Short term update

UPDATE - I think yesterday(30.01) was the inflection point... do not expect the market to plunge or something like that. Just the beginning of a correction for several weeks


As I have said no bearish signs so the grind higher is not a surpise. I have missed the info that there is FOMC tomorrow and that means there will be no move lower until the meeting. If there will be a pullback it will start with reversal candle tomorrow and that after the meeting.

Weekly review

Short term view - no bearish signs... waiting to see the open on Monday.
Intermediate term view - a top is expected but wait first for confirmation from the price.
Trading system signal (swing trading) - direction: UP | last entry signal: at SP500=.... xx.xx.xx | stop at:

I have made small changes adding the signals from my system - direction and entry if generated, weekly chart and short comments about trend and momentum for every time frame. With the additional info the picture will be complete as described in the post "Trading System". I will be more disciplined and it will be more informative for the readers.
- I will post the direction which my system is showing me and when it issues an entry signal (I will try to post asap). This will bring more clarity what I am doing.
I was asked if I am shorting when I am saying to expect a top. The answer is No. I am entering a trade when the system says so. I am drawing moves in the future, what I think the logical development should be but I could be wrong or too early. I wait for price confirmation. For example in summer I was saying expect move lower - yes it started but in September after QE3 to suck in all bulls and from higher levels. After that many were bearish but I have said expect bottom - yes it came but 2-3 weeks later from lower levels. I hope you get the idea - I was wrong 2-3 weeks early or not nailing the exact level of a bottom/top but I am right for the direction and I stay long/short until the system say so. When I am on the right side it does not matter if I am right or wrong. The current situation is exactly the same pullback is overdue but it could take another week and 20 points higher.
- I will start posting weekly chart too. We will have hourly/daily/weekly chart and we can put the pieces together which will reveal us the complete picture of the market.
- The blog is about technical analysis but somehow I have forgotten to comment the indicators:) I have read a lot of books and have tried to use different indicators... You do not need many indicators or search for magic indicators, all you need is trend following indicator and oscillator to measure momentum. It is not about what you use it is about how you use it. The indicators which I use are EMA50/MACD to follow the trend and Histogram/RSI to measure momentum. Trend lines and support/resistance are visible on the charts so they do not need explanation.

Back to the markets - the upper trend line on the hourly chart was breached as expected. I have forgotten to measure the waves. The first wave since November is 105 points the second wave up from January is now of the same size 105 points touching 1503. Measured move complete, the upper trend line of the wedge touched, EW W=Y completed?, TD Sequential 13 on the weekly chart finished..... the logic says expect some kind of a top.

Many indications for a top but there is no spike and capitulation on the upside.... so in wait and see mode.

Some interesting articles about topping, VXO... if you want to read. There were comments that the market will never go down:) http://www.marketoracle.co.uk/Article28744.html
http://www.marketoracle.co.uk/Article30346.html
http://www.marketoracle.co.uk/Article38688.html


TECHNICAL PICTURE
Short term - I will wait to see the open on Monday. No bearish signs but to be long when the upper trend line is breached... too many risk for me.

- Triple cross(EMA10 and EMA20 crossing EMA50) - the EMAs are pointing up so the short term trend is up.

Intermediate term - final spike and capitulation or a plunge... waiting to see which will trigger the correction. A correction expected target between 1420-1440 - support/lower wedge trend line/38,2%-50% Fibo retracement.

- Trend direction EMA50/MACD - pointing up so intermediate trend is UP.
- Momentum Histogram/RSI - the histogram says the acceleration is weakening, RSI is pointing up so overall the momentum is still UP.

Long term - no change, expecting the finish of this wave and correction for several weeks.

- Trend direction EMA50/MACD - MACD above the zero and price above EMA50, the long term trend is up. Quadruple divergence on MACD watch this veeeery carefully.
- Momentum Histogram/RSI - momentum is UP.


