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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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).

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