Weekly review

Short term view - not sure about the exact path but there is more on the downside.
Intermediate term view - the pullback should continue another week or two.

This past week the alternate scenario for the short term has played out. This is the surprise if this could be a surprise. The bigger picture has not changed - we are in the middle of the pullback.

There is no much to say this week. The correction is still not over we have another week or two. I am watching the 23,6% and the 38,2% Fibonacci retracement levels.

TECHNICAL PICTURE
Short term - a lot of possibilities... the opening on Monday will give us more information. I think the index will either move down from this levels or will try to touch the trend line around 1455 and move lower. The first drop was 44 points another one with the same size will push the SP500 into the support zone. In this area there is support from the trend line since the June low too.

Intermediate term - no change since last week - pullback to one of the two support levels expected.

MARKET BREADTH INDICATORS
The most indicators issued a sell signal.
McClellan Oscillator - below zero confirming the move.
McClellan Summation Index - issued sell signal.
Weekly Stochastic of the Summation Index - still in buy mode but it has inertia, this is a weekly indicator.
Bullish Percentage - issued sell signal.
Percent of Stocks above MA50 - moved below 75 confirming the move lower.
Fear Indicator VXO - has started to move higher. probably we will see it around 20 before the pullback is over.

CYCLES (TD - trading days)
Currently at day 18 from 20 day nominal Hurst cycle. It is moving right on track.
I expect the pullback to finish this 20 day cycle and the 20 week cycle. Another strong move up will mark the beginning of the next 20 week cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Nothing has changed since last week. You can see the chart from the last week post.

Short term update

UPDATE 27.09 - 1435 overshooted for several points but the bounce has begun. Now watching 1455 - the next target.

The alternate scenario shown on the hourly chart is activated. Target is 1435 before a bounce.

Weekly review

Short term view - I expect a topping process to finish next week and correction to start.
Intermediate term view - I think we will see a short term top soon and 4%-5% pullback.

Another week without surprises - as expected SP500 moved lower to the EMA50 on the hourly chart and bounced.

Short term I expect the indexes to hold this levels and try to test the highs. Its the end of the quarter and the funds must show good results so I do not expect troubles next week.
Intermediate term I still think that we will see a 4%-5% pullback. The long side is just too crowded. The banks will flood with money and save the world, there is only one direction - up, the VXO is at 12 the most bullish readings since 2009..... If you step back and look at the charts since August the SP500 is moving sideways and there is only two big green bars the ECB and FED meetings after that no follow trough at all. The big players new that QE is coming and have started buying in June and the news, the big bars are the end of this move and not the beginning. Look at the move from the lows October last year and the June lows - moving higher and higher for 2-3 weeks. This was a beginning of a new move from a depressed levels and follow trough and now is just an exhaustion.
So I think the next move is healthy pullback to shake out the crowd before moving higher.

TECHNICAL PICTURE
Short term - I think we will see another bounce of EMA50 and retest of the highs. If SP500 breaks bellow the last low at 1450 that would mean the pullback has already began. With the end of the quarter next week the first scenario has much higher probability.

Intermediate term - I expect a pullback to the 23,6% Fibo retracement level around 1420 or 38,2% Fibo around 1400. At this levels we have the trend line, MA50 and support levels. A pullback to this levels will be a retest of the old highs April-May after the break out to new highs. This should be another X wave followed by Z wave to new highs.

MARKET BREADTH INDICATORS
The market breadth indicators are bullish, there is no divergence on the VXO anymore. Anyway I think this is a top but short term only to reset the indicators and the bullish sentiment. I do not see signs of a major top but healthy pullback is in the cards.
McClellan Oscillator - flirting with the zero line. A new high on the SP500 will lead to a divergence on the indicator.
McClellan Summation Index - no change this week, still a buy signal.
Weekly Stochastic of the Summation Index - no change this week, still a buy signal.
Bullish Percentage - no change this week, still a buy signal.
Percent of Stocks above MA50 - retreating but still no bearish signs.
Fear Indicator VXO - the most bullish readings since 2009. Every time when the VXO reached this levels we saw a top. I do not think that this time will be different.
Put to Call Ratio - near to overbought levels

CYCLES (TD - trading days)
Currently at 13 from a 20 day cycle. I expect the pullback to finish this 20 day cycle and the 20 week cycle. Another strong move up will mark the beginning of the next 20 week cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
On the daily chart nothing has changed SP500 is at 11 from a combo(see the chart from the last week).
On the weekly chart we have 6 from a countdown and 9 from a combo. I think after the pullback completed combo or countdown will mark the end for this wave which started in June.