MARKET BREADTH INDICATORS
The Market Breadth Indicators - no change here - in overbought territory but bullish. I see strength and that is not what you see at meaningful Tops. That is another sign to expect only correction to relief overbought conditions.
McClellan Oscillator - more and more divergences, a warning that we are nearing a top for this move.
McClellan Summation Index - bullish moving up.
Weekly Stochastic of the Summation Index - says that this swing is mature... but no sell signal for now.
Bullish Percentage - bullish on buy...
Percent of Stocks above MA50 - very high at 90. At this levels is a move usually exhausted.
Fear Indicator VXO - making record lows and starting to rise slowly... complacency is very very high.
Advancing issues volume - the same like last week, the indexes are advancing but the volume is shrinking, we see lower highs.
Declining issues volume - the same picture, the indexes are moving up but the volume on the downside is expanding, we see higher lows.


HURST CYCLES
Day 18 of a 20 day cycle. The best days for this cycle are behind us.

Week 10 of 20 week cycle. After a longer cycle comes usually a shorter one. See the previous sequence 23-14. So I expect the same thing - correction in the next 4-5 weeks to finish this cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Sequence 9-13-9 finished so waiting for price flip to say momentum has changed.

Weekly TD Sequential 13 finished. Watch out every time correction has followed.

I have been asked if I look backward the TD Sequential show the same result. Here is the chart for the 2003-2007 bull market - yes exactly the same results.
I have counted on both chart (above and bellow) if after every 9 and every 13 there were a correction starting on the following week - the result is 13:4 for yes there were correction. From the other 4 occasions - twice 3-4 weeks later in both cases at the beginning of the bull market when it was strong , twice no correction but that was after 9 setup and the begging of the second push higher for the bull market.
Wow two many similarities.... the cyclical bulls behave the same way

Short term update

UPDATE 24.01 - always the same game push a move to the limit suck 99% of the traders and and catch them with the pants down:) The big boys are nasty guys they want your money.
The chart is looking bearish at least for the short term - bearish shooting star, SP500 touched the wedge trend line at 1503 and reversed,the histogram is pointing down now with divergences. Confirmation for a short term top is break below the last minor low at 1489. That is only several points from the current price so if this is for real the bears should show up and push it lower.

UPDATE: MACD divergence on the 15 min chart. If the bears manage to push it into the red into the close 1495 will be at least a short term resistance.

As expected the trend line on the hourly chart was slightly overshooted and SP500 touched 1495. There is no signs of reversal for now let see if the trend line will be a resistance.
Measured move 105 points or wave A=C, pick something:), points to target around 1500-1505 and around this levels comes the wedge trend line see the daily chart.
I must be honest and say I do not know if there is another 10 points up left. I was confident that we will see at least 1495. There is no reversal signs and wash out move on the upside is still missing so what are another 10 points:)

Weekly review

Short term view - when this spike up is over a pullback should begin.
Intermediate term view - I think the first pullback will be bought and after that we will see an intermediate term top.

I think the final move before a pullback has begun. Last week I have said to expect a spike - here it is. Probably the upper trend line will be breached and we will see ~1495.

I have been asked what I think about Russell 2000... I watched the charts a lot and what I see is bullish and I think the major indexes like SP500 have similar pattern. So my primary scenario now is a normal correction 5%-7%(that is around 1400 for the SP500) into early March and another move higher. The charts are updated and I have removed all counts because they only distract from the real action. There is at least five different counts which can fit but at the end the direction is up and I think we are in the final move up which will last at least until June-July before the topping process begins. For the short term there is two slight variations of the primary scenario. My preferred one is a pullback and last final move up before a correction for several weeks.

TECHNICAL PICTURE
Short term - the two variations are shown on the chart. There is divergence on the MACD on the hourly chart and on the histogram on the daily chart so waiting for the pullback... support,MA20 on the daily chart,25 points reaction like the previous ones - all that points to 1450-1460 as a target.

