 1-2 i-ii I am not big fan of this counts, never worked since 2009 it was always just that simple zig-zag.


Intermediate term - indicator which measures acceleration is the histogram. Examples of acceleration are the red arrows - the price just moves lower(or look what happens with crude oil). Currently we are seeing second higher trough with divergence which is the opposite of acceleration - it is slowing down. The price/indicator behavior is exactly the same like October 2018. The same setup has the DAX twice in 2018. In all three occasions the outcome is the same - the indicator has to reset(price higher) before continuation lower. I do not think this time will be different.

On the chart are shown the two options - bullish and bearish.
Bearish - if we see weak bounce for a few weeks unable to break above MA50 and resistance, pattern and time will look exactly like the Oct-Dec.2018 decline. June should be positive, but if the bounce is weak the next move will be lower to support and 68% retracement for 40 week cycle low - a/C yellow. The final decline for wave IV from 2009 should be one big zig-zag because of time and because it starts with corrective structure.

Bullish - second rally higher to finish wave B for huge expanded flat. It should continue until August, 1,38 Fibo extension for expanded flat points to 3040 as a target exactly where the trend line will be hit one more time. The Fibo measurements for wave B(1,38) and C(1,61) show perfect targets - the upper trend line and the 2150-2200 area, flat is more likely pattern than expanded triangle, so despite the lower odds at the moment I will not discard it until I see the bounce in June showing weakness.

P.S. for those trying to see H&S pattern I think the neckline is lower around the 2720-2730 area. H&S and a/C(yellow) targets are the same in this case.


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. The probability for wave B expanded flat(red) is still alive and can not be excluded at this point.


MARKET BREADTH INDICATORS
Market Breadth Indicators - in sell mode for a long time, some divergences(VIX,McClellan Oscillator), that is why it is more likely that the indexes are close to a bottom and not just starting with the third wave.
McClellan Oscillator - 7 weeks below zero with divergence.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - nearing the 25 level where corrections make a bottom.
Fear Indicator VIX - lower high and divergence, I expect one more low before exploding higher.
Advance-Decline Issues - nearing the oversold level.


HURST CYCLES
Day 57... second very long daily cycles which is unusual. It feels like we have the 40 week cycle high which I was talking about.... and the 40 week cycle(bottom-to-bottom) consisting of three long daily cycles instead of four daily cycles.


Week 23... this 20 week cycle is getting stretched, smells more and more like we have reversal.

52 comments:

  1. Thanks for the update Krasi. Don't know if this means anything in EW world, but I wanted to share I just noticed this week that unlike SPX cash index which made a new high in 2019, the June S&P futures topped at 2961.25 on September 21, 2018 and then again on May 1st, 2019 at 2961.25 - exact same price! Maybe it's just the most patient computer in the world.

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    Replies
    1. No EW meaning, probably double top... The definition for double top is +-2% difference between the highs, so SPX cash qualifies for double top too.

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  2. When I look at SOXL indicator like 60MIN MACD it just reset with price staying flat... higher price not necessary. Saw same thing on way up on big indices since December low, pause reset indicator up up up, Your charts show 100pts downside if I'm short and cover if price gets to more then 50DMA but I get 400pts upside if I stay short??....weekly MACD negative now, ugly weekly and monthly chart, Trump is not backing off tomorrow, let's stick too big picture. You are talking about the price going either 100pts or 300pts higher, but trend is down, what to do if it goes 100pts lower, trend is down now afterall? do we afford missing this move to be cute?

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    1. First the trend is confirmed down when we see reversal with impulse - it does not happening so it is not confirmed.
      Second you do not want to miss the big down wave and I can always be wrong than you should manage exit just like entries(posted about long entry last week) - RSI daily second oversold reading cover 1/3, if you see reversal with impulse cover the rest or another 1/3, wait to see what happening if it is corrective bullshit add to the shorts again if not cover the rest.

      I see another 20-30 points lower not 100, plenty of time to see strong reversal.... it is not happening.

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  3. To be clear, don't want to sound like jerk. Just want us to be short together after waiting so long on this move up:) I don't know why we can't follow price now that it's trending lower...below 200DMA, 50WKMA, in no man's land at weekly low price - Can't we at least use 200DMA as a short stop?? my experience is move lower always so fast that by the time we know what happened it time to get long...so what's the point of looking to short. Bond market + oil says shit about to hit fan

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    1. I do not want to follow the price lower at this point because it is showing corrective structure and all indicators and market breadth are pointing to a surprise to the upside.
      Of course you ca use MA200 as a stop, no one says you should believe me and cover all your shorts you can manage your exit(see above).

      I see some emotions in your post waiting so long:) I write what I see without emotions. Plenty of time for a sell off and SPX does not even reached 1x1 extension in this "third wave" lower.
      You are right the moves lower are very fast see the last chart 5-6 weeks and it is over - week 4 now so next week will tell the story it has to crash lower to confirm your point or not to confirm what I am explaining.

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  4. Krasi, can you share your thoughts on crude oil, thanks.

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    Replies
    1. It looks like iii of 3, but it is suspicious.
      The "surprise" will be if we see only one sequence up-down(for finished impulse you need two iv-v 4-5) than it will be just a-b-c.
      I am talking about "surprise" because it is moving lower too fast, RSI is already very oversold.
      With this speed the whole correction will be finished in July/August and the impulse for C will point to very low levels. This does not make much sense.

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  5. Hi Krasi... it should also be plausible to assume that we get a fast sell off now to extreme oversold levels, 2600-2650 with RSI 20 or lower, then sharp bounce so that indicators can reset. The final sell off to approximately 2100-2200 should keep the RSI at higher levels than now for a clear divergence. China will announce retaliatory measures on Sunday in the US China trade war which should cause panic on Monday. If that’s the case your histogram should head lower still before resetting. Would you agree?

