Saturday, May 31, 2014

Outlook Week of Jun 2, 2014

Some cycles up, some down. some sideways.  One topping.  Action for the week is somewhat confusing from the cycles, but we will try!!!  Expect early week to  hold up and move sideways, but by Wednesday we should see some pullback in the market.

Here is a visual:

GL traders

June 2014 - longer term outlook

I generally focus on shorter cycles from a few days to a few months (under 1 year).  Periodically I try to remind you there are longer cycles at work and those cycles can result in large moves in the indexes.  Often the downside correction covers shorter time frames than the upside and wipes out large portions of any previous extensive up side.

We can look at this in terms of time or we can look at it in terms of prices (or both).  First lets look at it in terms of time.  The market had major bottoms in 2002 and 2009 and major tops in 2000 and 2007.  These bottoms are 7 years apart.  The  tops are also 7 years apart.  2014 is 7 years since the last major top.  Notice that bottoms are about 2 years from the tops (right justified cycles).

Here is a visual representation:

So a major cycle top could be in place at any time  and a down trend could last 2years. 

Next how does it work out if we look at it based on price.  FIB ratios are a common way to analyze and project prices.  So what does this FIB analysis tell us:

And we are at the point where FIB analysis tells us we should be topping (prices).  So be very careful as both time analysis and price analysis agree - we could see a correction start at any time.  Notice the similarities to the sideways action since January with late 2007.

Post dedicated to TB for her URL references.

GL traders

update Jun 03: SPX has pushed a little above FIBS projection of 1923.44 above based on "A" leg down into Mar 2009 low at 666.67.  Looking at the most recent pullback of any substance in 2013 ("A" wave) we get a FIB projection of around 1928 (amazingly close to our other projection.  Here is a visual:

we get a downside projection of around 1795.

Monday, May 26, 2014

May 26, 2014 weekly outlook

The market continues to trade in a narrow channel and set marginal new highs on at least some of the indexes.  Doesn't inspire confidence that it is a market headed up to any large degree.  On the other hand, doesn't seem to want to correct much.  So far "the sell in May" part of "sell in May, and go away" seems to be OK as it could have gotten you out at high levels.  Only time will tell (June-July) if the "go away" part works out.

We will see a "new"  moon this coming week, which may mean, time for a pull back this week.  Here is a visual:

And here are the short cycles (good to trade in a sideways trending market):

GL traders

Sunday, May 18, 2014

May 19, 2014 weekly outlook

The rule is "sell in May and go away".  Many interpret this as meaning a down month in May.  On the other hand "sell in May" implies a high in May (we want to sell at highs don't we?).  And "go away" says stay out of the market for a while (say June and July).  That approach seems to have worked recently I believe.  Here is a short term visual:

The short term trend line has been broken and a close below it.  Currently the 50 day MA is being tested again.  If that is broken and closed below, then the market should test the medium term trend line around 1860.  A break (and close below) of that should lead to a test of the February low...

Trying to buy back the R2K inverse shares I sold last week by Mon/Tue.  Hoping to get trading shares around $17.20.  We will see Mon/Tue.

GL traders.

Update: shorter term trades (cycles):

3.5 day and 7 day trading cycles.....  Limit order to buy in at 17.20 (if order hits I expect to trade out for 1.5% gain in 2 days or less). This is shorter term than my normal trade (but market is boring me).

Update - May 20 close:  Market played out as projected (chart green line).  Missed low yesterday by 1 cent for trading entry.  Missed a good part of run up this AM, finally pulled the trigger on RWM pullback around 11 AM at 17.41 and sold around 3 PM (see comment) as I said we should see a pullback last hour.  Gain around 1 % after fees.  Market should be up for almost 2 days (and RWM down)...  So one could play IWM (opposite RWM) for a short term trade.

Here is an updated visual:

Update May 22:  RWM continues to follow projected path.  Should bottom around 3 PM Thursday May 22.

Update May 23: RWM bottomed around 3  PM Thursday as projected.  If this is the bottom for 3.5 and 7 days RWM should be up Friday and into Tuesday afternoon.  Since RWM is an inverse that means the major indices should be down Friday and into Tuesday.

Saturday, May 10, 2014

May 12, 2014 weekly outlook

Sell in May....  Looks like we should set a nice bottom around the end of May.  In the meantime moves down of around 2% per week the next 2 weeks should not surprise giving us a low in the area of the early Feb low (1800-1815  - maybe a lower low).

The envelopes are still on a "Sell" signal.

GL traders.  This past week I traded out of part of my RWM and bought those shares back at the close on Friday.  Not a huge profit - about 1.7% on shares traded.  We'll see how well the new purchases do.

Sunday, May 4, 2014

May 5, 2014 weekly outlook

Last week continued to show some residual strength.  The Dow set new highs and most of the major averages were up around 1% for the week.  The market shows little evidence it is going up a lot or down a lot near term.  That is how tops are made, they bore investors into inaction.

Still our envelope analysis is on a sell signal from just over a week ago, so the market should continue sideways with a downside bias this week.  The one month cycle is up for the next 7 or so trading days.  The 2 month and 4 month cycles are down into the end of May.  The 8 month cycle is up and tops near the end of May (as a mid-cycle slump develops as 3 shorter cycles bottom),

In summary - minor weakness next week.  Here is a visual: 

GL traders.  I suppose a full on War in Ukraine could cause additional downside movement.  For now (month of May) I hold RWM.