Intermediate term - the chart looks changed a lot but in fact is the same compared to the one posted on Wednesday. I have removed the counts, added the wedge trend lines and flipped the scenarios primary<->alternate. So I am watching the light green lines - pullback->test of the upper wedge trend line->correction 5%-7% and test of the lower wedge trend line. Only if the price breaks convincingly bellow 1400 something more bearish is going on.

Long term - this is the big picture. I think we are in the middle of the move up. For the fans of Elliot waves A-B-C->W / A-B-C flat->X and now near the end of A of Y.

MARKET BREADTH INDICATORS
The Market Breadth Indicators are in overbought territory but bullish. There is no any bearish signs, I see strength and that is not what you see at meaningful Tops. That is another sign to expect only correction to relief overbought conditions.
McClellan Oscillator - more and more divergences, a warning that we are nearing a top for this move.
McClellan Summation Index - bullish moving up
Weekly Stochastic of the Summation Index - says that this swing is mature... but no sell signal for now.
Bullish Percentage - bullish on buy...
Percent of Stocks above MA50 - very high at 90. At this levels is a move usually exhausted.
Fear Indicator VXO - making record lows around 12... complacency is very high.
Advancing issues volume - the same like last week, the indexes are advancing but the volume is shrinking, we see lower highs.
Declining issues volume - the same picture, the indexes are moving up but the volume on the downside is expanding, we see higher lows.

HURST CYCLES
14 days of 20 day cycle we are nearing a short term top but not there yet.

9 weeks of 20 week cycle
The interesting part is that every rally is getting shorter and shorter... and the time between the tops is Fibonacci 0,618:) 43x0,618=27 27x0,681=15 15x0,618=9 lets see if this time the magic works:)

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Countdown 13 finished and at 7 of a setup. I think we will see Sequential reinforcement 9-13-9 sequence before a top.

Currently at week 12 of countdown and combo. If SP500 records a higher prices next week the counts will be finished. Look at the chart - every time when a setup/countdown/combo is finished there is a pullback or correction. I do not think that this time will be different.

Short term update

UPDATE: Here is the spike... most of the moves finish this way - the last bear/bull must through the towel before a reversal. More money for the big boys:)

Two weeks..... nothing. It starts getting boring, veryyyy booooring :)

Updated chart of the scenarios which I see for the intermediate term. Sometime in March a bottom and final move up.

Short term update

I think the red scenario from the hourly chart will play out(see the first chart bellow).

Weekly review

Short term view - last final spike expected.
Intermediate term view - we are near to an intermediate term top. Dangerous on the long side early to be short.

A pause this week as expected. Nothing has really changed since last week just updated the charts.

If a new up leg is born there is several strong days a pause 1-2 days and the move continues... the action now looks more like the final surge of a move.
Ok what to expect - the market will try to trap as more traders as possible on the wrong side, that is the way it works. So I see two possibilities or a combination of them. The first one - a spike higher above 1475 to hit the stops of the bears and to trigger the buy orders of the bulls because this is a breakout to new highs. Second scenario is sharp decline followed by a marginal new high to confuse bears and bulls. Overall a topping process should start next week and last for a while 1-2 weeks.

TECHNICAL PICTURE
Short term - this two scenarios are shown on the chart. This move higher looks very weak,the MACD is crawling on the zero line and working on a divergence...

Intermediate term - nothing has changed, both scenarios still valid. The broken trend line continue to be a resistance, the histogram is working on a divergence... The rally in September ended in a similar way - huge bars up, huge euphoria QE3, a week moving sideways, two sharp days lower and retest of the high before moving lower.

MARKET BREADTH INDICATORS
The Market Breadth Indicators - no change since last week only McClellan Oscillator and Percent of Stocks above MA50 are showing first cracks. The indicators are bullish at overbought levels but they can stay there for several weeks. Again the move is already mature and I do not expect long lasting rally.
McClellan Oscillator - has a divergence... several down days and the red scenario from the hourly chart?
McClellan Summation Index - bullish on buy...
Weekly Stochastic of the Summation Index - says we are near to the end of this swing not the beginning... but no sell signal for now.
Bullish Percentage - bullish on buy...
Percent of Stocks above MA50 - small divergence - the red scenario from the hourly chart?
Fear Indicator VXO - the market participants are complacent. VXO in the danger zone bellow 14 but it could stay there for a while. There is small divergences between the last two minor peaks... the red scenario from the hourly chart?

