Daily Equity Analysis

By: TheWaveTrading | Thu, Nov 24, 2011
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The negative price action with a 6 days losing streak in a row does not bode too many bullish vibrations.

Instead of the bullish set up which called for a corrective Zig Zag = ABC, price could be involved in a bearish resolution.

In addition price has refused to "obey" to the extremely historical bullish seasonality and this has to be taken as another warning.

Yesterday I mentioned that the bullish set up was under serious stress, not because of the price action, which can still be considered as an impulsive wave (C) but given the "bearish" signals that have been triggered by momentum and breadth indicators.

Basically we have:

Chart 1
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$NYSI Index
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I cannot marry a count, I have to listen to what technical indicators are suggesting and adjust the bias accordingly.

It all began on November 17 with the failure of the bullish triangle; price broke down to the 0.382 retracement first then the 50 dsma and the 0.5 retracement were also breached. The selling pressure has been so intense that price is now almost at the 0.618 retracement and above what I had marked as the line in the sand at the gap = 1155.46

SPX Index
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SPX is now "very" oversold with a daily stochastic at 4.99 and the McClellan Oscillator at -106,21 & Trin at 3.34

In addition we have a daily Marubozu, which in an extended down trend, it can be considered as an exhaustion candlestick. Therefore the odds now favour a "large" rebound but at this point the burden of proof is now on the bulls' back.

Barring actions from the EU authorities I am afraid that instead of a wave (C) up to new highs the expected rebound will be a bearish wave (3) or even an "evil" wave (II) of (3).

Keep also in mind that the "bearish" structure of the October rally does not give for granted a bullish resolution.

We have to wait and see the strength of the bounce before reaching a conclusion, but the weekly time frame does not look good for the bulls, here we have a clear damage inflicted which needs a huge reversal in order to be fixed.

SPX Index
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Price Action & EWP

Yesterday we had another decent sell off into eod.
Price could have completed or almost done a fifth wave.

Therefore once we have confirmation that the fifth is done I expect a large rebound (watch if it is corrective or impulsive), with an initial target in the area of 1198 - 1207 (50 dsma)

Only a "huge" move above 1216 will revitalize a bullish resolution, in the mean time if the expected bounce is corrective it can be a bearish wave (3) or an "evil" wave (II) of (3)

SPX Index
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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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