Update

The last INVESTORS INTELLIGENCE SURVEY - more bulls, fewer bears... SP500 toooo stretched above MA200.

John Hampson:
Investors Intelligence bulls up to 59.6% from 58.2%. Highest since 62% in October 2007
Investors Intelligence bears down to 14.1% from 14.3%. Lowest since March ’87
The S&P Index today is farther above its 200 day moving avg then at any time in the last 25 yrs — with the exception of mid to late 09


Two of the bloggers which I follow think now, that this is a blow off top and we will not see a topping process. I will post some thoughts on the topic next year... in fact the topping pattern which I was showing for more than six months(weekly chart) was negated and the alternate pattern blow off sounds logical now.
John Hampson - thinks now that the top will be blow off top.
Toby Connor - another guy which I follow... one more bear:)

Update

The first target has been reached... I do not see an ending pattern for now. You should be worried if SP500 moves bellow 1810.

I do not follow many blogs, but two of the guys which I respect turned bearish a few weeks ago. I know that when you are bearish you like to read bearish stuff(simple psychology), but they were bullish for a long time and they are smarter than me:). Common sense tells me they are right. Now we can only wait and see if this time greed and madness is stronger than history and common sense.
Just a clarification - I am talking about intermediate term trend and the next bigger move. This is not a problem to be bullish short term as I wrote around the FOMC bottom. I am writing about that for a long time and the difference now is that a lot of different markets are in their final 5-th wave.

Something to read:
Nouf - He is good in counting EW. Obviously he can read my thoughts too:)
John Hampson's blog - makes a good point for the bearish case... He is long term trader and uses more fundamental stuff and solar cycles.

Weekly review

Short term view - more upside with targets 1830 or 1860.
Intermediate term view - I still think that the next bigger move is a correction.

This is the last post for the year, the next one will be in the second week of January. I wish all of you Merry Christmas, Happy New Year and enjoy the holidays:)

Last week I wrote expect test of the highs or marginal new high. Given the strength, the holidays with low volume... I think the scenario with new ATH is 100% sure. Some indexes like XLF which were missing the final wave will finish it in the next week or two...

For the short term there is more upside and I see two cases, for the intermediate term I still think that we will see sharp correction.
- case one A-B-C move with target around 1830. Interesting is if you remember the EW charts target was 1829 - coincidence??? I will take my hat off to EW if SP500 top out at 1830:) That is my preferred scenario... but we will just watch the charts they will tell us what is going on.
- case two an impulse will develop with target 1860 - this target matches with the upper purple trend line(see the daily chart) and reverse H&S with neckline 1810(see the hourly chart)
If we see in the next two days another huge bar 20 points expect impulse case two 1860, if not case one 1830.

TECHNICAL PICTURE
Short term - A-B-C is shown but it could be something else... reverse H&S? Do not think to much there is more upside for the short term.

Intermediate term - I find it interesting that both measures point exactly to the upper trend lines - 1830 yellow and 1860 purple.

Long term - soon we will know if I am right or wrong. The indexes are moving sideways for 5 weeks and I think they are topping for the intermediate term. Just one final high left...

MARKET BREADTH INDICATORS
The Market Breadth Indicators - some indicators are weakening... huge bar SP500 closing ATH, 3 points bellow ATH and yet Bullish Percentage does not react to the upside,Percent of Stocks above MA50 at 66 not even close to the previous highs. It is not normal - weakness? I think this rally is soon dead. Playing with ATH and only 66% of the shares are above MA50 this is a joke.
McClellan Oscillator - reseted its mildly oversold levels.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.... reached oversold levels. I hope it will stay there for several weeks.
Bullish Percentage - barely moved up and still on sell.
Percent of Stocks above MA50 - October-November-December highs huge divergences.
Fear Indicator VIX - it was overbought and pullback was expected. Just higher low nothing more.
Advance-Decline Issues - in the middle of the range no strength, but not enough weakness.
Put/Call ratio - no more call buyers?
Percent of Stocks above MA200 - I would expect to see it at 90% not at 60% with such massive rally for more than a year.


HURST CYCLES
After the first the first strong candle from MA50 I wrote that this is the low for the 40 day cycle. Now it is confirmed. I think the 20 week cycle is the dominant and we will see straddled-troughs, with other words something like double top or H&S.

Update

From the weekend - "So my best guess is short term bottom FOMC and drifting higher through the holidays. XLF probably will finish its count, SP500 could test the highs again or make marginal new high."
I just did not expect it to happen in one day:) - SP500 made lower low today and now it is a few points from the top.

