Weekly preview

Short term view - limited upside potential, pullback expected soon.
Intermediate term view - the indexes should move higher in June.

The move higher is not a surprise, but much stronger than expected. The implication is that the 20 week cycle low is probably behind us and the markets will move higher for a few weeks. I was really angry at myself that I missed to connect the pieces of information:) it happens.

I still think that the next great buying opportunity will come later September-October with 40 week cycle low. Until than it is time for traders.
The bullish case - wave 2 is finished with a zig-zag lower and huge wave 3 higher has begun - I do not believe this. The retracement is too shallow, no fear VIX at 13, market breadth not even close to oversold levels... the wave lower has the character of wave 4. I do not see signs for an important low.
The bearish case - 08.2015/02.2016 will repeat... I do not see something common between than and now. The move lower is corrective, market breadth has bullish behavior, there is other signs too... I do not see how to spin all this as bearish.

Now what could the pattern be? I see two options:
- higher probability 20 week cycle low(length 13 weeks) behind us with finished zig-zag - in this case the indexes should move higher in June.
- lower probability sharp reversal for a second zig-zag lower and 20 week cycle low(length 17-18 weeks) in the 2-3 weeks.
I think it will be the first option because the move is too strong and fits better with 20 week cycle low.
To explain it simple if you see a corrective pullback staying above 2050 it is a buying opportunity.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - I see limited upside and the move should finish soon as an impulse around the resistance zone. Impulse means there is more to the upside. The bullish options are - the market throwing a curve ball with expanded flat green A-B-C the market making new high and testing the ATH but still in a correction. The second option when the move lower behaves like wave 4 it is wave 4 and we are seeing wave i of 5(yellow) higher to finish the move since the February low.
Bearish scenario with an impulse is if this is wave c... in this case this is the flat which I have mentioned several times but expanded flat B red for a bigger A-B-C(red) corrective structure. In this case the market should turn sharply lower and do not look back.

Intermediate term - The same on the daily chart. From trading perspective there is no much difference which pattern higher will play out. Expanded flat(green) will test the ATH or slightly overshoot it 2130-2140, wave 5 will move above the ATH something like 2180.
The indicators look positive and does not really support the bearish scenario.

Long term - the indicators look like they want to turn lower and reset. They hint that the market wants to make a turn lower for wave 2.... the chart does not look like the market has started wave 3.

MARKET BREADTH INDICATORS
The Market Breadth Indicators - does not help us at all. They could turn sharply lower to touch oversold levels and to see some fear(the bearish scenario red) or just continue crawling higher and make divergences for intermediate term top(the bullish scenario green).
McClellan Oscillator - above zero, moving higher.
McClellan Summation Index - no useful information....
Weekly Stochastic of the Summation Index - reached oversold territory. It could stay there for a few weeks or turn higher for the swing higher.
Bullish Percentage - no useful information.... technically buy signal.
Percent of Stocks above MA50 - no useful information....
Fear Indicator VIX - complacency... no divergences...
Advance-Decline Issues - no useful information....


HURST CYCLES
Day 6 of the next 40 day cycle. I assume we have 20 week cycle low behind us.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Sell setup at 5... the same story the market moves much easier to the upside than lower. Two days rally wiped out 3 weeks "sell off".

DAX - exactly as expected strong rally from the low. The DAX is much weaker and it easier to see bearish patterns, but if it synchronizes with the US indexes I expect a bullish surprise(green) making one more high to finish some ugly expanded impulse and sell off until September-October for important low.

Update

I am such an idiot... I could not connect the dots between "we have the minimum for 20 week cycle low" and "it feels more like the first leg of a corrective move". I was expecting a move higher, but this 30 points yesterday(too much strength) confirm that we have 20 week cycle low behind us and I have to adjust the intermediate term path. It is not some drastic change, but it is a stupid mistake.

