Weekly review

Short term view - 2-3 green days after that we should see the final move lower.
Intermediate term view - expecting an intermediate term bottom soon.

The short term action was a little bit different than expected and I have had to adjust the chart on Tuesday but that has not changed anything - we had a red week and the bigger picture has not changed.

We had three days sideway action... it does not look like a bottom. I think we will see some upside pressure for a several days followed by the final leg down. If you look at the daily chart you will see a series of lower lows confirmed by lower troughs of the histogram. The correction will be over when we see higher low or lower low with divergence.

TECHNICAL PICTURE
Short term - MACD still moving higher but it says that this should be a corrective action... I think we will see 2-3 green days before another sell off. Target is the zone between 38,2% and 50% Fibo retrace 1428-1433 (MA50 on the daily chart is at 1434 so it looks like a logical tatget.).
The alternative is a sudden drop to support finishing the correction.

Intermediate term - still no reversal signs... we have series of lower lows confirmed by lower troughs of the histogram. But the price and the MACD are nearing their trend lines and I think that we are near to an intermediate term bottom.

MARKET BREADTH INDICATORS
The Market Breadth Indicators are showing weakness confirming that the direction is still down. The McClellan Oscillator made higher low so I expect to see something on the upside next week.
McClellan Oscillator - made higher low and looks the same way short before the last two rallies.
McClellan Summation Index - in sell mode moving lower....
Weekly Stochastic of the Summation Index - reached oversold levels, now waiting for a bottoming signal.
Bullish Percentage - in sell mode. Dropped this week to 70. My target stays the same 65-70.
Percent of Stocks above MA50 - dropped to 39 this week. One final move lower and it should reach levels between 25-35.
Fear Indicator VXO - reached 18.... I expect 20-22 to mark the end of the correction.

CYCLES (TD - trading days)
Right on track... waiting for the bottom of this 20 week cycle and a rally for at least 4-6 weeks.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Currently at 6 of a buy setup. If the alternate scenario plays out probably the setup will be finished and issue a buy signal. If the indexes move higher on Monday the setup will be invalidated.

Short term update

UPDATE 26.10.2012 - the trend line and the resistance zone(previous support) have been tested and the next move lower has begun. The futures are looking very bad currently SP500 -10 points at 1402. I think the next support zone(1390-1398) will be tested. After that a bottoming process should start. If you look at the bigger picture, the daily chart bellow, there is a support at this levels and the trend line connecting the October 2011 bottom and the June 2012 bottom. Monday play out perfectly - down to the gray trend line and the middle of the support range and then a strong bounce. I was expecting a pause Tuesday-Wednesday followed by the action which we are seeing today.... well I was right only for Monday and wrong for the short term:) but the big picture has not changed. Current thoughts...

Weekly review

Short term view - positive start of the week Monday and/or Tuesday but it should end as a red week.
Intermediate term view - I am expecting intermediate term bottom around the end of October.

As expected several green days and reversal. My target 1450-1455 was overshooted and for a moment I thought that the alternate scenario has a chance but the action on Friday showed that the correction is still not over. As I have said many times the crowd should be scared first before we have a bottom:)

Next week I expect short term bottom but for a day or two. it could be Monday or Tuesday I can not say but the week should end in the red.
The bigger picture - I think we are nearing an intermediate term bottom around the end of October.

TECHNICAL PICTURE
Short term - short term bottom than a relief move up followed by the final sell off. SP500 is making nice moves with the same size:) I think we will see the final move from a double zigzag
With red is shown the alternate scenario for completeness. I think it has very low probability. It will be on the radar again only if this relief move continue for three or more days - Wednesday and after that.

Intermediate term - the trend line has been broken, the histogram is pointing down again(on the weekly chart too), shooting star on the weekly chart - all this makes me think that we are still not done on the downside. Target which I see is the 38,2% Fibo retracement and support level 1390-1400. At this levels there is support from the trend line connecting the October 2011 bottom and June 2012 bottom too.
The Alternate scenario is shown above - the correction finishing at the 23,6% Fibo retracement level around 1415-1420.