Weekly review

Short term view - I expect a topping process to start next week.
Intermediate term view - I think we will see a short term top soon and 4%-5% pullback.

Again nothing surprising SP500 moved higher and touched the upper trend line. My forecast was for 1450-1455 where a lower trend was residing(see last week) but who cares if I am wrong 10-15 points when I am on the right side:)
So the alternate scenario from last week kicked in thanks to the central banks which are now all in.

How this scenario looks like:
- Short term I think that the indexes will start topping process. Crawling along the upper trend line we will see higher prices and topping pattern. For now there is no bearish sign but the indexes are already in the late stages of this move which is very mature.
- Intermediate term - as I have said the bullish scenario presented last week is playing out. That means short term top between now and the end of September, 4%-5% shallow pullback in October to finish the 20 week cycle and clear out the overbought conditions than a move higher into the year end should follow.

TECHNICAL PICTURE
Short term - its difficult to predict the short term squiggles best guess is move lower to EMA50 on the hourly chart and another move higher to the trend line. We will see a divergence before a reversal. We are not there yet.

Intermediate term - pullback to the trend line and support. Than we will see how high the next move will go.

Long term - weekly chart of the DJIA. The same idea with Elliot wave labels. The move from June is wave a, pullback should follow wave b and another move higher wave c to finish the wave Y of a bigger degree. After wave Y a correction should follow into the 4-year low but that will be in 2013.

MARKET BREADTH INDICATORS
All the indicators are bullish no divergences. Exception is the VXO which has triple divergence and this levels marked always a top.
McClellan Oscillator - making higher highs.
McClellan Summation Index - moving higher too.
Weekly Stochastic of the Summation Index - issued buy signal but I think it will short living.
Bullish Percentage - in buy mode.
Percent of Stocks above MA50 - still bullish signals.
Fear Indicator VXO - all the previous occasions of VXO at this levels have triggered a reversal. This time will be the same but I think that this will be only a short term top and not a major top.

CYCLES (TD - trading days)
I have changed the short term cycles a little bit. I think it fits better when the start of the rally is the low of the previous 20 day cycle and the beginning of the next one which is currently at day 8. That aligns with a short term top in the market in the next week or two.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Combo moved this week from 9 to 11. Two candles making higher highs are needed to finish it. That aligns with a short term top in the market in the next week or two.

Weekly review

Short term view - more upside in the next several days.
Intermediate term view - on a crossroad... I am in wait and see mode for 2-3 weeks.

This past week was not a surprise - SP500 tested the support level 1398 one more time and moved higher. Short term - next several days look bullish I do not see any danger on the downside.

Intermediate term its tricky we are on a crossroad so I am in wait and see mode for 2-3 weeks. The picture is bullish but I can not imagine a huge rally after moving higher for 3 months already, in the September-October period which is the weakest for the stocks for the whole year and the VXO in the 13 area for a month already. So the plan for the next weeks is follow the market and short term trading like this week - nice gains who cares if I am right or wrong:)

The options which I see (we will know soon enough which is the right one):
- The whole stuff technical analysis, cycles etc which guided me for months perfectly is right (its too early to throw everything away:) and we will see an intermediate term top soon followed by sell off into the 4-year cycle low scheduled somewhere between the end of January and March.
If this is the scenario than we should see a top around ~1450 +- 5 points:) and a serious decline should start after that for 3-4 weeks and all this should happen soon the end of next week for example.
- The bullish scenario - the charts which I followed for months are wrong:) than we will see SP500 rise to around ~1485, consolidation September-October with shallow pullbacks staying above 1425. The market breadth indicators clean up, and the 20 weeks cycle bottoms with sideways move. A rally into year end will follow.

