SP500 - Multi time frames, and chances of a bearish year
This year will be very interesting. I think Volatility will be a lot higher than in previous years, so I decided to examine the charts from different angles, on different time frames, trying to filter some noise as well with Heiken Ashi candles.
I do not want to give direct prognosis, but would rather like to highlight technical probabilities from different angle views.
Weekly (with Heiken Ashi candles):
Recent weekly Heiken Ashi candle switched to bearish again, with all the three western indicators signalling bearish: MACD, Slow Stoch and DMI all in SELL mode. What's more, ADX is increasing under the bearish DMI, and MACD has developed a long term a bearish divergence during 2014. Meanwhile Price action and Ichimoku as the main indicators still very much bullish: that Price is continuosly stuck to the upper side of the bullish channel, and could not even closed and stay for two weeks below the Kijun Sen line since mid 2012, except the big selloff in Sept/2014, when the Kumo proved to be the support.
The question is how long this kind of divergence can exist? I doubt it can stay like this for one more year. But a trend is a trend until it breaks.
So when can you call it a bearish reversal? The answer is very simple: below 1875!
Will it happen? When will it happen? If it happens how much it can collapse? Etc... NO ONE KNOWS the answers! Everything is guessing, but the probability of minimum a correction to tet the Kumo and long term bullish trend line within 1-2 months is really increasing.
Daily (with regular japanese candles):
Price is in the Kumo, actually trying to move back above the cloud with the Slow Stoch turning up again. The current Kumo is thick due to previously increased volatility, it would not be easy to break it now. But the future Kumo is getting very thin, and if we do not see increasing bullish momentum soon, it will stay thin and mkt will move sideaway neutral. That would be one big surprise for most of the people. The other important question is again, if bulls (or bears on a short term squeeze) can send SP500 to a new high or not? As if no new high, then there will be a chance to develop a Head and Shoulders pattern, which in that case could mark a long term market top. This is hard guessing now, I just popped this idea as on possibility, as with a H&S pattern neckline break together with bearish Kumo break would be extremely bearish.
For now I say the daily chart is neutral (may even turn bullish like again). I would look for next sell signals either ard 2075, or at lower breakdown below 2015.
4 Hrs (with Heiken Ashi candles): This time frame is also coming back to neutral. It has still some bearish bias until Price is below 2050, but on the other side Price is climbing above Kijun Sen now, DMI closed in too, so the short term bearish momentum decreased. If it prints a Heiken Ashi reversal candle (Red one) together with a Slow Stoch sell signal, it can start to dip again, but for a better bearsih move it will also have to print a lower low below 2000.
I would not touch it right now in any directions.
In general for me it is getting harder and harder to put on even a tiny bullish bet. Once every major bull market ends. So I still favour to look for high probability sell signals on the lower time frames, risking to miss any further bullish moves. And who knows, once it makes a bigger break, I will be lucky winning more than 3-4 % on my bearish positions.
I do not want to give direct prognosis, but would rather like to highlight technical probabilities from different angle views.
Weekly (with Heiken Ashi candles):
Recent weekly Heiken Ashi candle switched to bearish again, with all the three western indicators signalling bearish: MACD, Slow Stoch and DMI all in SELL mode. What's more, ADX is increasing under the bearish DMI, and MACD has developed a long term a bearish divergence during 2014. Meanwhile Price action and Ichimoku as the main indicators still very much bullish: that Price is continuosly stuck to the upper side of the bullish channel, and could not even closed and stay for two weeks below the Kijun Sen line since mid 2012, except the big selloff in Sept/2014, when the Kumo proved to be the support.
The question is how long this kind of divergence can exist? I doubt it can stay like this for one more year. But a trend is a trend until it breaks.
So when can you call it a bearish reversal? The answer is very simple: below 1875!
Will it happen? When will it happen? If it happens how much it can collapse? Etc... NO ONE KNOWS the answers! Everything is guessing, but the probability of minimum a correction to tet the Kumo and long term bullish trend line within 1-2 months is really increasing.
Daily (with regular japanese candles):
Price is in the Kumo, actually trying to move back above the cloud with the Slow Stoch turning up again. The current Kumo is thick due to previously increased volatility, it would not be easy to break it now. But the future Kumo is getting very thin, and if we do not see increasing bullish momentum soon, it will stay thin and mkt will move sideaway neutral. That would be one big surprise for most of the people. The other important question is again, if bulls (or bears on a short term squeeze) can send SP500 to a new high or not? As if no new high, then there will be a chance to develop a Head and Shoulders pattern, which in that case could mark a long term market top. This is hard guessing now, I just popped this idea as on possibility, as with a H&S pattern neckline break together with bearish Kumo break would be extremely bearish.
For now I say the daily chart is neutral (may even turn bullish like again). I would look for next sell signals either ard 2075, or at lower breakdown below 2015.
4 Hrs (with Heiken Ashi candles): This time frame is also coming back to neutral. It has still some bearish bias until Price is below 2050, but on the other side Price is climbing above Kijun Sen now, DMI closed in too, so the short term bearish momentum decreased. If it prints a Heiken Ashi reversal candle (Red one) together with a Slow Stoch sell signal, it can start to dip again, but for a better bearsih move it will also have to print a lower low below 2000.
I would not touch it right now in any directions.
In general for me it is getting harder and harder to put on even a tiny bullish bet. Once every major bull market ends. So I still favour to look for high probability sell signals on the lower time frames, risking to miss any further bullish moves. And who knows, once it makes a bigger break, I will be lucky winning more than 3-4 % on my bearish positions.
