Daily Analysis

By: TheWaveTrading | Wed, Feb 1, 2012
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Today I don't have much to add to the previous posts hence I will keep this very brief.

January ended with SPX shrugging off the negative seasonality & excessive bullish sentiment, in addition bulls have achieved to consolidate a bullish cross of the 3 m above the 6 m MA. This moving average cross has occurred twice since the March 2009 low and in both occasions price has unfolded the large 2 up legs of the "bear market" rally. Will this time be different?

As you must already know my scenario implies that the EW structure of the March 09 rally is not completed yet, but I have reasonable doubts whether the intermediate uptrend has resumed its path higher or if price is involved in the middle of a large corrective pattern from last summer's highs, with price unfolding a Flat/Triangle. If this is the correct scenario then the resumption of the intermediate uptrend will be postponed until the correction is completed.

In the monthly time frame we have a well-defined channel, hence, as long as price remains inside it the trend is up.

We also have the trend line resistance off the 2007 top, which has rejected for the time being the attempt to retest the summer's highs, hence, as long as this trend line is not breached on a monthly time frame we can maintain the scenario that price is trapped in a sideways EW pattern.

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In order to increase the confidence on the larger time frame outlook, in my opinion we need to wait for the likely Zig Zag that is in progress since the October 4 low.

If price is tracing a Zig Zag then the wave (C), which began on December 19, is not completed yet.

This scenario calls for a wave (4) pullback that could unfold a Triangle/Flat, if the alternation guideline is fulfilled or a Zig Zag/Double ZZ.

Time wise it could last 1-2 weeks, while the potential target range is 1289-1280

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I have also recently discussed that the overbought readings reached on January of the daily RSI, Summation Index and NYSE BPI strengthen the scenario of a pullback, in addition if SPX will unfold the fifth of (C), momentum & breadth indicators will probably have negative divergences, warning that the EW pattern from the October 4 low could be substantially retraced.

For the short term I am clueless regarding the corrective pattern chosen by the price, as Triangle/Flat or ZZ/DZZ are both possible.




Author: TheWaveTrading


Contact: If you would like to contact the author, you can e-mail him at thewavetrading@gmail.com

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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.

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