Yesterday I mentioned that: "SPX choppy action may have left by eod a potential reversal pattern if today price confirms a potential Double Top by breaching the 1250 horizontal support. If confirmed the DT has a target at 1233, where we also have the 10 dsma. If lower then the next target is at the .382 retracement = 1225"
Well we got the drop below 1250 but it did not have enough follow through to the down side to reach the obvious target of the DT at 1233.
Instead after completing a shallower impulse which can be labelled as a wave (c), dip buyers stepped in with an aggressive move, although price did not manage to achieve an eod print above the 200 dsma = 1264 leaving another toppish candlestick = Spinning Top.
The short-term key levels remain the same:
- Above the 200 dsma = 1264 then 1277.55
- Below the 3 dsma, but now we know that only the loss of 1243 will lead to a meaningful pullback.
The move off the lod is atm a 3-wave up leg hence if the correction is over price should not overlap today below 1258.89, although we should not rule out a 1 2; I II ..... Hence the line in the sand is at 1251.89
If a bottom is in place the next leg up will have an extension target in the range 1311 - 1352 and given the potential EWP off the October 4 low which calls for a Zig Zag then it should be the wave (3) of (C).
On the negative side we have the daily Stochastic in overbought territory. It is questionable that we have the kick off of a wave (3) with a stochastic at 92.
I would have preferred a deeper measured correction in order to increase the odds of a larger push into year-end. In any event this is not a normal market environment so we have to strictly follow the s/t price action.
The DAX should help us identify if the correction is over. It has a clear price structure with a potential completed (ABC) in addition to having almost reached the Double Top target.
Here as in the case of SPX we have a 3 -wave push off yesterday's low, hence if bulls achieve a fiver they will seal the deal.
- The EUR pattern is still not appealing, despite being corrective a bottom is very questionable, I don't have any brilliant idea unless price is attempting to come up with a leading Diagonal.
- VIX has been on the bear side with its move higher hand in hand with SPX but yesterday's shooting star may have established a top. A "real" reversal will need the Island Reversal with an eod print above 30.64. The large time frame pattern calls for a "massive" bullish falling wedge, which seems to be not completed yet.
- Bonds: I am following the Bund, which should be on the verge of completing a counter trend bounce, within a larger potential Double ZZ. When the wave (X) is in place then it is reasonable to expect the resumption of the equity rally.
Today we have the ECB meeting, while tomorrow the EC summit and next week we have FED day on Tuesday and quarterly OPEX on Friday. It seems that no relax will be allowed until Christmas's dinner !!!!!