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    Replies
    1. No, I do not agree - wrong interpretation of timing,waves and indicator.
      You are describing impulse wave C - if this is iii/1/C it will be too big, if it is 3/C it will be too short. It will be finished in 3-4 weeks - very unlikely. RSI is making already second oversold trough for a low.

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  6. If we see a 40 week cycle low in August and we expect a 4 year cycle low in Q1 2020, the next 40 week cycle from September to February, Is it not too short?

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    1. It is more like from mid-August to March or April so 7-8 months is ok.

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  7. Is there any chance that 40 week cycle low in August cycle is the end of the C wave(2100-2200)?

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    Replies
    1. The chance is very low... next week is last chance, it has to plunge below 2700.

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  8. krasi, what is the real duration of the 9 years cycle and the 4 years cycle?, thank you

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    1. real duration and average duration

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    2. Different cycle guys have different view. I am in the camp that we have shorter cycles.
      The nominal model is 54 months/9 years - what I see is 3,5-4 years and 7,5 years.
      I have to admit if you look at very long term charts, like 100 or more years back, the longer term cycles I see are 17 years/33-34 years. Examining this cycles closely it looks like they consist of five shorter 3,5-4 cycles.

      The other camp sticking to the model are counting 9 year length is counting 2002-2011-2020...
      So both camps the one sticking to the model and like me with shorter cycles have right:)
      It is about the sum of waves with different length and with "building block" 18 months(1,5 years) you can have different models... there is other guys counting 3 and 6 year long cycles fo example.

      Four years is very long period for me, my model works for me so I do not care for 18/36 years long cycles.
      Example from last long term post - https://4.bp.blogspot.com/-dZb1JxU8VIY/XChjNRkgPhI/AAAAAAAAIrs/mV4Ly5kCM5cJZiIE4b4u0T7JPPt7TJqQgCLcBGAs/s1600/lt7-1.PNG

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  9. Looks like Powell put is back on, right about time to mark the lows here?

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    Replies
    1. It has nothing to do with FED it was pretty obvious.... neckline hit, 38% Fibo hit.

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    2. So is now a good long entry or one more low first?

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    3. I think we saw the low already...

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    4. Krasi It's just a 4th wave bounce ahead of the final 5th wave

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    5. I hope you are right:) but reversal candles,gap higher, strong move... very low probability for wave 4.

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  10. Krasi your thoughts on that chart

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  11. Nice work Krasi. Feels like near term bottom in place, buy dips to play for 2900 next?
    Hang seng and China markets lagging this move

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    Replies
    1. If the yellow scenario is playing out the ideal target is between 2870-2890 which is 62%-76% Fibo levels and resistance zone old highs like Jan.2018
      We should see at least 2-3 weeks higher so yes buy the dips for a while.

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  12. One wave up of almost 100pts in less than two days - as is normal for the rips off lows .

    Your resistance only 70 pts away at today's highs , so a pullback now to 278x would give us another 100pts before decision time.

    ie the dip might be quite shallow...

    ReplyDelete
    Replies
    1. Time/market breadth says a few weeks higher so just watching and waiting how it will develop.
      Let the market play out... I do not build patterns in my head because latter I am not open for surprises:) This is the bearish case and it still has room for 100 points...



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  13. I think this is 3/1/c/B

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    Replies
    1. Do not fall in love just because it is moving fast.... it is not a problem to see the yellow scenario, in fact I think this is more likely.

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  14. krasi what is your opinion on uvxy

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    1. It looks like lower to 32 then higher to 50.

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    2. i was thinking that also gap fill

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  15. looks like it might want to hit the 50d sma at 2868 before taking a breather ...the snapbacks get faster & faster.

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    1. so your saying 38 and change before a drop to 31

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  16. 2868 it is , for now . Hedging longs here

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    Replies
    1. Yes, many stocks and some indexes with impulse higher so time for a pullback.

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    2. I doubt it, this strength is a problem:) if you count this week as w1 the whole impulse points to 3200.... and this is not B in the first place. Than you have to count i/3, but I do not see stocks or indexes starting third wave.... the bullish case just does not fit.

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  17. Is it wave C like the red line?

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    Replies
    1. I do not see how to count it as impulse... it has to be a zig-zag again.

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    2. So your assumption is this is a of the corrective zigzag, right? And b should follow next soon?

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    3. Yes, this is the yellow count which I follow in the last few weeks.
      Now waiting to see if it will be confirmed or not.

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  18. But in this case c would have to go higher than your chart suggests.. probably over 2900. Does this make sens? Do you think that possibly we already had b on June 5? It’s very tiny $2 drop. If you don’t think so please explain why. We maybe finishing c now. Thank you Krasi

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    Replies
    1. Only a few days higher is too short. This zig-zag you are referring is just wave a of my yellow scenario.
      See Feb and Nov 2018 vertical moves up and the market finds a way not to move much higher. In the first case Feb.2018 the c wave is shallow 0,618xa and in Nov.2018 it is a flat.

      If we see the scenario from Feb.2018 than we have b to 2810 50% retracement and c to 2900 for 61,8%xa.
      This is fine... let the market show us the path.

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  19. Thanks Krasi.. and just to confirm the move from May 02 till June 03, the abc on your chart is wave 1 down, right? Pretty short as compared to Jan 2018 and October 2018. Especially when the assumption is the fall should go below dec 2018. Don’t you think? It may suggest much more powerful wave 3 down.

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    Replies
    1. There is no third wave, I am showing corrective pattern on the weekly chart for months.

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