Two new indicators which I follow for several months and I can say that they are valuable. The volume for advancing/declining issues shows if the volume on the up side/down side is growing with the move.
Advancing issues volume - the indexes are advancing but the volume is shrinking(see the lower highs) - we have less volume committed on the upside.
Declining issues volume - the indexes are moving up but the volume on the downside is expanding(see the higher lows) - I think we have distribution.


HURST CYCLES
At day 9 of the 20 day cycle - still pointing up.

At week 8 of the last 20 week cycle of a 4 year cycle. I expect to see an intermediate term top soon. The last cycle was longer so this one should be shorter 14-17 weeks.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
On the daily charts we have finished countdown and combo. That means that we are near to a some kind of top. If you look at the weekly chart you will see that we are near to a completed countdown too.... so it does not look nice for the bulls.
Tom Demark itself said that the market is sell

The weekly chart is 11 of a combo and countdown. A topping process for a week or two will finish the countdown.

Tom Demark on Bloomberg

Tom Demark sell off is coming - I agree with him :) My chart tells the same. I will post the charts tomorrow

Short term update

Cool off as expected,shallow pullback of 17 points. I think the next move up has begun. The final move will probably overshoot a little bit the trend line and the previous high. Watch the MACD for a divergence.

Tom Demark Sequential

Books which I have found and have read:
New Market Timing Techniques - Thomas R. Demark. Written by Tom Demark itself but it is difficult to read and understand. I have needed several months to understand the idea and to summarize the information bellow.... and than I found the following book:
DeMark INDICATORS - Jason Perl. A great book about Demark indicators easy to read and understand. The theory is presented in a way which is very easy to understand. I recommend you to read it. But Murphy's law I have found it one week later... when I already had the information which I have needed:)

The post is not intended to be a comprehensive guide how to trade using Tom Demark's technique there is books about that. In "DeMark INDICATORS by Jason Perl" for example you can find the info - when trading signal is appearing/entry level/stop level etc. and much more TD indicators and techniques.
The post is intended to be a quick reference so we do not need to look for the rules each time on Internet or in the books:) I will post my thoughts and some charts which will help you to understand how to apply Tom Demark's method in the practice. I am not a Pro but I hope that the post will be a good starting point for you to start using TD Sequential in real trading.


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TD Sequential indicator consist of two components. TD Setup is the first one and it is a prerequisite for the TD Countdown – the second component.

1.TD Setup
TD Setup compares the current close with the corresponding close four bars earlier. There must be nine consecutive closes higher/lower than the close four bars earlier.

TD Buy Setup - prerequisite is a bearish price flip, which indicates a switch from positive to negative momentum.
– After a bearish price flip, there must be nine consecutive closes, each one less than the corresponding close four bars earlier.
– Cancellation - If at any point a bar closes higher than the close four bars earlier the setup is canceled and we are waiting for another price flip
- Setup perfection – the low of bars 8 or 9 should be lower than the low of bar 6 and bar 7 (if not satisfied expect new low/retest of the low).

TD Sell Setup - prerequisite is a bullish price flip, which indicates a switch from negative to positive momentum.
– After a bullish price flip, there must be nine consecutive closes, each one higher than the corresponding close four bars earlier.
– Cancellation - If at any point a bar closes lower than the close four bars earlier the setup is canceled and we are waiting for another price flip
- Setup perfection – the high of bars 8 or 9 should be greater than the high of bar 6 and bar 7 (if not satisfied expect new high/retest of the high).

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2. TD Countdown - after a setup is finished the countdown can begin from bar 9 of the setup.
TD Countdown compares the current close with the low/high two bars earlier and you count 13 bars. Unlike the Setup, the Countdown doesn’t have to be a sequence of 13 consecutive price bars. If it is interrupted you just do not count the bars and when it resumes you continue counting further.

