Daily Analysis

By: TheWaveTrading | Tue, Dec 6, 2011
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I maintain a bullish bias as long as price remains above the 50 dsma = 1212 (SPX)

The reason is based upon the fact that the November's decline has proven to be corrective therefore the EW pattern off the October 4 low is not completed.


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As I mentioned in the weekend post, since the initial up leg off the October 4 has been corrective in my opinion we have 2 potential scenarios:

1. Price is tracing a Zig Zag = (ABC)

This option remains valid as long as the structure of the current move, the assumed wave (C), is impulsive.

The extension (1x1) target is at 1377


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2. Price is shaping a Triangle wave (B)

If the current rise proves to be corrective then it should be establishing the wave (b) of potential contracting pattern = Triangle


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Unfortunately price atm is hiding its true intentions.

In order to have an impulsive up leg off the November 25 low we now need 13 waves while if we have only 11 it would be corrective.

And as a matter of fact both counts are possible:


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Then we have to wait for the "due" pullback, which will kick-off with an eod print below 1243.

Since last Thursday we have eod potential reversal candlesticks that atm have been aborted, signalling underlying strength, but when yesterday's news of S&P placing all 17 EU nations on downgrade watch hit the tape it immediately cooled down the buying enthusiasm seen earlier in Europe.

I suspect that it has to be considered as a mean of placing pressure to EU leaders!!!!

We have a double-edged sword, with equity price that is willing to go higher based on the expectation of firmer response from ECB & EU officials next Thursday.

But if THEY disappoint you better not be long the market.

Not only the equity market is "betting" on end of week good news also EU Government bonds are rallying as it can be seen also by:

Italy 10-Year Yield


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As it can be seen in the 60 min chart price could have completed "only" the wave (III) of 3

EUR is atm a worry since it has not joined the "party".

The EWP has not an impulsive look, hence it is "suggesting" of being prudent on the upside potential for the equity market but it is far from being bearish and we are used to corrective rallies in this pair.

Here I am working with at least a potential Zig Zag, with a pending wave (C) up.

We shall see how price reacts at the first potential target for the wave (B) in the 1.3300 = (1 x 1) extension target.


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Technical Front:

Amongst the indicators that I follow, daily momentum should show us the "way"

The behaviour of the RSI above the 50 line and the MACD bullish cross and zero line will determine which bullish set up is in the cards.


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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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