Update

Ok as I wrote after the low - expect at least two weeks higher and the sentiment should turn bullish again. and that is what we saw...
The alternate scenario played out with higher high.... that is why I told you to go long around the low.

Now I think we should not expect huge rally this is final wave 5 before a bigger correction. Short term I think we are in wave 3 of this final wave and one push above 2000 is left.
Cycles - at week 10 of 20 week cycle(average 14 weeks) and week 29 of the 40 week cycle(average 33 weeks) so it is time for the 4-6 weeks down part of the bigger cycles.

It is time to be cautious, chasing 5 of 5 of 5 could be dangerous. At the moment move bellow 1965 and this wave higher is over.

Update

I will be offline till 8th September... I will post sometimes if I find time and Internet:)

Current thoughts:
- short term the SP500 is testing MA50 from bellow with MACD divergence on the hourly chart. It does not look good... tighten the stops if you are long.

- intermediate term - open a daily chart and look at the previous bottoms and you will see always 2-3 strong green bars in a row from the bottom. This bounce is weaker, the dip buyers are missing....
So far the market is following rather the preferred scenario for a corrective move than for a new ATH.
If the market will move higher it should prove it. It is time to see a second strong bar above MA50. We had already 2-3 days sideway action.
Till then the plan is the same - this is a corrective move no new ATH. Ideally we should see a sharp drop today/tomorrow with higher low and another move higher next week before the sell off resumes.

Visually how the moves bullish and bearish should look like.

Update

SP500 is moving as expected - a little bit higher and a dip lower.
Yesterday the shorts were squeezed and in the afternoon the dip lower has begun..... now the reaction lower looks like it should finish soon.

I do not know if the count is right, but it is more important that the move higher looks like an impulse and the move lower as a correction.

Weekly review

Short term view - I expect a dip soon and more upside after that.
Intermediate term view - Probably 2-3 weeks higher.

It lasted a little bit longer with choppy final wave but we have the short term bottom. I hope you did no fall into the bear trap when the futures plunged on Friday.
EW - impulse lower finished, Cycles - bottom at day 39 for the 40 day cycle, Market breadth indicators - pointing to a bottom, TomDemark buy Setup finished, Technicals - DJ hit MA200 SP500 support and trend line with MACD divergence on the hourly chart. Short said I do not see a reason why that should not be a short term bottom and the candle formation from Friday confirms that the bottom is in - strong green candle closing above the highs for the previous two days.

We saw some fear and I think that before another move lower, the sentiment needs to turn bullish again. That means time, the traders should forget the pain. The next 40 day cycle has begun and I am thinking probably 2-3 weeks higher....
SP500 is the strongest index of all that is why I will follow the two options and read the signs:
- Lower high (preferred) - watch for signs like this - moving higher but with sudden drops for a day or two, the slope of the rise is not so steep, sentiment turning bullish after 2-3 weeks rise but the price is still bellow or around the 1965-1970 area, a week starts strong and than fades (missing strong bullish candle on the weekly chart).
- Higher high - signs moving rapidly higher and for 2-3 weeks at least near the previous highs 1985-1991. If I am wrong and this is what is going on, like the last time just say thank you mister market for the bigger gains:)

TECHNICAL PICTURE
Short term - I think we should see a dip soon to around 1920 and that should be another opportunity for a long entry.

Intermediate term - support and trend line touched and it is time for a move higher. The plan has not changed for now. Later we will adjust it if necessary.

Long term - no change bounce from MA50 as expected.

MARKET BREADTH INDICATORS
The Market Breadth Indicators - oversold levels reached. I think it is time for a move higher.
McClellan Oscillator - oversold level reached and divergence warned us to expect a bottom.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - oversold level, swing higher should begin.
Bullish Percentage - sell signal but sill above 70.
Percent of Stocks above MA50 - hit the levels for a correction 25. Time for a bounce.
Fear Indicator VIX - spiked higher outside the BB, it is time to cool off.
Advancing Issues - almost touched oversold levels


HURST CYCLES
Bottom at day 39 for the 40 day cycle at MA200 veeeeery nice:))))
The bottom is lower than the previous 40 and 80 day cycle low and we should expect lower high. It is not a problem to see now 2-3 weeks higher (10-15 days). The 40 day cycle will be still right translated(bearish) with 25-30 days to the downside.

The 40 week cycle has toped out. I expect 4 to 8 weeks before we see the bottom for the cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Buy setup finished....

Update

Very weak move higher yesterday which was suspicious and we have lower low today. Wave 5 red has changed and I think it is an ending diagonal.
We still have MACD divergences on 10min and hourly charts, so I still think that we will see a bottom.

The bigger picture

I wrote that I do not have a count for the long run. I am posting links to two other guys which are summing up the two scenarios for the long term and short term:
- Long term wave 3 from 2011 is over and now we are in wave 4 which will lead to significant drop lower. Short term the top is in and we should expect a 3 leg corrective bounce after a short term bottom.
- Long term wave C from 2009 is finishing and short term we have expanded flat and we should see another higher high before a big correction begins.

I will just follow the market - long now and see how the move higher looks like corrective or impulse than we will know which short term scenario.
Than we will follow the market lower and again when we see the move we will decide which scenario - wave 4 or "THE TOP" is in.

Update

Looking at the last two hourly candles I think SP500 tries to bottom out. We have lower low with MACD divergence at the hourly chart.... as expected. There is half an hour but I am long now...