Now with 20 week cycle low behind us we should see a few weeks higher. I think this will be wave B(red) and the move should be corrective. So far we have only two legs higher with the same size. If I am wrong the bulls must prove it and continue pushing higher for an impulse(green).
Resistance is around 2085 and support around 2050. Any move lower should stay above 2050 to confirm my forecast.

And on the daily chart how it should look like. I suspect dominant 40 week cycle, the second 20 week cycle running higher making M pattern and lower into the September-October period for 40 week cycle low.
The oscillators are saying there is more to the upside, RSI broke the trend line which means we have a new move not part of the decline from April.

As a reminder the article A May-November Relationship from Tom McClellan. I should read what I am posting:) Notice the dates and 21.05 was a full moon... just a coincidence.

Weekly preview

Short term view - higher next week.
Intermediate term view - the move lower does not look finished, I expect an intermediate term bottom first half of June around 2000-2010.

I was expecting to see some fear to finish the first leg lower.... no another very choppy week. Now it looks like the flat correction, which I have posted twice, is playing out. Europe looks like messy flat correction too(see below) and DJ/Russell2000 look like finished zig-zag two legs lower with the same size. The message is expect a move higher.

Technically you can say the correction is over we have the minimum as EW pattern and cycles, but it does not feel like finished correction. We have only 23,6% Fibo retracement, market breadth hanging somewhere in the middle, no fear..... it feels more like the first leg of a corrective move. So after a move higher I think we should see another leg lower.

The next long term update is the end of June, but the trades are reversing now. I warned that the USD is turning up, now I think yields made 4 year cycle low this week(see the last chart), next commodities should turn lower. So if I am right in the next 6-9 months USD/yields are higher and bonds/commodities lower.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - either a flat or zig-zag higher than the indexes should turn lower again(red). Alternate we have finished correction and the first pause will be around the previous high 2110(green). I do not see sign for such development at the moment, but who knows.
Anyway we have resistance,trend line,MA200(the circle area) and a pullback is expected. If you see a higher low it is a buy and we see what happens.

Intermediate term - the histogram and slow stochastic are showing divergences and I expect at least 4-5 days higher.

Long term - no change. The oscillators are resetting and they have more to go lower... I would say the correction is not finished.

MARKET BREADTH INDICATORS
The Market Breadth Indicators - the same like previous weeks sell signals and in the middle of their ranges, the indexes are in a correction. Only the McClellan Oscillator hit levels common for at least a short term bottom.
McClellan Oscillator - hit 67 and reversed. I think we have at least short term bottom.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - in the middle of the range.
Fear Indicator VIX - we saw small spike 17,65, but this is not enough for important low.
Advance-Decline Issues - in the middle of the range.


HURST CYCLES
Day 31 of the 40 day cycle and week 14 of the 20 week cycle. We have the minimum for an intermediate term bottom, but the pattern and the indicators are saying we should wait a few more weeks.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
One setup lower has been negated. Currently at 6 of the next setup. There is high probability that it will not be finished too. The same message so far - to the upside the market is trending we saw finish countdown/combo and to the downside the price action is weak.

Last week I have shown CAC40 today the DAX. I was expecting strong move lower some fear.... and we have messy up and down moves (the rectangle is this past week). I think the European markets are in a choppy flat correction wave B. We should see a leg higher to finish wave B and another leg lower wave C will follow.

10-year yield - EW pattern I think we have impulse higher for A correction lower for B and now another leg higher C should follow. Cycles three 18-month cycles and finished 4 year cycle. We should see 6-9 months of rising yields/USD higher/bonds lower/commodities lower.

Update

The choppy price action continues, but now we have two legs lower with the same size and the McClellan Oscillator hit 67.
This means we should see at least a few days higher to test the resistance zone. The correction does not look finished, but this is week 14(the usual time frame for 20 week cycle low) so there is an option that we will see a few weeks higher not only a few days.
The price is below MA50 and MA200 so expect pullbacks along the way.

