Short term update

Update
and NYSE McClellan Oscillator at extremes which means at least very deep pullback.

Chart update.
Wow perfect call on the third day SP500 hit the target...
Lets see now if I am right and the sell off resumes:) or the shorts will be squeezed a little bit longer.

Weekly review / Седмичен преглед

Last week I have had no idea which way the indexes will move... positive week, no new lows or new highs... no new information strengthening bullish or bearish case.

The bigger picture has not changed - I think we will see one final low, which will be THE LOW for this move. First support level is 1100-1080, or it can extend all the way to major support 1020-1040 which is the 50% retracement from the 2009 bottom.
The alternate scenario is we have already saw the bottom... but I not buying it.. it does not feel right. Even if I am wrong we will see deep retracement which will be good buying opportunity.
Why am I skeptical? - The market breadth indicators do not show me that another move on the upside has began. Look at the histogram on the chart - its positive for several days but the indexes are moving sideways. That means for me this a corrective move, the histogram is reseting from oversold level and it will make another trough low with divergence.

Short term I expect 2-3 days on the upside. Target 50% retracement level around 1220.
My initial expectation was rally to 38,2% retracement,pullback and another rally to 50% retracement level. The big guys stretched the pullback all the way down to support at 1120 and many are wondering is this a double bottom. Now I think they will stretch the price beyond the "triangle" which all bears are watching. The bulls will think great double bottom and the bears will close their shorts thinking this is wave 2 up.
They have played the same game before the huge sell off and I have changed my scenario several times just to see my initial plan playing out. This time I am not buying it and will trust my indicators.

Weekly review / Седмичен преглед

I was right and in the same time wrong:)
I was right about the direction - SP500 to hit ~1200 followed by a pullback and wrong about the way it will play out. It is more than a pullback.
I was right about the retest of the lows and wrong because i was expecting to retrace time moving up/sideways for one or two weeks.
Hey nobody knows the future, important is to be on the right side of the trade:) and I was.

Know what?? For the short term I have no idea. We will see on Monday - gap down and reverse? continue moving down?
What I know is th indexes are working on a bottom. That is what my indicators and market breadth indicators are telling me.
By the previous low the futures hit ~10450(DJ) and ~1080(SP500) and I expect that the cash indexes will visit this lows. Then strong rebound, deep retracement and another rally.

More bullish alternate scenario - the trend line is broken and the indexes are testing it now working on double bottom.
The lower low will be a buying opportunity

Short term update

No surprise SP500 hit the 38,2% retracement - 1200 and several points above. Moving sideways for now.

Close view 15min chart. Moving sideways staying above 1180(23,6% Fibo) and working out the overbought conditions, or retrace to support levels which match the Fibo retracement levels. EMA50 on the hourly chart is at 1170(38,2% Fibo). I will not be surprised if SP500 pull back to this level.
Its difficult to say which scenario will play out.

Weekly review / Седмичен преглед

There was one final sell off on Monday hitting the 61,8% retracement from thee July 2010 low and 50% retracement from the March 2009 bottom. One support level lower, but you can not catch a falling knife and you never can say at which support level the selling will stop.

The big picture has not changed.

Short term - there is more upside. I expect one or two green weeks. Best guess - SP500 will hit 38,5 retracement(~1200) pullback to support and another push higher to 50% retracement(~1240). Then the sell off should resume and test the lows.

The plan stays the same-initial bounce,retest of the lows,strong rally and another bear leg down.

When NYSE McClellan Oscillator hit such extremes bellow -100, there is always one more push lower on the indexes. So after this initial rebound I am expecting a lower low.

Charts updated

The same story but lower levels.

Weekly review / Седмичен преглед

I was a little bit too early on my bottom calls. I thought we will see short term bottom followed by a bounce and lower lows forming divergences (it can still be the case:). The market decided to enter in panic mode and we saw huge sell off.

Current thoughts:
The long term picture - I think we entered a cyclical bear market.
- we have lower highs and lower lows and that means down trend
- we will see 50MA crossing 200MA which means bear market
- broken trend line from the 2009 bottom
- S&P500 Percent of Stocks above 200 day MA in a bear market territory

The intermediate term picture - I think we will see intermediate term bottom carved out. Expect:
- bounce - see short term picture
- some kind of retest of the low - it could be higher low, double bottom or lower low. I do not know but the low of inertia says we will visit it again.
- bear market rally lasting at least 6-8 weeks

The short term picture - Is this the bottom? I do not know, but look at this charts:
- S&P500 Percent of Stocks above 50 day MA the stocks are beaten down hard.
- NYSE McClellan Oscillator is at extremes. Such levels we see short before a bottom.
- VXO hitting extreme of 41 and retracing.
That does not mean they can not get more oversold, but the odds are higher that we will see soon a bounce from oversold levels and further push lower is a buying opportunity and not a selling opportunity. The prices are stretched too far from 50MA and 200MA. They will snap back because the MA are like magnets.

So current expectations are for a bounce because the indexes are oversold,retest of the lows and strong rally which will convince everybody that we are in a bull market and higher highs are ahead. Alternation is lower lows with divergence before the rally. Low probability going lower all the way down to the major support.
Bellow are charts of different time frames showing my plan and charts of DJ weekly and DAX daily showing how it played out in 2007. The similarities with DAX till now are amazing:)

DJ 2007 - three peaks, plunge, retest of the low and bear market rally. The same story till now.
Currently in a cyclical bear market - the first leg is nearing its end. consolidation and a rally - it will last 4-5 months(like in 2007) long enough to forget the pain and to convince everybody that we are in a bull market. Another leg down to major support.

Daily chart with support levels which match perfectly the Fibonacci retracement levels. The expected bounce and retest of the lows. It is difficult to say how the retest of the lows will look like so the two options with highest probability are shown.

Hourly chart - expect a bounce in the form of three waves. It could hit the 38,2% or the 50% retracement no one can say.
But be patient we will see wild moves up and down before a tradable bottom. The indicators still does not show bottom and reversal.

The similarities are stunning so can not ignore this chart.

Short term update

RECAP:
In my review before the vacation I wrote that after such strong rally we should see 2-3 days consolidation and another leg higher if this is really a new bull upleg. The indexes start showing weakness and I wrote warning that something is wrong. The result is the alternate scenario played out (see the review for the chart).

UPDATE:
Wow panic sell off SP500 -60 points.
I was not 100% sure that we have entered cyclical bear market, but now I am:)
The next big move will be to the upside - strong bear market rally. I do not know when the current move to the down side will be over. I think we will see bottoming process - several green days retest of the lows forming divergences etc.
In a nutshell - if you are short take some profits, I will post the charts on Sunday.

This looks like a climax sell off with SP500 -43 points and VIX hitting 30... and we are at support level.
The odds are high that this is short term bottom.

Short term update

Bottoming process has begun as expected after another two days off selling and reversal. But I think this will be a short term bottom and the scenario shown with red, on the chart bellow, will play out.
Charts later:)

Short term update

Back from vacation:)
The Indexes are moving in a trading range for a long time... since February almost six months. That means when the consolidation is over we will see a strong move UP or DOWN.
SP500 is nearing the lower end of the range and MA200. Its very oversold - look at this chart of NYSE McClellan Oscillator.
So I think the next move will be UP and this bounce will tell us more what to expect. The two scenarios are shown on the chart.
P.S. there is no bottoming sings on the 60 min charts so it can last several days before we see some kind of bottom