The move is too strong so new highs are sure given the holidays and the expected low volume. The chart updated. The bears were killed again, including me:) I have forecasted new high, but it is a little bit too much for one day... so it is not time to be bearish.... short term.

Update

I was expecting a low today and move higher tomorrow or Wednesday FOMC. Well the low was overnight, the futures dropped 15 points and we have short term low. I expect the move to continue at least until FOMC.
I see two scenarios - the moves continue until FOMC or Friday OPEX and alternate scenario the "Christmas rally" to extend into the next week grinding slowly higher with low volume. Expect lower high the first scenario and new marginal ATH the second one.

Given the strength today and the indicators, the alternate scenario shown in the weekly review with 40 day cycle low on Friday at day 46 looks better.
I think the 20 week cycle is the dominant and we will see straddled-troughs.

Time to be brave or stupid...

Take a look at the two charts bellow and ask yourself - is it time to be brave or stupid.
A bull will say be brave buy,buy,buy... the bears are stupid they have missed such a great opportunity. Ok that was the past, buy now and expect what? The prices to go perpendicular... at this point I prefer to be called stupid and miss "Christmas rally", another 5% what ever. I prefer to be smart and not too greedy and take my chips of the table.

I wrote about mania... well it can always get crazier:) - Zerohedge Peak "Greater Fools"
Latest Investor's Intelligence survey:
- Bull/Bear ratio at 4 - the highest value ever recorded... yes you have read it right.
- Bears 14,3% - the only time "bears" have been less than now was in 1987... that does not ended good.
I ask myself is there sellers left? It looks like everybody are at one side of the boat fully invested. Is there buyers left?

The chart speaks for it self - DJ reached the upper trend line, double MACD divergence, double RSI divergence, a lot of similarities with previous tops, peak sentiment....
Is see three possible scenarios:
- the index continues higher and the divergence are erased. For that to happen the trajectory should become even more steeper,that means perpendicular... 90 degree rise with this sentiment... good luck with that.
- the index crawls slowly sideways for months even longer until the indicators are cleared, the fundamentals to catch up with price... ok than start praying, that all this margin debt do not start unwinding.
- what history says - excess mania and greed in bull markets is being purged through very sharp 10%-20% and short living several weeks correction. That is my scenario - I will bet that human beings are the same stupid and greedy idiots.
Pick your scenario and be brave or stupid:)

Weekly review

Short term view - one final lower low and short term bottom FOMC 18.12
Intermediate term view - intermediate term top should be in and I expect another 4-6 weeks of weakness to finish the correction.

SP500 made something like double top DJ more like H&S the call for a short at 1810 was very good so this week has not disappointed us:)

Now the charts are looking a little bit confusing...
- The weekly charts are looking bad - divergences MACD/RSI, TomDemark bearish price flip momentum has turned lower, bearish candle stick formation and this week candlestick closed bellow it, the last 4-6 weeks of 18 month cycle.
- On the other side the move is still not strong enough. We still do not have serious technical damages. On the daily chart you can count the move as A-B-C, the oscillators are nearing oversold levels (short term bottom?), FOMC and holidays(low volume) are coming which favors the upside. Some indexes look weak and finished their EW counts - Russell 2000, DAX, FTSE others like SP500 not so weak and XLF for example has not finished it's count.

Usually the bigger time frame wins(weekly), but in the near term it is not a problem that the smaller one(daily) plays out.
So my best guess is short term bottom FOMC(or the previous day) and drifting higher through the holidays. XLF probably will finish its count, SP500 could test the highs again or make marginal new high.
We will just wait and see what happens. If you are short from 1810 for example just put a stop on break even or several points lower and enjoy the holidays:) If we see something interesting you can even go long.

TECHNICAL PICTURE
Short term - one final low and at least a retracement. Probable target the broken trend line around 1805. If I am wrong marginal new high around 1840.

- Triple cross(EMA10 and EMA20 crossing EMA50) - negative, short term trend is down.

Intermediate term - the same story, both scenarios.... we must be prepared and keep an eye on alternate scenarios if we are wrong.

- Trend direction EMA50/MACD - the intermediate term trend is up, but we are seeing now double MACD divergence. Watch out for a trend reversal.
- Momentum Histogram/RSI - momentum is down, short term trend is down.

Long term - the weekly chart says it looks bad, intermediate top is in.

- Trend direction EMA50/MACD - long term trend is up - the price above MA50 and MACD above zero. Watch out for the MACD divergence - something bad could happen.
- Momentum Histogram/RSI - turned lower, it looks like the intermediate term reversed to the downside.


