Weekly Analysis

By: TheWaveTrading | Sun, Jan 29, 2012
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Last week I have been suggesting that the trend line resistance off the 2007 top, which stands in the 1330 area, could be the right spot for a potential short-term top.

Last Thursday, we had a gap up with price making a high at 1333.47 followed by a negative close. On Friday a potential Ending Diagonal should have completed the first down leg of a corrective EW pattern.

Thursday reversal (higher high followed by a lower close) still needs further confirmation by the establishment of a lower high.

Hence my short-term scenario calls for an initial Zig Zag (ABC) with a potential target in the 1300 area.

The end of month first treading day of a new month bullish bias may delay the potential wave (C) down:

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Given the corrective structure of the pull back, which has almost retraced the thrust out of a likely Triangle, we can deduce that, if on Thursday price has established a top, it should not be considered a major top, instead, if the count that I am following is the correct one, last week`s high is the wave (3) of (C).

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If the wave (3) of (C) is in place then the "assumed" wave (4) should trace a Flat or a Triangle if the alternation guideline is fulfilled. Time wise, the EW pattern should need 1-2 weeks to be completed.

The target of the wave (4) should be located in the range: 1289.09 (gap fill) - 1283 (0.382 retracement).

This scenario will be killed if price overlaps below 1267.06

If this count is the correct one then the final wave (5) of (C) has a projected target at 1376.55

When/if this last up leg occurs we should see negative divergences in the daily RSI and breadth indicators such as the Summation Index.

More reasons for a short term pause:

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Regarding the long-term time frame pattern I maintain the outlook unchanged:

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Author: TheWaveTrading


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