Update - Probably a little bit earlier but the bottom should not be far away...

Update

It is taking too long so I think we are already in wave 4 red. I am sure the short term traders will trade the last move, but it is important for swing traders to spot the bottom of the move too. I think we will see at least 50% retracement around 1950... I will not be surprised to see even 1965. So I think swing traders should take profits and open longs... plus I can be wrong and the indexes could make one final high:) who knows.

Weekly review

Short term view - down and up working on waves 4 and 5 to finish the first leg lower.
Intermediate term view - I think at least standard correction 8%-10% has started.

Well the last two weeks I was warning you that a top is coming. Targets were 1900-1925 and here we are. I was wrong this is not just a pullback it will be at least standard correction 8%-10%. As I wrote last week if this occurs just say thank you mister market and adjust the charts, that is what I will do.

Lets start - important top or "THE TOP"? I do not know, there is enough arguments for both cases. In hindsights the answer will look easy, but now if you ask me it is pure guessing. My thoughts - if you look at the weekly and monthly charts the price is way too far from important moving averages and the price will snap back to the MAs and bounce. When we see the bounce we will know what is happening and we will have a chance to position for the long run if this is "THE TOP".
Why not a bottom and pullback is over? - because we have strong impulse lower, too many technical damages, huge weekly bar which is the beginning of a move and not the end(this is not an exhaustion bar there is no previous sell off so huge bar has just ignite the selling). SP500 one bar wiped out 8 weeks gains... make your conclusion.
How much lower?- I think program minimum is correction which points to the 1800-1815 area(see the second charts), lower targets if we see something deeper are 1750 and 1650 (see the last chart).


Lets look through different angles:
- Technical analysis - Monthly momentum points lower with divergences, Weekly MACD trend line broken divergence and the histogram moved bellow zero, Daily the same story. I think something bigger has just begun and we will see a snap back to long term moving averages. Short term nearing oversold levels and a bounce is expected soon.
- EW - the move is of a bigger degree and to label it right you must go back all the way to 2011... there is a room for a lot of interpretations and I am not so good with EW:) so I do not have a count. There is no a lot of good EW guys out there... the two which I follow are expecting wave 4 for the move since 2011 and 38,2% Fibo points to around 1650. I do not have an opinion and I will just follow the market. For the short term I think we have an impulse with extended wave 3. The measurement and internal waves look very good so no reason to doubt at the moment.
- Cycles - the 40 day cycle should bottom soon but it made lower low which means we should see a lower high. I think the 40 week cycle has topped out. The average length is 31-36 weeks currently we are at week 26 so we have 5-10 weeks before a bottom. Short term we should see a bounce soon, but more to come to the downside. Bottom somewhere between mid September to mid October... it will be adjusted with time.
- Market breadth - I do not see a clue for the long term. For the short term we are near or at oversold levels and bounce is expected next week.
- TomDemark - as I wrote the daily chart was telling us to expect something to the downside and there we have it. Now the monthly chart... finished combo and countdown at 12 - enough reason to worry. The previous occasion was 2011 and you know what happened.

My conclusion - next week the indexes will start working on a bottom than we should see a rebound, but I do not think the sell off is over.

TECHNICAL PICTURE
Short term - extended impulses are not easy to follow... how do you measure fear? But for now it looks good so we will track the 4's 5's and try to spot short term bottom. When you can count 9 distinct waves then the extended impulse will be over:)

Intermediate term - I see minimum A-B-C to around 1800 later we will adjust the target if necessary. Around 1885-1900 we have support and the trend line so I expect a bounce from this area. If I am right we should see a bounce higher and it should be weak. If I am wrong expect rocket launch.
See when the histogram reaches extremes... it is a sign of a fear. Notice that the bottom does not occur when there is fear it comes later with lower low. That is simple psycholgy and the indicator is consistent with what I expect another lower low.

Long term - I was repeating for months that the divergences will play out some day and it will look nasty. This day has come. Almost 10 weeks wiped out and negative for the year. Now we watch how deep the move will be. I suspect bounce from MA50 and lower to support and trend line around 15500.

MARKET BREADTH INDICATORS
The Market Breadth Indicators - near oversold levels.
McClellan Oscillator - oversold level reached and outside from BB - bounce expected.
McClellan Summation Index - sell signal
Weekly Stochastic of the Summation Index - oversold... bounce for 2-3 weeks?
Bullish Percentage - sell signal
Percent of Stocks above MA50 - near to the lower range 25. One more push lower and probably we will have short term bottom.
Fear Indicator VIX - went crazy.... what do you expect when it was 10 and no fear at all.
Advance-Decline Issues - nearing oversold level one more push lower to finish the move and a short term bottom.
Percent of Stocks above MA200 - how strong is the market when after a few percent sell off only 59% of shares are above 200MA?


HURST CYCLES
Day 35 near to a 40 day cycle low... consistent with technical analysis and EW that we see a short term bottom. The cycle made lower low as the previous one and we should expect now lower high.

The 40 week cycle has toped out. I think we have between 5 and 10 weeks before the bottom for the cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
At day 5 of a buy setup... high probability that it will be finished unless we see the prices close above the huge bar.

Monthly chart more interesting than the weekly - with finished combo and countdown at 12 I think we will see a meaningful correction like in 2011

Update

Updated chart of the extended impulse. I suppose the day traders will close their positions before the weekend and on Monday we should see the bottom for wave 3(red)