Update

Well corrective moves often make look like a fool. Back to the flat correction... the move higher is an impulse which found resistance at MA200. Impulse means there will be more to the upside... probably brief pullback to the MA50 and another leg higher. If a rally to new ATH has already begun it will stop for a brief pause around 2100-2110 and continue higher(green). I think we are still in a correction(red) but trading is easy if you see a shallow pullback buy it and we see what happens.

Weekly preview

Short term view - bounce up for a few days than lower again.
Intermediate term view - lower in the next 2-3 weeks for intermediate term bottom watch the 2000-2010 area.

Zig-zag higher and than the price turned lower, but with a lot of whipsaws especially the European markets. The intermediate term pattern develops as expected.

The EW pattern is corrective, but not completed. Cycle at week 13 in the time window for a 20 week cycle low. Market breadth says we are in a correction, but still no final push lower to oversold levels.
What is missing? - fear. So far we saw only choppy price action no straight lower for a few days. I think we will see a bounce and than "scary" sell off to around 2000-2010 to finish the leg lower which begun in April.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - with all this whipsaws there is different options, but I think we will see another a-b-c shown on the chart. The price action develops below the MA200 and the index should be already in the second leg lower.

Intermediate term - different Fibo measurements are pointing to around 2010. This is the middle of the support area, MA200 on the daily chart and if the move overshoot lower the 38,2% Fibo retracement is at 2000. So watch 2000-2010 for a bottom.

Long term - no change. In a few months we will know which pattern will play out.

MARKET BREADTH INDICATORS
The Market Breadth Indicators - are showing that the indexes are in a correction, but the final push lower and fear is missing.
McClellan Oscillator - hitting 45 twice typical for mild corrections... a push lower to 60-65 will look great.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - in the middle of the range we need a push lower to 25.
Fear Indicator VIX - still no fear. A spike to 20-25 will be nice
Advance-Decline Issues - in the middle of the range.


HURST CYCLES
Day 26 of the 40 day cycle. I think another 1-3 weeks and we will see a 40 day and 20 week cycle low.

Week 13 of the 20 week cycle. We are entering the time window for a low.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Price flips up and down on the weekly chart. The buy setup has not been finished. Price flips up and down on the daily chart.
This means for me confirmation that we have trending move higher and corrective move lower.

This is the French CAC40 hourly chart... the rectangle is the trading week a lot of sharp reversals and whipsaws 12 swing for 5 days:)
You do not need to be an EW expert to see what is going on. It is more bearish than the US indexes with impulse lower, but the intermediate term path is exactly the same - final move lower to finish an impulse, after a finished impulse there is a move in the opposite direction(rally higher in the summer) and another move lower should follow probably until September-October.

Update

It was a sell around the circle, but the pattern has changed... this is day trading:) if you want to trade such moves.
Now again it looks like normal zig-zag.... a move with the same size points to around 2100 the next resistance level.

Update

It did not last too long to see a confirmation that it is traders time. The expected zigzag was finished only for three days touching the lower resistance line. Strong bullish candle on Tuesday followed by strong bearish candle on Wednesday. You have to dig deeper on smaller time frames trying to predict corrective moves.... not really a grateful job:) the success rate drops like a rock.

What we have - corrective move higher to resistance, move lower which looks more like impulse, but so far three legs 3=1x1,618 waiting for confirmation today. Price pattern points lower, the oscillators Histogram/RSI(5)/McClellan Oscillator look like they want to move higher.
This is closer look with the 10min chart. Based on the thoughts above - first I think the indexes will finish small impulse lower which means expect more to the downs. Given the speed even the move higher to circle should happen today or early tomorrow. Second based on the indicators it could be just another zigzag from a flat correction(red) or just continuing lower. I favor the flat correction, but we need more price action for a confirmation.

Trading - if an impulse lower is confirmed wait for a pullback around the circle area. Stop is the last high so the risk is 10-15 points and profit 30 points(red) or more.

Interesting article A May-November Relationship from Tom McClellan, The McClellan Market Report.
Historical research how the market behaves from May to November in the second presidential term during the election year.
Stunning the historical pattern shows exactly the same path which I have presented last weekend based on cycles - lower to the end of May, higher in summer June/mid July, lower around the end of September.

