Daily Equity Analysis
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:
- Daily MACD crossing the zero line in addition to the loss of a long term trend line.
- Daily RSI loss of a long-term trend line and below the 50 line.
- Weekly RSI losing the trend line and below the 50 line.
- Weekly Stochastic with a new bearish cross.
- Weekly Stochastic of the Summation index with a new bearish cross.
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 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.
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)