Weekly preview

Short term view - no confirmation for a reversal, but I think next week should be lower.
Intermediate term view - not very clear, waiting to see next week.

SP500 squeezed 2 points above the March high and turned lower, but I do not see an impulse for confirmation. All indicators are pointing lower and I think next week should be lower.

The short term picture is messy. Since Brexit we have 4-5 weeks higher and 2-3 months sideway move, this is is repeating for the third time now. We have flat pattern for 11 weeks since 1-th of March. We have a few zig-zags and one impulse from the April low... accordingly many combinations - c of B for flat correction, final high for iii of 3 and iv just beginning, v of 3 running and this impulse is just the first wave higher, not forgetting and B of a triangle.

Intermediate term - I think we are in some kind of 4-th wave. I have changed 10 times my mind which is the most likely scenario and at the end I do not know exactly which pattern we have. This is typical with waves 4, more price action is necessary and we will know the pattern when it is mature.
Overall I do not think we saw the top of wave 3 and VIX historical behavior(see previous post) says this should be just iv of 3.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - this impulse can be counted different ways... interesting is all counts are pointing lower for the next week, indicators are pointing lower, the daily cycle is mature. I will be really surprised if we see a rally next week.
I am waiting to see the decline how deep it will be and if it is a impulse or corrective to negate some of the options.

Intermediate term - the histogram is pointing lower, RSI/MACD with lower high... so far the signs are for a move lower.
Preferred scenario is green wave iv of 3... just I do not know where to put it's low at the moment.

Long term - no change, waiting for the wave from Feb.2016 to be finished.

MARKET BREADTH INDICATORS
Market Breadth Indicators - are pointing lower.
McClellan Oscillator - below zero.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - sell signal but still strong above 70.
Percent of Stocks above MA50 - turned lower, in the middle of the range.
Fear Indicator VIX - historical low values. I think it will rise and test the level one more time.
Advance-Decline Issues - turned lower, in the middle of the range.


HURST CYCLES
Day 33 of the 40 day cycle. It is mature and it is more likely to see a move lower.

Week 16 for the 20 week cycle. The picture is not 100% clear... if this is not wave C for iv of 3 the cycle count should be adjusted.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
If you follow the rules the count is still 11 for combo/countdown. For the last bars it is allowed to make only higher high to count them so this week could be 12 for combo/countdown. This tool allows "flexibility" too... like EW and cycles there is room for adjustment.

VIX record lows

According to the data on this page this is the 4-th lowest close. Interesting is what happens after that. As I wrote this weekend because of the very low VIX levels SP500 should be in wave iv of 3 since Feb.2016 and the bigger correction should come later... history seems to confirm this.

The same data from the page above by date:
Date --- Close
22 December 1993 --- 9.31
23 December 1993 --- 9.48
27 December 1993 --- 9.70
28 December 1993 --- 9.82
28 January 1994 --- 9.94
What happened after that -> small pullback -> 6% higher for 4 weeks -> 11% lower for 9 weeks

20 November 2006 --- 9.97
21 November 2006 --- 9.90
14 December 2006 --- 9.97
24 January 2007 --- 9.89
What happened after that -> small pullback(after every record low) -> 6% higher for 11 weeks(after the first record low) -> 7% lower for 4 weeks


What is common - after a record low small pullback follows, move higher roughly 6% and then bigger correction. The difference - in 1993 the move 6% higher was short 4 weeks and the correction long 11 weeks, in 2006 it was the opposite.

Now if we translate this in the current pattern:
- two options for the small drop - could be roughly 50 points (ii) of v of 3 to close the gap and test MA50(green pattern) or 80-90 points to 2310-2320 for expanded flat and finished iv of 3(red pattern).
- move higher for v of 3 - this is the 6% move higher... from 1320 to 1480(3=1,618x1) is again like in 1993/1994 and 2006/2007 roughly 6%:))))
- the bigger correction will be wave 4.

You know my preferred scenario - this is red. Cycles will fit like a glove - another 2-3 weeks lower for 17-18 weeks long 20 week cycle. Wave 4 for the 18 month cycle low it will stretch way too long and with a low behind us the 40 week cycle will be way too short. As I wrote weeks ago after long 40 week cycle(38 weeks) a shorter one follows according history since 2009 25-31 weeks long. With a low in 2-3 weeks we will have 28-29 weeks long 40 week cycle and 18 month cycle with average length as expected.

VIX 1993-1994. Short rally , the index with higher high VIX with higher low and divergence.

VIX 2006-2007. Slow rally crawling higher for almost three months and sharp decline.

VIX 2017 before a major top we will see a higher low and a break out from the wedge.