Weekly preview

Short term view - a high next week and turning lower.
Intermediate term view - there is high probability this high to be the top for wave 3 from Feb.2016 low.

The indexes are higher this week, which is not a surprise - finished pattern was missing. Now we have enough waves and all indexes are showing possible finished pattern(right on schedule the end of January).
It is not only the stock indexes which all are in sync now, If you remember in the last "Long term update" I said all asset classes are pointing to intermediate term trend change - I think the time has come. The USD took the short cut and just plunged lower for wave 5, the decline is either finished or we have small waves iv and v of 5. Bonds - TLT looks like finished triangle and reversal. Crude Oil has finished pattern and should reverse. Short volatility is not working despite the blow off.
Short said I think we have several extremely overcrowded trades(short USD,short volatility,long Oil,long stocks) which are about to reverse. For stocks the monthly bar looks like exhaustion candle similar to March 2000 this is not the beginning of a trend it is the end.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - I have shown short term charts in the last update - the same chart updated. Higher before FOMC then lower. Way too many shallow pullbacks in 2017 so you can't be sure where to start and end a wave. We have to wait and see the wave lower before we are sure that we have a top.

Intermediate term - expecting the top of wave 3 from the Feb.2016 low then 23,6% Fibo retracement.

Long term - switched to logaritmic scale. One more correction and a rally before turning bearish.

MARKET BREADTH INDICATORS
Market Breadth Indicators - the same like last week... strange blow off move Friday in the moon again and market breadth do not react at all. Starting to turn lower diverging with the stocks rally, but no strong sell signal. VIX and A/D spelling big trouble ahead.
McClellan Oscillator - below zero with multiple divergences.
McClellan Summation Index - something like double top, just crossed the signal line expecting continuation next week.
Weekly Stochastic of the Summation Index - turned lower and sell signal.
Bullish Percentage - something like double top, but no sell signal so far.
Percent of Stocks above MA50 - something like double top, but still above 75.
Fear Indicator VIX - hovering around 11-12 for weeks instead of around 8-9... big warning sign for me.
Advance-Decline Issues - very weak with double divergence, only a few stocks are participating in this rally.


HURST CYCLES
Day 18 of the 40 day cycle. It looks too stretched to me so I split it into two 40 day cycles. Usually for a bottom you have 2 or more closes below MA10, but we have so many crazy statistics with this rally so only one close below MA10 for 40 day cycle low is the least problem:)

Week 10 of the 20 week cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Week 12 for the countdown. One more higher high next week and it will be finished. This fits very good with the EW pattern.

Update

The chart below is for the next 2-3 weeks and for the next 2 days one final high today or tomorrow will look good to finish an impulse from the last low. As I wrote this 4 yellow is questionable at the moment we have to see the decline first to be sure. Watch for RSI and price breaking below the trend lines for short term reversal.

Currently I see the pattern as shown on the chart. It depends on where you start to count green or red. There is enough small waves to count finished pattern. I think it is more likely to see in the next 2 weeks one correction and one move higher than plunge and crash.... just I do not know higher high or lower low. If you want to be a prudent trader it does not matter you have to wait for confirmation anyway.

Weekly preview

Short term view - not very clear, I do not think we saw the top.
Intermediate term view - topping in January and lower in February.

I do not see a clear short term pattern. I can not say if we saw small wave 4 and wave 5 is running or not. I think one more high will look better.
Anyway we have RSI showing a lot of strength and you do not try to short the blow off move, you try to short higher high with divergences or confirmation impulse lower and lower high.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - I do not see a top. The pattern will look better with wave 4 and higher high with divergences on the daily chart. If you look at the futures you will see clear zig-zag higher so I do not know if we have a flat for wave 4 or some ED is running.

Intermediate term - this chart shows the same path like the two charts from the previous post, but a deeper correction. We have a vertical move and what comes up vertical comes the same way down. So I will not be surprised to see sudden sell off similar to Feb.2007. This will purge the greed from the market, we will see 6%-8% standard correction, the "missing" wave IV with 0,236 Fibo retracement(after extended third wave more common than 38%), we will have mean reversion to the trend line and MA200.
To sum up such price action will fit perfectly from technical and "emotional"(fear/greed) perspective.... interesting scenario.

Long term - one more correction and a rally before turning bearish.

MARKET BREADTH INDICATORS
Market Breadth Indicators - half of them turned lower close to a sell signal and some like VIX and A/D looking awful. We had a vertical move higher and VIX is two weeks in a row higher.... options traders are expecting the volatility to rise.
McClellan Oscillator - below zero.
McClellan Summation Index - turned lower, waiting for continuation.
Weekly Stochastic of the Summation Index - turned lower waiting for continuation.
Bullish Percentage - turned lower waiting for a sell signal.
Percent of Stocks above MA50 - turned lower, but still above 75.
Fear Indicator VIX - higher for two weeks despite the blow off. I suspect higher low with the final high.
Advance-Decline Issues - divergence and heading lower, obviously the blow off was caused only by a few shares.