TECHNICAL PICTURE
Short term - more upside with target 1450-1455.

Intermediate term - the two options explained above are shown on the chart - short term up to around 1450 and the lower trend line than reversal. The second scenario up to around 1485 and the upper trend line.

MARKET BREADTH INDICATORS
Nothing bearish for now. Only the weekly Stochastic of the Summation Index is in sell mode but there is no price confirmation.
McClellan Oscillator - above the zero line and made higher high. No bearish signs.
McClellan Summation Index - issued a buy signal, but still below the previous two peaks.
Weekly Stochastic of the Summation Index - still in sell mode. It tells us that soon we should see a correction.
Bullish Percentage - in buy mode. SP500 made new high but the indicator is way below the previous high.
Percent of Stocks above MA50 - showed some strength reaching 84.... at last before this surge it was weak moving above and bellow the 75 line.
Fear Indicator VXO - says we are near to a top. Lets see if we get a divergence.

CYCLES (TD - trading days)
The 20 day cycle should top in the next several days probably not before the FOMC meeting on Thursday. The next week or two will tell us how the 20 week cycle will look like and which scenario will play out.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
We have another combo currently at 9, several more days and it will be finished. That fits perfect with the cycles and technical picture.

Weekly review

Short term view - with the long weekend it is difficult to say if the index will move first down and than to new highs or straight up to new highs. The open on Tuesday will tell us more which option will play out.
Intermediate term view - I expect a new high followed by intermediate term top.

Three weeks later there is no surprises - SP500 made new high as expected and started a pullback. In previous posts I have mentioned two targets ~1415 and ~1425, SP500 touched the upper line of the wedge at 1426 and reversed. 1426 is also the level where W=Y=97 points. After that the index should have begun a topping process. Everything worked perfect for months and 1426 should have been the top but the move down from 1426 looks corrective and very weak. It looks like a pause before moving higher so I think that 1426 is not the top and we will see one more higher high before an intermediate term top.
As I say many times trade what you see not what you want to see:) so I will not call a top when I do not see bearish signs.

TECHNICAL PICTURE
Short term - SP500 is moving in a range for several days. If it breaks below 1398 we will see a-b-c ending around ~1385 where the trend line is. If it breaks above 1415 the move up will begin with target the upper trend line 1450-1455.

Intermediate term - the move lower looks corrective. I expect new high around 1450 where the trend line is with divergence on MACD.

MARKET BREADTH INDICATORS
Market breadth indicators are weak but no extremes or divergences to warn us that the top is in. McClellan Summation Index has sell signal but this is still not confirmed from price. Staying bullish but cautious.
McClellan Oscillator - is negative but no extremes or divergences. The weakness reflects the pullback nothing more.
McClellan Summation Index - issued sell signal and we have double top but there still no price confirmation.
Weekly Stochastic of the Summation Index - in sell mode too... decent correction should start soon.
Bullish Percentage - still in buy mode reaching the upper boundary of 70.
Percent of Stocks above MA50 - bellow the overbought level of 75 probably we will see a divergence after the next high.
Fear Indicator VXO - hit the lowest level under 13 for the whole cyclical bull market since March 2009. The market players are complacent. Probably we will see a divergence after the next high.
Percent of Stocks above MA200 - this chart shows the weakness of this rally. SP500 made new high but only 67% of stocks were above their MA200 compared with 78% the last time.

CYCLES (TD - trading days)
The firs leg lower 28 points marked the low of the 20 day cycle which lasted 21 days. The next one has begun, currently 6 days. I expect another 4-8 days on the upside before the high for this cycle. After that we should see a sharp sell off into the bottom of the 20 week cycle between the end of September and the first half of October.

The bigger picture - the 20 week cycle lasts usually 14 to 20 weeks. The current one is already 13 long and mature so the upside should be limited and a significant correction should start soon. After SP500 makes its intermediate term top the rest of the year should be negative because all bigger cycles point lower. This 3 month rally started with the beginning of the last 9 month cycle in June and it should be soon over.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Another 9 setup finished as expected. Probably we will second countdown/combo before the move is over.