Long term - that is what i expect for the long term. We will see one more high but I think the indexes have already begun a topping process. The MACD says the trend is tired - we are witnessing a double divergence developing. Divergence on the weekly chart is dangerous think and double one.... loooook out.

MARKET BREADTH INDICATORS
Market Breadth Indicators are confirming the move lower showing weakness but nothing troubling and that is the way it should be this not a major top just a pullback. One more sell off to scare the herd will not be bad. This will very healthy for the bulls - the same like last week:)
McClellan Oscillator - is bellow the zero line again. A divergence will be nice to signal the end of the correction.
McClellan Summation Index - still in a sell mode, nothing unusual.
Weekly Stochastic of the Summation Index - on the right side all the time telling us for weeks that the direction is still down.
Bullish Percentage - issued a sell signal, probably will reach 65-70 at the end of the correction.
Percent of Stocks above MA50 - showing weakness... probably will reach levels between 25-35 at the end of the correction.
Fear Indicator VXO - at last showing some strength reaching 16.... I expect 20-22 to mark the end of the correction.

CYCLES (TD - trading days)
The current 20 week cycle should finish soon in the next week or two and the next one will start. This will mark an intermediate term bottom and a rally into year end should start. We will see how it develops but I expect at least 5-6 weeks upside and at least 1500.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Nothing worth mentioning... nothing has changed the setup to the downside has failed as I have predicted.

Short term update

UPDATE 16.10 - target for wave "b" reached. Two strong days and now higher probability that the next move up(the alternate scenario) has begun. If the indexes do not reverse at this levels and tomorrow we see another strong green day the alternate scenario will play out.


Positive day as expected. A better short term chart with the same colors as the daily chart the last one was a little bit confusing - green highest probability, red alternate scenario. The plan has not changed I think the correction is not over. SP500 is short term oversold after five red days. We will see a bounce because there is a co-influence of support, EMA50 and the trend line(see the daily chart). But we have not seen the players being really scared and I think last final sell off and VXO around 20 will mark the end of this move. If I am right we are in a wave "b"(green scenario). If I am wrong we already saw the bottom with W=X=44 points(red scenario). The move from the bottom should be very strong at least for several days. Today does not look very promising... the way this move up is developing will tell us the story.

Weekly review

Short term view - I expect positive start of the week 2-3 green days.
Intermediate term view - in a pullback waiting for the bottom in the next week or two.

The deep pullback last week let me doubt in my forecast for a correction in October but this week confirmed the initial plan. There were only one direction this past week - down. This happens often I should trust myself more:)

When I look at the smaller charts I think short term we will see a move up but the market players are still too complacent and we will see one final move lower to shake out the weak hands.

TECHNICAL PICTURE
Short term - small divergence on the hourly tells me that wave "a" of the final wave Y is finished and we will see a "b" up. Resistance is at 1450.
I can not say exactly where the pullback will finish the two targets for now are W=Y=1420 and Y=1,618*W=1395-1400. I think the lower one have higher odds but lets wait and see what will happen with wave "b".

Intermediate term - again the two scenarios with preferred target 38,2% retracement. Of course we should be cautious at this point the market can find support at the MA50 and the channel line, MACD is almost at the zero line, the histogram made two troughs - the alternate scenario. Pullbacks have the ability to finish abruptly followed by a strong rally.

MARKET BREADTH INDICATORS
Market Breadth Indicators are confirming the move lower showing weakness but nothing troubling and that is the way it should be this not a major top just a pullback. One more sell off to scare the herd will not be bad. This will very healthy for the bulls:)
McClellan Oscillator - showing small divergence confirming the idea for a move higher in the next days.
McClellan Summation Index - still in sell mode, well we are in a correction:)
Weekly Stochastic of the Summation Index - says there still a week or two until this move lower finishes.
Bullish Percentage - not impressed at all.... again a sharp sell off to finish the correction and scare the herd is not a bad idea.
Percent of Stocks above MA50 - in the middle of the range around 50. One more move lower will give a nice buy signal around 25-30.
Fear Indicator VXO - moving higher but still too low. Move to 20 will be a healthier to finish this correction.