TD Buy Countdown starts after the finish of a buy setup. The close of bar 9 should be less than the low two bars earlier. If satisfied bar 9 of the setup becomes bar 1 of the countdown. If the condition is not met than bar 1 of the countdown is postponed until the conditions is satisfied and you continue to count until there are a total of thirteen closes, each one less than, or equal to, the low two bars earlier.
Countdown qualifier - The low of Countdown bar thirteen must be less than, or equal to, the close of Countdown bar eight.
Countdown cancellation:
- A sell Setup appears. The price has rallied in the opposite direction and the market dynamic has changed.
- close above the highest high for the current buy Setup (break of TDST for the current Setup)
- recycle occurs ( new Setup in the same direction and recycle activated )

TD Sell Countdown starts after the finish of a sell setup. The close of bar 9 should be greater than the high two bars earlier. If satisfied bar 9 of the setup becomes bar 1 of the countdown. If the condition is not met than bar 1 of the countdown is postponed until the conditions is satisfied and you continue to count until there are a total of thirteen closes, each one greater than, or equal to, the high two bars earlier.
Countdown qualifier - The high of Countdown bar thirteen must be greater than, or equal to, the close of Countdown bar eight.
Countdown cancellation:
- A buy Setup appears. The price has rallied in the opposite direction and the market dynamic has changed.
- close below the lowest low for the current sell Setup(break of TDST for the current Setup)
- recycle occurs (new Setup in the same direction and recycle activated)

Aggressive TD Sequential – the difference is the Countdown phase. You compare high/low (not the close ) with the high/low two price bars earlier.
Aggressive Sequential always produces buy and sell signals before Sequential does.

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3. TD Combo
TD Combo is better when you have sharp directional moves, because it requires only thirteen price bars from start to finish compared to TD Sequential which needs at least 22 bars. The criteria for a Setup within TD Combo are the same with those required for a Setup within TD Sequential. The difference is that the count starts at bar 1 of the setup and not from bar 9 and TD Combo requires four conditions to be satisfied simultaneously.

Requirements for a TD Combo Buy Countdown
- close lower or equal than the low 2 trading days earlier.
- The low of a countdown day should be less than the previous "trading day‘s" low
- The close of a countdown day should be less than the previous "trading day‘s" close
- The close of a countdowns day should be less than the previous "countdowns day‘s" close
- bars 11,12,13 each one should just close successively lower and the other rules above are not applied

Requirements for a TD Combo Sell Countdown
- close higher or equal than the high 2 trading days earlier.
- The high of a countdown day should be greater than the previous "trading day‘s" high
- The close of a countdown day should be greater than the previous "trading day‘s" close
- The close of a countdowns day should be greater than the previous "countdowns day‘s" close
- bars 11,12,13 each one should just close successively higher and the other rules above are not applied

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Bearish Price Flip - occurs when the market records a close greater than the close four bars earlier, immediately followed by a close less than the close four bars earlier.
Bullish Price Flip - occurs when the market records a close less than the close four bars before, immediately followed by a close greater than the close four bars earlier.

TDST level – this is the highest high(usually the high of bar 1) for a buy setup or the lowest low(usually the low of bar 1) for sell setup, also called true high/low for a Setup.
- If a move cannot close above or below the TDST level of the most recently completed Setup in the opposite direction that means the momentum is weak and this is just a corrective move.
- If a move closes above/below the TDST level of the most recently completed Setup in the opposite direction that means that the momentum is strong enough and the price should then continue in that direction , and with high probability a TD Countdown will be completed before a reversal occurs.

True low/True high – is the lowest and the highest point for a setup, BUT including gaps before bar 1 and the days after the 9-th bar, qualifying for a setup bar.

Sell zone/Buy zone after finished TD Sequential – find the bar which records the highest high/lowest low for the countdown, find the range of the bar plus gaps and project it from the high/low of the bar. After finished TD Sequential/Combo the price should make a top in this zone not later than 12 price bars after bar 13 for the countdown. If the market breaks this level the signal is negated and we are witnessing renewed strength.