MARKET BREADTH INDICATORS
The Market Breadth Indicators - are negative as the last week, but showed a little bit more enthusiasm to the downside:)
McClellan Oscillator - made another lower low and bouncing from slightly oversold levels.
McClellan Summation Index - sell signal moving down.
Weekly Stochastic of the Summation Index - sell signal.... reached oversold levels. I hope it will stay there for several weeks.
Bullish Percentage - sell signal... showed some signs of life.
Percent of Stocks above MA50 - in the middle of the range... we are in a correction??
Fear Indicator VXO - shot up to 16... as i said there will be explosive move to the upside. Are the traders nervous?
Advance-Decline Issues - weak and probably we are nearing short term bottom with the indicator nearing oversold levels.
Put/Call ratio - third peak in a row...
Percent of Stocks above MA200 - continue falling... Think about it for a second, we are near to the highs huge rally and 41% of the stocks are in bear territory bellow MA200 and only 59% above it.... how is this bullish???


HURST CYCLES
If wee see only a retracement the bottom was at day 41. If we see a surprise, stronger than expected move to the upside, the bottom will be Friday at day 47.

The weekly chart looks on track and we should see 4 to 6 weeks correction.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
The weekly candles look definitely bearish... and we have this week price flip - the momentum has turned lower.

Update

I think another 5 wave sequence has finished.... now watching the 38,2% and 50% Fibo retracement.

Update

Two days later we do not have continuation even with another double POMO yesterday. This confirms that the huge candle is not the start of another rally probably short covering as I have expected.
The current move since October is for me definitely not an impulse. The best what I have come up with is shown bellow on the chart.
If we see see ATH expect another 3 wave structure probably Z to 1840-1850.
If SP500 does not make another ATH the move has finished as a double zigzag W-X-Y(preferred scenario). If you have followed my advice yesterday, you can sit back and relax now:) you will not miss anything to the down side.

Update

UPDATE: the move looks corrective,the price do not want go lower, I expect something to the upside....


If you are bearish an look for an entry now it's perfect - broken trend line retested,MACD divergences on the smaller time frames, stop at 1815 above ATH only 5 points risk.....

Weekly review

Short term view - no idea...
Intermediate term view - I still think that SP500 either toped out or we will see soon an intermediate term top.

The call for a top last week was right and the forecasts throughout the week were right too... the only caveat now is that the retracement is stronger than expected, moved above 1800 and closed near the highs of the day printing huge bar. The bears were killed again and the bulls are cheering.

Positive:
- trend reversal is still not confirmed, the next 40 day cycle has begun, strong move with huge gap...
Negative:
- in fact nothing has changed - we have the same negative signals as for the last several weeks. 30 points lower has not reseted the indicators, scared the herd etc. so that we can think of the next rally.
- If EW matters after 5 wave impulse and a retracement another move lower should be expected.
- The last three weeks SP500 is not advancing the weekly histogram ticked lower and we are seeing reversal candlesticks - hanging man, dragon fly doji and the formations looks like evening star (see the last chart). That makes me think that the index is topping.

Short term - I do not know. H&S, double top,marginal new highs... everything is possible. One strong day does not mean anything, it could be the exhaustion bar which you see around tops. It was missing till now - huge gap and huge bar. They appear short before, short after or at the top(see the daily chart). How to make a difference - if there will be more upside, in the next two days we should see another huge bar, if the bulls can not master a rally in the next two days this is an exhaustion bar and part of the topping process.
Intermediate term - you know what I think - intermediate term top and for the next 5-7 weeks I am bearish. If I am wrong.... the indexes will go vertical above 1900.
How to trade - wait to see what happens. My opinion stays the same - if you see a spike higher or a move bellow 1800 take another portion of the profits.

TECHNICAL PICTURE
Short term - Head and Shoulders, double top, another rally I can not tell you.....

- Triple cross(EMA10 and EMA20 crossing EMA50) - positive,short term trend up, but be careful for a reversal and H&S

Intermediate term - it looks like topping process to me...
Around tops you will always see a strong move(exhaustion bar) to suck all the traders in kill the shorts. Till now it was missing and the bearish case looks better now.

- Trend direction EMA50/MACD - the intermediate term trend is up, but we are seeing now double MACD divergence. Watch out for a trend reversal.
- Momentum Histogram/RSI - ticked up.

Long term - we have reached the point where the price should decide to follow the pattern, as for the last 6 months, or it will negate it and go parabolic.

- Trend direction EMA50/MACD - long term trend is up - the price above MA50 and MACD above zero. Watch out for the MACD divergence.
- Momentum Histogram/RSI - ticked lower, intermediate term reversal?