HURST CYCLES
Day 43 of the 40 day cycle. The next short term low should be the low of this daily cycle.

Week 9 of the 20 week cycle. I count shorter cycles, but other Hurst guys are counting 18 month peek now and expected 40 week cycle instead of 20 week low. This should cause deeper retracement and not just 3% like all pullbacks in 2017.

Weekly preview

Short term view - lower next week.
Intermediate term view - topping in January and lower in February

In the last two posts I have shown that something more bullish is going on - the counts are changed accordingly. I see five waves for the week and five waves from the low in the end December with divergences on the hourly chart. So I expect something lower next week, but I think this will be a correction with another higher high with divergences on the daily chart. This top late January should be the top of the 20 week cycle and bigger correction for a few weeks should follow in February. Worst case this is the intermediate term top with a deep retracement, but I do not expect sudden plunge before the end of January(FOMC 31.01).

Last week market breadth indicators were positive, but this week Bullish Percentage and Percent of Stocks above MA50 turned lower, VIX is higher since last week, A/D issues with more divergences. Of course this is early warning and there is no sell signal, but the last positive sign is turning negative. Maybe we will see a divergences developing in the next 2-3 weeks.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - now I think the count should be started from the November low(see the previous post). In this case we should see one more correction and a high for an intermediate term top.

Intermediate term - this is the count from the previous post. Alternate this is the top of wave III with extended fifth wave. Interesting is both follow the same path until the 18 month cycle low in the summer. This is good for trading:) just follow the market and in summer the market will show it's cards.
The RSI erased the divergence and shows strength so the probability is higher that this is a third wave with 4 and 5 to follow before an intermediate term top (yellow 3 late January).
The next important lows are late Feb/March and late June/July 18 month cycle low.

This is the alternate scenario with the top of wave III. Put aside EW what we have is weekly RSI close to 90 which is crazy, price extremely stretch far from MA200 daily(MA50 weekly) so in the first half of 2018 we should see reverse to the mean - the price will drop lower to the MAs.

Long term - one more correction and a rally before turning very bearish. I am not sure if the indexes are heading higher for the final top or just the third wave. The wave into the June/July low will invalidate one of the both scenarios.

MARKET BREADTH INDICATORS
Market Breadth Indicators - now most indicators are not following the rally. Some toping is needed no sell signals so far.
McClellan Oscillator - above zero and more divergences.
McClellan Summation Index - buy signal, but clear intermediate term divergence.
Weekly Stochastic of the Summation Index - buy signal, in overbought territory.
Bullish Percentage - turned lower, but still buy signal.
Percent of Stocks above MA50 - turned lower, but still buy signal.
Fear Indicator VIX - is not following the indexes with lower lows, 6 green candles in the last 7 trading sessions.
Advance-Decline Issues - intermediate term and short term divergence now.


HURST CYCLES
Day 39 of the 40 day cycle. A pullback next week should be the low of this daily cycle.

Week 8 of the 20 week cycle, in the middle of the cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
If we see the final high around FOMC 31.01 we will have finished countdown on the weekly too.

EW pattern some thoughts

I have problems with the daily EW pattern for a long time, it is obvious that is some kind of a third wave but that is all. Looking at other guys which are better than me... their counts are not convincing either. We have very shallow pullbacks for a long time(since Nov.2016) which makes difficult to find the pattern and opens the door for a lot of speculation when you try to use EW.
Different indexes have different looking pattern and I have played a little bit with the charts comparing them and here is what has come out.


DJT looks different compared to SPX / DJI, but I think it's pattern looks easy to count without a lot of contradictions.
DJTA weekly.... I can not see what could be wrong with this count. Btw XLF has similar pattern with missing 4 and 5 of V.

Than we have NYSE. It is very similar to SPX / DJI with one important difference the Oct-Nov.2017 correction which diverge from the major indexes barely noticeable on their charts, but seems to be important. This drives me nuts for a long time:)
Looking at the chart we have wave up Aug-Oct.2017(1 yellow) correction(2 yellow) and acceleration most likely third wave(3 yellow). Now how to fit this in the bigger picture?. We have weak wave April-Aug.2017(see the angle of ascend) probably a fifth wave(5/III) where does this fifth wave fits if you start to count from 2016 low? It fist like the top of wave III. So the move up from the Aug.2017 low should be 1-2-3 from wave V.
And you end up with the same count like DJTA. If you look at the RSI and draw trend lines you will see that it follows every wave even the internal waves without breaking the trend lines so the start and end of the waves on the chart are right.