Setup Recycle - A second setup appears in the same direction before/on/after a Countdown - that usually means strength. The question is recycle and start a new Countdown? (there must be a price flip to divide the two setups or the first just continuous)
Compare the size of the two setups. The size is the difference between the true high and true low of a setup.
- if the second setup is equal or greater than the previous one , but less than 1.618 times its size, then Setup recycle will occur – the trend re-energize itself. Whichever Setup has the larger true range will become the active Setup.
- ignore setup recycle if the new setup is smaller or 1.618 times and more, bigger than the previous one – most probably price exhaustion area.

TD Sequential Reinforcement - 9-13-9 sequence
After a Buy Countdown the market temporarily trades higher and produces a Price Flip and subsequently a TD Buy Setup appears, this is known as a TD Sequential 9-13-9 Buy Count.
Requirements for a valid Sequential 9-13-9 Buy Count:
- The Buy Setup must not begin before or on the same price bar as the completed Buy Countdown
- The second Buy Setup must be preceded by a bullish Price Flip
- There must be no completed Sell Setup prior to the appearance of the Buy Setup.

After a Sell Countdown the market temporarily trades lower and produces a Price Flip and subsequently a TD Sell Setup appears, this is known as a TD Sequential 9-13-9 Sell Count.
Requirements for a valid Sequential 9-13-9 Sell Count:
- The Sell Setup must not begin before or on the same price bar as the completed Sell Countdown
- The second Sell Setup must be preceded by a bearish Price Flip
- There must be no completed Buy Setup prior to the appearance of the Sell Setup.

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P.S. There is special software which counts for you with a bunch of other TD indicators etc. If you want to trade using TD Sequential you should probably use such software and buy some books. I use TD Sequential in a combination with technical analysis and count by myself. That is good enough for me and the summary above is all I need.


So what should we do with all this bunch of 9's and 13's ?????

TD Sequential is a great tool for identifying trends, measuring momentum and spotting areas of price exhaustion.

I use TD Sequential as a complementary technique to technical analysis(TA) and that is my interpretation:
- Price flip indicates short term reversal of the momentum up<->down. Look at your charts if there is no reversal signs that means short term pullback and you can load more in the direction of the trend. Or you are expecting a reversal than a price flip is a great way to trigger an entry(take profits) for a new swing trade.
- The appearance of a TD Setup confirms strong momentum in it's direction. After a swing has begun, up or down, the appearance of a TD setup says the momentum is strong enough. It's absence is a valuable information too - the move is just a correction expect a resumption of the trend.
- Countdown 13 is the trending phase – when a setup has finished and a countdown has begun the market is in a trending phase. The odds are very high that the move will not finish before it records 13 in the corresponding direction, just watch out for a setup in the opposite direction. When a countdown has finished the price has reached an area of exhaustion watch out for a reversal.

As every technique it has it's weaknesses. I have not found answer in the books of the following questions:
- its called sell setup because the price is moving up and after a setup is finished you should sell - should I really sell? Should I expect a follow trough on the upside and the start of a countdown? - The answer which I found is watch if the setup has broken the TDST of the previous setup in the opposite direction. Not good enough for me.
- and when the countdown is finished should I sell or expect another 9/13.... usually you have a reversal after finished countdown but if you see the charts that is not always the case. The only hint which I have found is Sell zone/Buy zone - it's good enough, you have entry level,stop level and you know when you are wrong.

It's not so bad:) using TA you can solve this issues. And one thing in which TD Sequential is better than TA - the indicators can tell you the market is overbought but for how long can it stay overbought.... TA does not have the answer. TD sequential can tell you when the trend has reached exhaustion - when countdown 13 is finished.


