Some of my readers will recognize my previous work from the Reversion to the Unified Mean (RUM) Wave blog. I wrote it in relative anonymity for a couple years. That work can now be found here.
The RumWave has triggered a sell signal. I have positioned the UltraWave to take advantage of any declines, which seem to be just around the corner (early next week).
The 4 hr chart (above) would not necessarily lead you to believe there is a big looming bear in the wings. In fact, the only thing that looks kind of scary is the %B and RSI. Other than that, the candlesticks look like they are starting a bounce after a long sideways consolidations. This is where the RumWave is going to save us, I think.
The same could be said for the daily chart (above). Nothing too scary, except the slow stochastic red and blue lines are both at very high levels. In my experience, it is unusual to see both of them riding this high. Something has to give, and it probably won't be to the upside.
Additionally, I heard a couple interesting discussions on CNBC yesterday about the VIX. It is at very low levels and the commentators made intelligent arguments as to why it shouldn't stay there. I also heard that August is a vacation period in Europe. That would explain the vacuum of information from there.
All that being said, here's how I see the 2-4 weeks... "surprise" declines through the end of the month, then a big bullish push based on the return of European lawmakers and their "Support of the Euro", AND speculation about QE3 leading up to the hallowed Jackson Hole summit, where the FED is hoped to announce (or at least give hints at) QE3.
The best we can do is use all the info we have to be ready for this. I like to think that luck favors those that are prepared... lets hope to be on that side of the coin!
GOOD LUCK NEXT WEEK!