To this end, fund managers became very bullish in July, September, November and December, and stocks have subsequently sold off each time. Contrariwise, there were some relative bearish extremes reached in August and October to set up new rallies. We did a recap of this pattern last month (post).
Sine tomorrow I will be travelling for one week and I will be off the screens I want to share my thoughts regarding the current Elliott Wave pattern and the potential outcome.
Despite weekly oscillators remains a major concern:
- RSI negative divergence in force since July 2014
- Stochastic bearish cross on January 9
- MACD bearish cross on January 16
The aggressive advance from the January 16 low has neutralized a potential reversal pattern. Bulls with the help of accommodative action of the ECB have regained the upper hand. Going forward odds favor new All Time Highs.
If this is the case we need to see:
- Weekly RSI breaching the trend line resistance off the December 5 peak
- Weekly Stochastic holding the 80 line and cancelling the bearish cross
- It remains to be seen if MACD will cancel its sell signal