Please first check the tagged chart "The Dow - Divergence analysis". You can see there the reliability of all these bearish divergences. On this chart, only the latest divergences are labeled.
I am short since Monday on the US stock market and major global markets, and now the weekly confirms my bearish bias, with a very ugly pattern.
First of all, price formation. A double top formed with divergence on the MACD lines and Force Index (which includes volume!), and last week there was a retest of that double top, with a false breakout, with a gravestone doji. That's bearish enough for me, considering this is the weekly chart.
The MACD shows three bearish divergences, one that includes the year end rally, and two for the double top. You can see a huge class A bearish divergence, which I believe didn't play out yet. There was a strong reaction two months ago, but not enough considering the size of the divergence. After another push, a class B bearish divergence formed with the double top. This is one of my favorite patterns, for reverseals or strong corrections, class A followed by a retest of that level with a class B. Furthermore, there is a huge bearish divergence on the MACD histogram. Look how little power the bulls had with this last rally. All these divergences for me point to a very bearish short term future.
Let's take a look at Force Index, which works here cause we have volume. The double top came with a bearish divergence also on FI, and with this last rally there was no cross over zero. This points out how strong the bears really are. The level at which we find the Force Index today is the lowest since the start of 2013!!!! This shows bear power!
The EMA wave shows value, and when price gets close to value, it's good to go with the trend. Right now there are no bullish signals, neither here, nor on the daily, so I will be looking for a further decline.
Please look at the pattern described on the chart *!! which I think is very important.
If we analyze candlesticks, last week there was a gravestone doji star, a very strong reverseal candle, especially on weekly charts. This week, a closing marubozu that broke local support.
Support levels are labeled on the chart, and those are the levels to watch for the end of this correction. I am looking to add to my short using the daily chart.
Where price stopped now is my first daily demand zone. Agree with your weekly support/demand zone, only in my map is above the hammer of Feb 3rd, around 158.20 for safety reasons as I'm short at 16,600. Made you a rough chart to see. I don't know if it holds, as marubozu is powerful, but like all candlesticks needs confirmation first.
Take care and all the best my friend
Panos
vlad.adrian
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Thank you Panos! I will take a look at Nial Fuller's lesson as soon as I get a chance.
About the demand zone, it is more or less the same, a few points up or down doesn't matter for me.
I checked your charts earlier, when you posted them, and I agree with them. If you are interested I posted Dailys on France and Europe.
pantheo
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Great, just check them. Shorts going well;-)
warmandfuzzy
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Great analysis, as per usual:)
nightcrawler
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I agree with your assessment.
In addition the VIX has not made a new low since December 2013. SPXA50R has put in a lower low and lower high showing a change in trend. It has since started heading south again and should make a new low. This would would complete the top of the market. Looking at the monthly there was a divergence on RSI and MACD on the new high. Could this be the top for this 5 year bull market only time can confirm that? If this is the top would it be a quick run down (2008) or slow grind decrease (2000)?
vlad.adrian
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Thank you.
Regarding VIX, I know there is a relation between US indices and VIX, but I do not watch it, so I can't really give an opinion. I know Tim West published some charts with VIX, so maybe he can comment on that.
Regarding the possibility of a top, it surely does look like one, but if you look at the first divergence analysis (the related idea) you will see that there were other 'tops' in the past, so right now there's no way to tell. You can tell when there is a bear market, only after it started, thats my belief and my approach to the market. If this is truly the top, there's no way to know if it will be a slow or quick fall, but if I would have to choose with a gun to my head, I would say a slow fall because I believe the market isn't as crazy as in 2008. For example, in 2008, here in my country, every farmer who grew pigs and chicken all their lives would buy Nike clothes or paint his house 3 times a year, because he sold some land in the middle of nowhere, for an astonishing amount of money. Every gardner would have a loan for a car, or whatever he felt was 'necessary'. Right now I don't see that excess, neither here, or abroad, and the data released by the FED isn't getting worse after the tappering.
Where price stopped now is my first daily demand zone. Agree with your weekly support/demand zone, only in my map is above the hammer of Feb 3rd, around 158.20 for safety reasons as I'm short at 16,600. Made you a rough chart to see. I don't know if it holds, as marubozu is powerful, but like all candlesticks needs confirmation first.
Take care and all the best my friend
Panos