Daily Analysis

By: TheWaveTrading | Fri, Jan 20, 2012
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Congratulations to the NDX, since yesterday it achieved a new high above the July 2011 peak officially killing the Perma bearish counts.

We already knew it!

As a matter of fact NDX is the only major US equity index that could have completed a corrective pattern and setting the pace to restart the intermediate up trend.

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But a broader sector analysis does not agree with this scenario, therefore I am still in the camp of considering the price will unfold at least a third down leg within a large and complex corrective pattern.

Therefore if my scenario is correct the SPX should complete a wave (B) anywhere in the range 1330 (Trend line resistance off the 2007 Top) - 1375 (Equality target of the assumed (abc) off the October 4 low).

Hence since the assumed wave (C) up has to trace a 5 - wave up leg, this scenario will not be threatened as long as price remains above the 200 dsma.

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Yesterday price has made a big statement in favour of the impulsive option since now we have the third wave larger then the first one; therefore the Ending Diagonal option has been seriously wounded.

Then I have to switch to the scenario that implies that the current wave (C) will trace a fiver up off the November 25 low. This potential wave structure opens the door for a move back towards the summer highs; as a matter of fact the 1 x 1 target is 1376.55

Now my focus is on the down side since, when the overdue pullback kicks off, 2 key # will come into play:

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Not only is price suggesting that price is going for the impulsive wave (C) option, also the erasing of the negative divergences that were in play in the daily RSI and breadth indicators such as the NYSE BPI are strengthening this option.

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In the last few days I have been looking for a likely pause, which should lead to a multi day pullback. Today could be the day with monthly OPEX; Opex days have the reputation of being potential "turning windows".

In addition CPCE has dropped to an extreme low level increasing the probability of the expected pull back

The potential multi-week bottom of EUR should play a major role in the equity scenario that I am working with. If "my" assumed wave (A) is in place a countertrend wave (B) has a Fibo. target range = 1.3243 -1.3636

For the short term the 10 dsma should now be an impenetrable support.

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Also we need a catch up of MIB-30, IBEX & EUROXX as they are clearly lagging behind.

Have a great weekend.




Author: 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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