Update

Back to work:) I will need some time to update the charts. At first glance I do not see something new or surprises. SP500 hit 2020 for a top at day 17 exactly like in 2010 and 2011(see previous post). If the indexes continue to follow similar path like 2010/2011 we should see in the next 2-3 weeks the moves shown on the chart - higher for a few days and than lower again.

Update

The next weekly analysis will be around the end of September. I will be traveling in the next two weeks.


I had bullish bias after the sell off because I am comparing the price action/technical indicators/market breadth with previous corrections of this kind and I would say so far the history repeats itself. If it continues to "rhyme"(it is never exactly the same) we should see one more leg higher to finish a zigzag. In 2010 and 2011 after the sell off a zigzag higher has followed which lasted 17/18 days. The pattern so far looks to me like a leg higher consolidation(triangle) and another leg higher should follow. A new 40 day cycle at day 12 is running if we see another 3-5 higher days and the move will look similar to the previous corrections. Next week is FOMC 17.09 with important decision so again if history repeats the current move should top out around FOMC. The move higher is corrective, I do not expect V-shape recovery so after a top the bottom will be tested probably mid October.

The whole move looks to me like a zig zag and the current sideway pattern should be a triangle. Below 1910 is bad and will mean that a bigger wave lower has begun - expect lower low.

DAX - the pattern is not so clear, but if you look at EUROSTOXX50 and CAC40 it looks better. First the pattern is more clear it looks like expanding triangle and second this move lower from the last top is three waves with two legs lower with the same size. That means the probability is higher that this is not wave 1 from a impulse lower rather it is part of a zigzag to finish the triangle.
I suppose the DAX should have the same pattern and this is expanding triangle. Yesterday was "a" , today small triangle "b" and tomorrow we should see "c" lower to finish the triangle.

Weekly preview

Short term view - I do not know, wait to see the opening next week.
Intermediate term view - volatile September and important low in October.

The week was lower as expected now waiting to see what happens - lower low or higher low before the next move higher.
Such moves have similar dynamics scary sell off -> bounce 2-3 days -> test of the low(higher/lower low) -> rally 5-10 days -> another test of the low(higher/lower low) before important low. This two tests of the low with different combinations higher/lower low makes them look different.
At the moment the indexes should be working on the first test of the low after 2-3 days rally.
I think we will see a higher low, but I will lie to you if I say I am convinced. It is time for short term trading anyway so I would say just wait to see what happens with the opening next week.

I think the most important at the moment is the USD which will give the direction not only for the stocks. For example the DAX has very high correlation with EUR/USD for a long time and PM moves depend on USD too.
My forecast from the last months is working great so far... if it continue working we should see several more days higher which translates into indexes higher to finish a-b-c, PM lower to finish their moves lower. Than we have the FED rates decision...
- rates unchanged -> USD lower -> stocks lower into October/PM higher no surprise.
- raising rates -> USD higher EW/Cycles enough moves/time to count the correction finished -> stocks higher with higher low in October, PM lower.
The first scenario looks more probable at the moment...


TECHNICAL PICTURE
Short term - the scenarios which I see - triangle(white), a-b-c lower and one more leg higher(yellow) and the bearish scenario with lower low(red).

Intermediate term - test of the low and another move higher before important low in October.

Long term - I have circled moves lower which I think are similar to he current one. If history repeats we should see up and down for weeks and intermediate term bottom in October followed by the second leg of the correction.

MARKET BREADTH INDICATORS
The Market Breadth Indicators - moved higher from the oversold levels, but it is way too early for a buy signal.
McClellan Oscillator - moved above zero after very oversold levels.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - bounced higher from very oversold levels.
Fear Indicator VIX - moving lower but still at elevated levels.
Advance-Decline Issues - back to zero after oversold levels.


HURST CYCLES
The Hurst cycles guy has an update... the same what I am talking about for a few weeks. There is several different scenarios so as I said just follow the short term cycles until the picture is clear.

Day 9 of the current 40 day cycle... another week higher to finish a-b-c will look great:)

We have to wait until the test of the low in October to see if it is higher or lower low before we can label the cycles.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Another price flip which is not a surprise and setup at 4.

The DAX has extremely high correlation with EUR/USD when EUR moves higher it moves lower and the opposite, so watch closely the EUR/USD charts.
At the moment I see a range, broken trend line and a test of the support level and the broken trend line. Instead of trying to guess the direction wait to see what happens:
- bearish (red) - gap below support or move higher failing to reach the upper range boundary followed by move below support.
- bullish (green) - move to the upper range boundary weak move lower probably to the middle of the range followed by break out higher.
Everybody counting the next plunge lower wave 5.... I am not convinced, I think it is the bullish scenario... just watch the signs above.

Gold and Silver charts does not look convincing for a move higher at the moment. I think there is more to the downside before a low. The gold is bullish as long as it stay above support 1100 around there c=a too. If it moves below 1100 it will not look very good.

GDXJ the same story the moves higher does not look convincing. From the top we have an impulse lower and corrective moves higher... the more bullish scenario for the short term is shown on the chart, there is more bearish too.... at the moment is only for short term trades.

Update

So far the forecast for an a-b-c higher looks on track, but the bulls need two small waves to finish an impulse. The alternate option is triangle....

The same story for the DAX - the move looks impulsive, but we need one small 4-5 to confirm it. The current high is just 1 point below the previous one so theoretically we still could have i-ii from wave 5 lower. At the moment it does not look realistic, but it will be nice to have confirmation and not just reversal from MA200.