Lets take a look at the charts.... I would say TD Sequential has pretty high success rate, if I am honest much higher than most oder indicators or techniques. I am not a pro applying TD indicators and probably some counts are wrong but combined with TA its a valuable tool for me. My overall score based on the charts bellow is TD Win:TD Loss 10:5 - not bad.
Oooo and notice that these are not charts specially selected for some book showing you when some method is working conveniently not showing you the charts when its not working:) These are just the SP500 charts for the last several years... this is happening now.

The charts are self-explanatory, I will comment what I think is interesting.....
- Aug-Oct 2011 huge drop, everybody were scared, bearish market will resume bla bla... I have said we will see lower low with divergence, first it was 18 month cycle low and second a bear market does not start with a "BANG". Nice... low but when? - When the count is finished:) 13 spot on the last bar for the decline TD Win:TD Loss 1:0
- Oct 2011 sharp rally has started so combo is your tool. When to expect a pullback so we can jump on the rally if you missed it or is it too late to jump on - 13 combo finished and spotted the top of this rally. TD Win:TD Loss 2:0
- corrective mess followed and it reached 8 of a setup - the decline into December. You can say that the cancellation of the buy setup failed to produce buy signal or say failed setup says this is just a correction and the trend resumes. I knew that the move will not finish with just one wave up and one day miss is not a drama so I would say a point for both sides TD Win:TD Loss 3:1 is fair enough.
- from mid December rally up and up and up - TD Sequential produced 9-13-9-13. This is the second problem which I have mentioned above - when it will be over on the first countdown after 9-13-9 reinforcement? I do not have an answer. But you must admit 13 countdown spotted the top and if you look at the weekly chart 13 combo spotted the top too so for me TD wins TD Win:TD Loss 4:1
- the summer correction produced 12 Combo bars.... again 1 day miss honestly how many indicators do you know which can spot the exact top or bottom? Point for both sides is fair enough TD Win:TD Loss 5:2

- again sequence 9-13-9-13. The move is a mess but a countdown finished just before the plunge lower - point for both camps TD Win:TD Loss 6:3
- combo and countdown finished on Friday 11.01.2013... the future will show if TD Sequential wins or loses :)

The weekly chart - pretty damn good :) in order of appearance:
- sequence 9-13-9-9 but you must admit every time finished before a correction so one point for both sides TD Win:TD Loss 7:4
- TD sequential finished TD Win:TD Loss 8:4
- TD combo finished TD Win:TD Loss 9:4
- TD buy setup finished - that is the first problem mentioned above. When a setup is finished should I expect a countdown or reversal? no answer but spotted the reversal - one point for both sides TD Win:TD Loss 10:5

Weekly review

Short term view - probably short term cool off next week.
Intermediate term view - There is no bearish signs for now so up is up. I think there is another 2-3 weeks before intermediate term top.

So sharp rally after another orchestrated drama... QE,debt ceiling,fiscal cliff and always the same results print more spend more - somebody surprised?
I was WRONG calling the end of the move. The problem is not that I was wrong that is part of the game called trading I am angry at me that I read the charts the wrong way... ok I was working all the time lets say I was tired:)

The question now is do we see replay of the QE3 drama from September - sharp rally for several days and reversal or we are in the middle of a rally and the next leg up has started.
- On the technical front the charts look bullish. Weekly chart(see chart three)- huge bar,the histogram is moving higher, MACD turning up at the zero line and the trend line, the price bounced of support,EMA50 and the trend line. The daily chart is bullish too - price,histogram and MACD are still moving up.
- The Market Breadth Indicators are bullish pointing up but the move is already mature as all indicators are in the overbought zone. But they could stay there for several weeks that is not a problem.
- Cycles - we are in the last 20 week cycle of a 4 year cycle and waiting for a 4 year low. So we should see intermediate term top soon.
- Tom Demark Sequential - daily chart 13 reached pullback is to be expected, weekly chart we are at week 10 from a countdown so another 2-3 weeks up are to be expected. We are near to an intermediate term top but not there yet.