SPX / DJI and NYSE have very similar charts. If you compare them there is hardly any difference(except Nov.2017 which could be very important clue) and I think they all have the same EW count. So applying it to SPX it looks like this on the chart below.
We will know soon if this is right or wrong, but I think this count is better than any other I have seen. Cycles are ok with it.... what could go wrong - this is the top of wave III and not V. We will know this when we see the 18 month cycle low in the summer(expected in late June or July at the moment).

Update

UPDATE: I see five waves for the week and five waves from the low in the end December with divergences on the hourly chart, so something lower is expected. I can not say if this is the top or another pullback wave 4, but I do not think the indexes will reverse and plunge before the end of the month. If it is the top we will see an impulse lower and deep retracement, if not another pullback and higher high with divergences on the daily chart.



I was playing with the charts searching for a way to extend the impulse higher... it looks a little bit crazy with nested 1-2 i-ii (i)-(ii), but the bull is strong enough it can handle 50 points higher:)
After a pullback if we see another higher high I have to switch to this count. The Fibo extensions look very good so after all may be itis not so crazy.

Weekly preview

Short term view - topping next week and waiting for reversal pattern.
Intermediate term view - near to the top of wave 3 from Feb.2016.

The sideway pattern resolved higher which is not a big surprises because one more rally and reversal pattern was missing. Now the pattern looks like finished 5 waves on multiple degrees. My count is the top of wave 3 from Feb.2016 with extended fifth wave(see long term update). In this case wave 5(414 points) should have the same size like wave 1 to 3(409 points). This was met this week. So either we see a topping next week and first signs of reversal.... or I do not know what pattern we have:)
Europe looks like almost finished huge expanded flat for wave B and should turn lower too. TomDemark finished sequential on daily/weekly/monthly all time frames aligned. Weekly RSI on crazy 85+, daily RSI overbought again makes a third peak. On the positive side market breadth looks strong. Curious how it will play out - I think we will see a topping for 2-3 weeks and a few false starts, but lower eventually.


TECHNICAL PICTURE and ELLIOTT WAVES
Short term - in the last weekly post the last wave 5 was missing - this week we saw it.... I do not know how to extend the pattern with more impulses higher.

Intermediate term - in the final stage of wave 3. Overshooting the upper trend line and RSI double divergence does not look very bullish. Now waiting to see what happens.

Long term - one more correction and a rally before turning very bearish. The next wave lower will show us if the move from the Feb.2016 is over or not. I think it is not.

MARKET BREADTH INDICATORS
Market Breadth Indicators - some are showing strength other like McClellan indicators are weak. No reversal signal so far. I suppose topping and initial move lower with very deep retracement.
McClellan Oscillator - above zero , but no strength and double divergence.
McClellan Summation Index - buy signal, but is not following the price with strong move up.
Weekly Stochastic of the Summation Index - buy signal, in overbought territory .
Bullish Percentage - buy signal, very strong.
Percent of Stocks above MA50 - havering around 75 and yesterday some strength.
Advance-Decline Issues - weak making a lower high.
Fear Indicator VIX - notice how it reaches a low and stays there for 3 months followed by a spike higher. We are at the next lower low valley lasting 3 months already. I think the next spike higher is around the corner and it will make higher high breaking out of the wedge.

HURST CYCLES
Day 34 of the 40 day cycle, a little bit extended.

Week 7 of the 20 week cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Finished countdown/combo on the daily chart. Now all time frames are aligned with finished patterns daily/weekly/monthly. In the next few weeks we will see how important is this signal.

Update

It starts looking a little bit dangerous on the long side. Too many indexes with finished patterns or close to finishing them. Some should make one more pullback and a high next week like EEM and probably XBI(it will be great if RUT makes one more high too), but too much risk and tiny profit for my taste.

Long term - update

Happy New Year!!!!

I hope you had pleasant holidays and recharged the batteries. I wish you successful year and great trades in 2018:)

From the last update the main ideas were - stocks are in a bull market higher, corrective move up for Bonds, corrective move lower around the end of the year for PM/gold miners, finished wave B for Crude Oil, USD waves 4 and 5 lower missing from 16 year cycle high.
Stocks the pullbacks were more shallow than expected, USD it takes longer to play out, Crude oil with a low earlier than expected.... but overall the ideas are playing out.

The current view for the next 6 months:
- Stocks - correction wave 4 and higher. There is a scenario that we are close to a major top, but even in this case I expect something like double top.
- Bonds - I expect the corrective move higher to continue.
- USD - should finish waves 4/5 and we should see the bottom of an impulse lower from major top, then a move higher for a few months is expected.
- Precious metals/miners - should move higher for a few months, but I do not think this is a major bottom.
- Crude Oil - wave C higher running.... move lower expected and there is high probability that Crude oil is finishing a zig-zag from the Feb.2016 low.


