Weekly Analysis

By: TheWaveTrading | Sun, Oct 2, 2011
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In my last weekend analysis I discussed 3 possible patterns that described the price action off the August lows:

  1. Flat wave (B/2)

The Flat Idea Has Been Aborted
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  1. Triple ZZ wave (B/2)

SPX Triple ZZ option is doubtful
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  1. Ending Diagonal wave (C)

Ending Diagonal Idea
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The Flat idea was aborted since the up leg off 1114.22 proved to be a 3-wave up leg while an impulsive move was needed for the assumed wave (C) up.

The Triple ZZ option, in my opinion, is also not feasible because this week's decline is a corrective mess, unless it traced a LD wave (I).

Given the recent price sequence of lower highs/lows within a potential converging pattern the Ending Diagonal wave (C) scenario is now my primary count.

Price is on track of validating the pattern as long as it remains below the upper wedge line and establishes a double bottom or below 1101 SPX with a potential "overthrow" of the lower wedge line.

In addition the final assumed wave (V) of the ED requires capitulation / selling exhaustion (Daily TRIN > 2; NYSE TICK = < -1000... etc.) and positive divergences of momentum (RSI) & breadth indicators (Summation Index; BPI)

If the ED pans out with bullish divergences I will have enough confidence to consider a potential intermediate bottom that should lead to a multi week rebound within a potential larger Zig Zag that could complete a corrective pattern off the July's peak.

Primary Long-Term Count
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The Russell 2000 is tracing an interesting pattern that is suggesting a corrective price structure off its April's peak therefore the intermediate trend should be still up.

Russell 2000
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In Europe it will be vital that the DAX confirms with a corrective pullback that it has already bottomed. For this reason I don't want to see price breaching the horizontal support at 5218.

Here my primary count calls for a wave (C) already in progress that has a potential target in the area of 6400


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Next week we have plenty of economic data. Main focus on Monday with ISM manufacturing Index and NFP on Friday.

 


 

TheWaveTrading

Author: TheWaveTrading

TheWaveTrading

Contact: If you would like to contact the author, you can e-mail him at thewavetrading@gmail.com

The main objective of this project is to share my views on several markets and asset classes.

In the initial stage TWT website will be a free service.

My main focus will be the equity market with SPX being the leader but I will also follow US equity sectors, major European indices, fixed income, currencies and commodities markets.

My analysis is based upon traditional Technical Analysis, Elliot Wave guidelines and investor sentiment.

My goal is to establish the most likely path that the price of a particular asset will undertake and profit through ETF instruments both on the long and short side and mainly with leveraged ones (2 x & 3 x).

The advantage of ETF investments is that it allows getting involved in equity indices & sectors, currencies, fixed income, commodities etc.

Therefore the main purpose of TWT will be to establish investment strategies regardless if the market is in an up trend or in a down trend, leveraging the chosen scenario while managing the risk by establishing protective stop losses.

Hence I will always define the risk, I will try to let winners run the wave and I will cut the losses if my strategy is wrong.

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