When I asses the facts above I head two scenarios shown on the long term chart:
- the current one for a reversal now, which I am following for a long time. It is still valid there is no technical damages but the time is running out. We should see a reversal soon. It was the same story in September - I was expecting an intermediate term top and than ECB announcement, FED QE3 sharp rally for several days from 1400 to 1475 one final push stretched to the maximum.... and than a reversal. So I could not exclude this scenario.
- we are in a wedge, we saw already 1-2-3-4 and now we are in the middle of 5. That means we have more on the upside in the next 3-4 weeks and 1500 points on the SP500 at least.

Unbiased conclusion - the wedge scenario has more weight because of the technical picture, the other scenario is based on indirect evidence and at the moment we do not have any confirmation.
If you find this confusing I will tell you my trading strategy which is very simple - buy the next pullback. If the wedge plays out you make money, if the other scenario kicks in you make small gain(worst case small loss) on the upside and reverse short.... and you make money:)

TECHNICAL PICTURE
Short term - I think we will see a pullback next week. How deep will give us more information what to expect from the next move. Normal pullback should be 25 points like the previous ones which is ~1440, the middle trend line, support and EMA50 on the hourly chart.

Intermediate term - both scenarios are shown on the chart. Red 1-2-3-4-5 is the wedge scenario, yellow W-X-Y is a flat correction which is part of the green scenario and should mark the low of the 4 year cycle.

Long term - a better view of the big picture. Ending diagonal/wedge in red 1-2-3-4-5 we are in the middle of 5. Or a big sideway move (the green scenario) from W to X should be the end of a 4 year cycle with the last year of the cycle (April 2012 to the projected low Q1 2013) basically flat.
The irony is the bearish mid term scenario(green) is more bullish for the long term. As a trader I hope that this scenario will play out - it will offer us much more opportunities to make some money in both directions:). The other one... a lot of risk with this ending diagonal and multiple divergence on the MACD.

MARKET BREADTH INDICATORS
The Market Breadth Indicators are bullish but at overbought levels. They can stay there for several weeks and the indexes can move higher BUT the move is mature. I would not expect a rally for another two months and 10%+ gains rather 3-4 weeks and another 5%.
McClellan Oscillator - divergence erased, healthy move... no troubles here.
McClellan Summation Index - bullish on buy...
Weekly Stochastic of the Summation Index - says we are near to the end of this swing not the beginning... but no sell signal for now.
Bullish Percentage - bullish on buy...
Percent of Stocks above MA50 - very stretched to the upside around 90. It will take same time to reverse probably with divergences.
Fear Indicator VXO - in the danger zone bellow 14 but it could stay there for a while. There is no divergences for now...

HURST CYCLES
I moved the low of the 20 day cycle. The strong move of the low and the new minor high suggests that a new 20 day cycle has started on Monday - currently at day 4. At least a week at this levels before we see the top of this daily cycle.

The big picture - currently at week 7 of the last 20 week cycle of the 4 year cycle. Something on the downside should start very soon.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
This week SP500 has finished 13 combo and 13 countdown.... lets see what happens next, probably a pullback.

The weekly shows Countdown and Combo at 10. This will fit perfect with the 1-2-3-4-5 wedge scenario finishing countdown 13 in the next 2-3 weeks.
The T-theory says the same another 2-3 weeks of strength - after a period of weakness follows a period of strength with at least the same duration.

Short term update

The bigger plan has not changed, the trend line is being tested again.
I was expecting one last push higher (which we see now) but with five red days in a row I have let myself to be misled that the move lower has begun..... I am an idiot, I knew it that with this "fiscal cliff drama" a sharp rally is to expect....
If I am right in the next several days this move up should be over or I am completely wrong... we will know that very soon.

Short term update

HAPPY NEW YEAR !!!

I wish you all the best and I wish you and me to be a better traders in the new year 2013 :)

The futures recovered before the open, market breadth indicators were short term oversold and the fiscal cliff drama gave the indexes the reason to rally.... so the red scenario has played out. My plan stays the same - lower high 1435-1440. If I am wrong 1475 here we come (the red line).