Weekly preview

Short term view - I expect a move higher.
Intermediate term view - I think we will see in the summer up and down moves with the next important low in September.

The market chose a third path:) it was not neither short correction for w4 nor impulse to confirm reversal. The move lower looks corrective, it has found support at MA50 on the daily chart as expected and we have a break out higher from the wedge which I have shown in the last update.

From EW perspective we still could see w5 higher, but the wave takes way too long, MACD/RSI diving too deep on the daily chart and breaking below the trend lines... the price action and the indicators do not fit for wave 4. For me this move is not part of the rally since mid February. Probably we are in wave 2, but it is too short to finish now... indicators and market breadth has not really retraced too.
So too long for w4 and too short as a retracement of the rally since mid February - I think this move is a part of a bigger corrective structure and I expect move higher with lower high and another move lower.

If I am right we are entering a period which is for active traders. We will see several swings higher and lower with the next important low 40 week cycle low in September.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - the zig-zag lower looks finished. We have break out from a wedge, MACD/RSI carved out divergences and broke above the trend lines. Now I expect zig-zag higher to the resistance zone.

Intermediate term - green is roughly the path up and down based on cycles.... It could be more bullish with higher high in summer(July) or it could be more bearish with a weak bounce in summer. We need more price action to see how the corrective pattern develops so that we can calculate the amplitude of the swings higher/lower.
Red is if I am wrong and severe bear market begins. It will just move lower... there is no signs at the moment. The current move lower is not an impulsive reversal.

Long term - no change. In the next few months we should see a confirmation if I am right or not.

MARKET BREADTH INDICATORS
The Market Breadth Indicators - look bearish, but it is not "expect crash and burn" rather normal correction. The indicators has not really retraced, most of them just turned lower or are in the middle of their ranges. I think we will see more from this correction.
McClellan Oscillator - spending time below the zero line at levels expected for a pullback.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - sell signal, but still above 70.
Percent of Stocks above MA50 - sell signal, in the middle of the range.
Fear Indicator VIX - making higher lows...
Advance-Decline Issues - turned lower after divergence and in the middle of the range.


HURST CYCLES
Day 21 of the 40 day cycle. I suspect another 2-4 weeks and we will see a 40 day and 20 week cycle low.

Week 12 of the 20 week cycle we are seeing the down phase of the cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
The weekly bar could not close below the close four days ago and the price flip has not been confirmed. The move lower so far is not strong enough.
On the daily chart at day 7 of a buy setup. If the break out of the wedge is tested the setup could be finished on Tuesday.

Update

It takes too long the move lower and MACD/RSI broke below the trend lines so the move since mid February is over and correction is running.
The first leg looks corrective and should finish soon on Friday or early Monday at support MA50/23,6% Fibo. It is a little bit too early for 40 day cycle low... not impossible but I think we will see one more leg lower around the end of May for 40 day/20 week cycle low before more significant move higher.

Short term it looks like a-b-c with "c" as a diagonal with two more waves up and down to finish this leg... on Friday?

USD

The pattern looked like a triangle for more than a year, but after the plunge in USD/JPY it looks now like finished corrective zig-zag W-X-Y.
Yesterday the measurements were met and we have reversal candle. If my analysis is right we should see the final wave higher for the USD dollar in the next 9-12 months and in the mean time commodities should correct after the rally from early this year.

USD/JPY cycle analysis bottoms instead of tops - basically the same 8-9 year cycle. The next major low is 2020-2021... do you remember my post "Secular trends" and the period 2020-2022? Add USD/JPY to stocks,yields,precious metals... just another coincidence:)
This should be a 4 year cycle low... worst case one more test of the low in 1-2 months. I expect one more leg higher, "M pattern" and the next 4 year cycle and the 8 year cycle should make a top and USD/JPY heading lower until 2020-2021.