Astonishing response from the bulls to Wednesday's potential reversal pattern, which was triggered from the ECB announcement of its intention to swap its current holding of Greek bonds for newly, issued bonds. Don't ask me what it means.........
The EUR, which is best gauge of risk sentiment, had a strong reversal after that the critical support in the 1.3020 area was seriously challenged.
The dip below the 50 dsma was aggressively bought.
Despite this impressive move I believe that the EUR has began a corrective wave (X) pattern that may unfold a Zig Zag, shaping a bullish flag or a Triangle.
In the daily chart below I have the Zig Zag option:
If I am wrong and the EUR resumes the uptrend off the January's lows then the equity market "will never top!!!!!"
Probably it is worthwhile to monitor commodities currencies (AUD/USD, USD/CAD) for warnings of possible reversal patterns.
Regarding the equity market nothing has changed despite yesterday strong rally.
"Excuses moi", if I keep maintaining a bearish stance for the short-term time frame.
I am strongly confident that price is involved in a topping process.
I don't want to bore you with a ton of bearish charts of indicators that are screaming that something is wrong regarding this buying spree. If you don't mind I post just a few:
- McClellan Oscillator: Huge negative divergence, still below the zero line and without a positive divergence at yesterday's equity sudden surge.
- NYSE % Stocks > 50dsma: It is showing a negative divergence, while it is inside the overbought zone.
- RSI: Negative divergence. The right reversal pattern will have to breach the rising trend line.
- MACD: Sell signal in play.
- The weekly Stochastic of the Summation Index is flashing a sell signal.
So today we have OPEX with SPX at a multi month high and on Monday US markets are closed hence I suspect a pullback by eod, well this is an "easy" prediction.
We continue to have the same bearish patterns in progress on both the DOW and the SPX.
- DOW: There still is a bearish Ending Diagonal:
- SPX: There still is a bearish rising wedge. Here now we have the key support at 1341.22, as a break down below will open the door for the OVERDUE PULLBACK:
Regarding the "required ending pattern" maybe price is involved in an Ending Diagonal. It is only a "project" and it requires a pullback today.
I suggest to monitor closely VIX, which as I have already mentioned several times, in my opinion it has already established a potential bottom and it is now in the process of establishing a trend reversal, something that if it is correct does note bode well for the equity market.
I am also looking for bearish setups in the IBEX since I think that this one is already in a corrective mode.
Well that is all for today, while I am on the lookout for the definitive exhaustion move, I wish you a great weekend.