Daily Analysis

By: TheWaveTrading | Tue, Dec 20, 2011
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We now have to be watchful since price should be attempting to complete the corrective down leg from the December 7 peak (SPX = 1267), and allow the awaited Santa "rebound".

From almost the beginning of this down leg I was aware that the EW pattern that price was tracing was not impulsive hence I was not expecting a fully retracement of the previous up leg.

I have been looking at a potential Double ZZ as price was drifting lower but maybe the overlapping pullback can be easier labelled as a Zig Zag with the wave (C) on the verge of finishing an Ending Diagonal.

If this is the correct pattern then price will be able to rally at least into next week.

Keep in mind that the break out of a falling wedge is always swift and usually price attempts to retrace towards the origin of the wedge of 1258 which, btw, almost coincides with December 2010 eom print of 1257.64. Definitely this # could be a magnet going into year-end.

As a potential target we have the 1.618 extension at 1200


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If the ED option is busted then I will take up again the Double ZZ option, which seemingly needs more business to the down side in order to establish a bottom presumably in the 1190 area.


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Regarding the overall EW pattern from the October 4 low unfortunately I have a lot of reasonable doubts and honestly right now I don't have enough confidence on none of the 4 options I discussed this weekend:

  1. Impulsive wave (C)
  2. Triangle wave (B)
  3. Larger Double ZZ wave (B)
  4. Bearish resolution, which calls for a wave (B) in progress with a potential target in the 1000 area.

Therefore for the time being I maintain my focus in the short-term time frame.

From the daily chart below we can know that:

In addition we have the Santa bullish seasonality.


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I would like to add 2 thoughts:

We have to realize that we are trapped by a large amount of uncertainties, which is clearly reflected by the price action.

 


 

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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