Intermediate term view - after a top in January I expect a bigger correction in February.
We had a small pullback and 40 day cycle low as expected. Now waiting for the current move higher to be finished in January and the top of the 20 week cycle. The pattern from February 2016 is not clear, it is ambiguous. Most indexes favor bullish EW pattern, but some like NYSE and Nasdaq look more bearish. All other signs are bearish and suggest something bigger to the downside - divergences on the weekly chart, market breadth indicators with double divergences, 20 week cycle top, TomDemark 9-13-9 finished on the weekly chart. So think and act as a trader, which means follow the market step by step until we have more clear pattern. Now waiting to see first the move higher in January then the move lower in February before trying to guess the pattern.
TECHNICAL PICTURE and ELLIOTT WAVES
Short term - the trend line was broken and we had the pullback lower. We saw already small impulse higher with higher high. This is enough to have a finished pattern, but it is more likely that the move continue higher. Watch the red line - if the price moves below it, with very high probability we have reversal lower.
Intermediate term - for the SP500 you can make the case for possible A-B-C(red), but if you look at other indexes bullish impulse(green) looks better (see the last chart).
Long term - most indexes favor impulse as a pattern... if this is III or V is another story.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - short term no reversal signs, but double divergences on some indicators suggesting that something bearish is around the corner.
McClellan Oscillator - making lower high.
McClellan Summation Index - buy signal.
Weekly Stochastic of the Summation Index - buy signal, in overbought territory for a while.
Bullish Percentage - buy signal.
Percent of Stocks above MA50 - second high still buy signal above 75.
Fear Indicator VIX - very tight BB again and low values. Volatility will rise soon.
Advance-Decline Issues - one more push to overbought levels will look better.
HURST CYCLES
It looks like we have finished 40 day cycle at day 38 and the next one is running at day 4.
Week 9 of the 20 week cycle... in the next 1-2 weeks we should see the top and the cycle should turn lower.
Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
We have finished 9-13-9 on the weekly chart. Waiting for a price flip and reversal.
DJI looks much better as an impulse. Other indexes like RUT, DAX, DJT show similar pattern.
Thanks for the update Krasi. Just to clarify, if SPX crosses the red line (2250), would the red intermediate term scenario become more likely in your view? or would you expect a move closer to 2235 (green line)? or both scenarios would still be equally plausible? Thank you in advance!
ReplyDeleteBelow the red line just the short term pattern will change. For the big picture important is if a move lower will move below MA50 and overlap with the previous high around 2190.
DeleteThanks for your update. Suppose short term top will be in January. How about the effect of Trump inauguration? Is it possible that Jan 20 would be the near term Top? Or someday earlier like the end of this week? Thanks. Now the indicators look mixed...
ReplyDeleteAnd how about trump effect on Gold/Gold miners? To me USDJPY and DXY look quite weak. Is it possible that the next correction in stock would trigger the gold up? Now the gold miner has been jumped up a lot...
DeleteIn general, does stock down mean gold up? It seems not exactly the same pace? Thanks!
At the moment the price action looks like sideway corrective move before the inauguration,the indicators are resetting without the price moving lower.
DeleteThis means to expect the top around the inauguration or after it. Top this week looks unlikely and we will see what happens the end of next week.
I do not think Trump has effect on Gold. USD does not look weak it is correcting wave 4 I do not see reversal. USD making final high and Gold higher low will not be a surprise even it is more probable.
There is correlation stocks<->gold only if you watch the secular(long term) trends.
Money moves from one market to another. Usually if PM are in a secular bull market stocks are in secular bear market and the opposite, but this does not mean stocks and gold can not move in the same direction for a while.
Look at this page http://pricedingold.com/sp-500/ - SP500 priced in gold. It shows you clear when you should be invested in gold and when in stocks, when PM and when stocks are in secular bear/bull market. If you are long term investor and move your money following this chart (every 10 years) you will beat most of the hedgefonds:)
What about 2009-2011 both stocks and gold moved higher? Which brings you more value for your invested money? Sp500 moved 100% higher Gold 170% - PM with bigger gains so you stay invested in PM and switch to stocks in 2011.
Some cycle guys even count 2011 as a major cycle low not 2009.