- STOCKS
I think from the low in 2016 we have 1-2 i-ii count plus fifth wave extension v of 3. This is my EW weak spot:) the result is I have predicted the tops(March/August/November), but I did not know what kind of correction to expect and how high the index will move. I think I know the answer now - Fibo measurements projecting iii using i (1,618 Fibo) and 3 using 1 (2,618 Fibo).

So the bull market is not over. We should see soon the top of wave 3, then wave 4, followed by wave 5, first decline and test of the top.... overall I think 2018 will be a sideway year. Cycles are pointing to important low late Q2 early Q3 and in 2018 the 4 year cycle should start turning lower, this should cause a topping process. I can not project exactly the path, but it should be something similar to the shown on the chart below several up and down moves.

- BONDS
My view is that the mega bond bull market is over, we saw the first impulse lower and now corrective sideway move is running.
In the last 6 months we saw corrective move as expected. I think it will continue for a few more months.

Looking at the monthly chart the cycles says to expect a few more months until the next important high.

The pattern looks to we like a triangle for wave X and zig-zag higher to finish the pattern from the low in March.2017.

- FOREX
Like RUT(and all international indexes) the DXY chart disappeared from freestockcharts.com, so I will use EUR/USD which is not much different. For JPY the Philadelphia Japanese Yen index because it is easier to correlate with precious metals.

The USD made major 16 year cycle top early 2017(EUR/USD bottom) and should move lower for 7 years. The next important low for USD should be the 2 year cycle low sometime in Q2 or early Q3 2018. This is EUR/USD chart which is showing inverted picture. In the next few months EUR/USD should finish an impulse from the last low and 2 year cycle high followed by multi month correction(USD higher).

The pattern from the low looks like an impulse which is still not finished. If you look at cycles,JPY,PM you need more time ideally until mid-2018. The pattern which will do it is triangle for wave 4 before the final leg lower for USD(higher EUR/USD). Alternate it could be a flat for wave 4(red) or ED the top of w1 currently. The idea is the same - corrective waves since the top in September and one more high before a reversal.

XDN cycles show 2 year cycle high mid-2018. The move up in 2017 is very choppy and I do not see a way to count it as impulse. I suspect another zig-zag up until mid-2018 followed by another plunge lower.

If you look at the mirror picture USD/JPY we had an 1 year cycle low(as usual), but the first 24 week cycle toped out very early at week 8 which is bearish so I think we have one more leg lower c to finish wave B next year before another strong surge higher for C.

- GOLD/SILVER/MINERS
The expectations were for an intermediate term low around the end of the year and I think this is exactly what is going on. I see an intermediate term bottom, but I can not see major low. Gold/Silver/Miners have different patterns the common is it is some corrective mess. I suppose some W-X-Y.... with so many corrective waves you can only guess. The PM sector should be higher for a few months, trade accordingly then we will see what happens.

Gold made 4 year cycle high in 2016 followed by sharp sell off and since then choppy move up. I think we should see a few months higher for a 2 year cycle high which is confirmed by the JPY. The pattern from the low late 2016 looks corrective to me so I do not expect major move up.

Silver monthly chart the same story - 4 year cycle high in 2016 and a few months higher for 2 year cycle high(yellow).

I have already shown HUI, I think GDX has the same pattern.

GDXJ weekly - a low was expected at the end of the year.... it looks like we have the 1 and 2 year cycle low as expected. Now we should see a move higher for a few months.

- CRUDE OIL/NATGAS
CRUDE OIL - a low for wave B and higher was expected, but timing was bad.... I do not know, it could be bad cycle model or just an exception.
I can choose to trade what I see(first chart) or try to fit the pattern to model/analysis(second chart). You should always choose to trade what you see.
So I expect a move lower an impulse to confirm the first chart and if we see only an a-b-c correction for a few weeks I will switch to the second chart.

Looking at the chart I see A-B-C... and if you look at Brent Oil or Heating Oil the pattern looks even better. Crude Oil leaves some room for interpretation, but not Brent Oil.

This is if I try to fit the pattern to the cycle model... it is not impossible, but I would not bet on it until I see a corrective test of the break out around 53-54.

NATGAS - the correction has continued as expected. Long term we have leg higher(March-Dec.2016) followed by a correction(2017) and we should see one more leg higher with important top in Q4 2019. Top-to-top cycle analysis looks consistent and NATGAS makes important tops every 2,5-3 years.

Now the problem - is the correction over? We have several corrective waves which means several different possible patterns and trough-to-trough cycle analysis is not working for NATGAS. Technically it can be over, but I think the correction needs more time because I do not see a nice finished pattern and in a few months we should see 18 month cycle high. I think we have either a triangle or some complex W-X-Y like gold miners(see GDX above).
Intermediate term we have finished a-b-c from the top in Mai so we should see a move higher for a few months. After this move we will know what pattern we have and if the correction is over or not. Again I think the correction needs more time and it is not over.