MARKET BREADTH INDICATORS
The Market Breadth Indicators - no change. The indicators are negative and do not support the idea for a rally at the moment.
McClellan Oscillator - made lower low for the first time since June. Early warning for a reversal?
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - another lower high expected.
Fear Indicator VXO - spiked higher... I think it started a move higher.
Advance-Decline Issues - continue to show weakness.
Put/Call ratio - the traders are very enthusiastic again
Percent of Stocks above MA200 - continue falling.


HURST CYCLES
I think the second 40 day cycle has begun. Until now the 40 day cycle were fairly symmetrical, now I think the 80 days cycle will be symmetrical and we will see straddled troughs. We are several weeks away from 18 months cycle low and think correction has higher probability than a rally.

The same length and size as the previous 18 month cycle has been reached. From cycles point of view - there is only one direction in the next 5-7 weeks and it is down.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Nothing interesting to show. This is just a closer view of the weekly chart to see the last three weeks.

Another EW chart

Tomorrow I will post the weekly review...

XLF another proxy for SP500... again I can not see an impulse, either I have no idea of EW or I have put my bearish glasses:)
XLF chart from the 2011 bottom(the second part of this cyclical bull) - I see three wave sequences.... W-X-Y and triple zigzag for Y which should finish in the next several days.
Proportions look very good - The black waves Y=1.74xW | The red waves W=Z=3 Y=5.4=1.8x3 X=1.3/1.7 | The blue waves A=C=2.3 (C finishes ~21.8)

And the closer look of the last wave z - one final high should finish the ending diagonal for "c" of "z" of "Y". Divergence between "a" and "c" and between 3 and 5 of the ending diagonal.

Update

Ok for now the price action follows the plan... the corrective moves are tricky let's see how it will play out. The bigger picture - we had one leg lower and I think we will see second one lower before a short term bottom. Target area 1735-1745.

Signals

Short term signal: DOWN - it will turn up above 1800
Intermediate term signal: DOWN - it will turn up above 1800
Comment: I think a pullback has begun. The move looks like an impulse for now....
Double POMO today and the market is selling all day... all of a sudden it does not work???

Watch price behavior for clues:
- intermediate term top - at least two consecutive down days of strong selling breaking bellow 1775.
- bullish moves continue higher - any pullback should stay above 1775.

Levels to watch SP500:
- 1745-1740 - minor support
- 1715-1730 - important support

It looks like an impulse to me.... Which means expect more downside. Target for wave 5 if the count is right around 1787 where MA20 is on the daily chart, than rebound - should stay bellow 1810.
UPDATE - I think wave 3(or 5) has just finished with ending diagonal touching 1787...

If this plays out, it will be technical analysis in all it's beauty:)

Signals

Short term signal: UP - it will turn down bellow 1800
Intermediate term signal: UP - it will turn down bellow 1795
Comment: We did not get the answer today. The price is playing with the trend line and support 1800, but the charts are looking toppy...
Tomorrow is heavy POMO day... I do not know if we will see this final 5-th wave for a perfect pattern. Often the patterns are not perfect, or it will be too easy.
If SP500 opens tomorrow bellow 1800 I will bet, that a pullback has begun and POMO will lead only to a test of the broken wedge trend line. If is

Watch price behavior for clues:
- intermediate term top - at least two consecutive down days of strong selling breaking bellow 1775.
- bullish moves continue higher - any pullback should stay above 1775.

Levels to watch SP500:
- 1745 - minor support
- 1715-1730 - important support

Signals

Short term signal: UP - it will turn down bellow 1800
Intermediate term signal: UP - it will turn down bellow 1795
Comment: It is time to start posting the signals again. They were up till now, nothing worth mentioning, but after the targets has been reached and the divergences all over the place it is time to be cautious. Look at the hourly,daily and weekly chart from the weekly review - MACD double divergence on all time frames.... I do not know what do you think but in my opinion it is time to step aside(start taking profits).
The charts look to me like they hit some kind of a top or it will be on Tuesday which is heavy POMO day(see the hourly chart bellow).

Watch price behavior for clues:
- intermediate term top - at least two consecutive down days of strong selling breaking bellow 1775.
- bullish moves continue higher - any pullback should stay above 1775.

Levels to watch SP500:
- 1745 - minor support
- 1715-1730 - important support

The wedges are everywhere the hourly chart, the daily chart. The buyers are eager to buy as soon as possible not letting even a small pullback to play out. Too much greed..... MACD double divergences on all time frames,wedges... I will dare to say expect a top next week:)