CYCLES (TD - trading days)
This daily cycle is getting very long and it should finish soon. The last 20 week cycle was only 61 days long so it is not a surprise that this one lasts longer. You can see the previous two on the chart - the same story 78 days and 106 days.

Waiting for the end of the 20 week cycle and the beginning of the next one which should bring a rally for 2 months into year end.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Last week I was not sure if the countdown or the combo is the right option - well it was the countdown. Currently SP500 at 4 of a setup. The correction is not finished but I am not sure that the bears are strong enough to finish this setup.

Short term update

UPDATE - well no bottoming process just a brief pause and the break bellow 1440 is no a surprise. Now back to the initial idea of a correction in October with targets 1420 or 1395-1400.

Ok that was the easy part - as expected two days later SP500 is in the middle of the 1440-1450 range. Two options - the index will start bottoming process and move higher(this is shown on the chart) or make a brief pause and move bellow support 1440.

Weekly review

Short term view - probably another one or two red days after that we will see what happens.
Intermediate term view - not sure.. favoring the scenario with move higher to the low 1500.

So I was wrong this week, the index has continued moving higher. The move up is corrective and weak but it is what it is. The move lower was very very shallow and lasted only several days so I thought one more leg down to the trend line is in the cards. Anyway we had our 3% pullback so now the higher probability is that SP500 will move higher.

For the next week I expect a day or two lower than moving to higher highs. I can not exclude the possibility that the correction is not over but now this scenario has lower probability. Until SP500 breaks bellow 1440 I do not see problems for the bulls.

TECHNICAL PICTURE
Short term - we had on Friday shooting star on the daily chart, MACD cross and histogram moving lower on the hourly chart so I think the index will touch support between 1440-1450 and move higher. If SP500 breaks bellow 1440 than the correction is back on the radar.

Intermediate term - I think the SP500 will move higher to the 1500 area. If SP500 breaks bellow 1440 than the target is 1400.

MARKET BREADTH INDICATORS
Do not look very strong in fact some of them are still in sell mode. This is not a problem to see the indexes moving higher it rather means do not expect strong rally. There is now divergences or signs that a top of a higher degree is upon us, so no troubles for the bulls.. for now.
McClellan Oscillator - showed at last some strength moving above the zero line.
McClellan Summation Index - still on sell, saying that this rise is weak.
Weekly Stochastic of the Summation Index - in sell mode, do not expect strong rally.
Bullish Percentage - issued buy signal, no troubles on the horizon.
Percent of Stocks above MA50 - is bellow 75. Probably the next rise will lead to divergence.
Fear Indicator VXO - excessive bullishness has not been cleaned up. The market players are complacent so I do not expect strong rally.

CYCLES (TD - trading days)
This cycle 20 day cycle is getting to long. When 20 week cycle finishes and the next one starts you see descent sell off at least for a week or two and than strong move up. We saw nothing of that. When I look at the daily chart of SP500I I see only... two red bars and the move higher is not exactly strong. I see two options - sharp sell off next week to finish the 20 week cycle or the bottom was last week and the next cycle has begun but is weak and we will see it topping sooner than later marking the beginning of a move to the 4-year cycle low.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
This week we have 13 countdown completed. You can say we have countdown completed , shooting star candle and it looks like a double top. Or you can say the combo is still not finished 1500 is upon us. It depends on how you look at the chart:) so not much of a help.

Short term update

The correction has mutated which is not surprising corrections are always pain in the ass:) This is how I see it - deep pullback with a=c=25 points and another move lower W=Y=44 points to around 1420 where the support from previous highs lies and the trend line.
If the index continue higher above 1463 expect new highs.

Short term update

Wow perfect hit to the point. The target 1455 has been reached. Lets see now if the part on the down side will play out.