Daily Analysis

By: TheWaveTrading | Wed, Feb 22, 2012
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SPX is involved in a topping process and as you must already know my view, this pending top should be the wave (3) of (C), labelled from the November 25 low.

I also assume that the coming wave (4) should have a target in the range 1300 – 1289, and we have the line in the sand # = 1267.06 which will kill this scenario.

We also have the pivot # = 1341.22 which will officially confirm the correction.

What we still don't have, despite an obvious bearish rising wedge, is a clear ending pattern, although any sign of weakness has to be respected since sometimes the perfect final fifth never comes.

For instance a day like yesterday with an eod Spinning Top could conceal an ending pattern.

But since price is still above the 10dsma and above the converging trend line support I am reluctant to call it the top.

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Regarding the "required" s/t ending pattern of the wave (3), since price has been rising with overlapping waves I believe that the odds of an Ending Diagonal are quite large.

If the ED is the right EWP then price MUST overlap below 1354.32 maintaining a converging structure, with a wave (IV), which will be followed by the last wave up.

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On the technical front, everything remains unchanged with topping warnings. Below is the chart of daily SPX momentum indicators.

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We are also beginning to see signs of weakness in the DJT, which is clearly diverging and in general we have bearish candlestick patterns in many sectors.

The one that I am watching closely is KBE (Bank etf), since a smaller ED could be forming. At the same time, keep in mind that if the wave (4) pull back plays out, the 200 dsma will probably halt the down ward correction = 7% pullback.

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I am also monitoring closely VIX which, if the SPX ED idea plays out, then it should maintain a higher low / Double Bottom.

Keep also an eye on gold, since it should lead/follow the equity market in the awaited pullback and bonds as they always "catch a bid" when there is an equity sell off.

In Europe in addition to the weakness of IBEX, which in my opinion as I mentioned last Sunday, has already began the correction, the DAX is finally showing signs of fatigue. If by eod price closes the gap at 6873 (atm price has dipped below it) then the odds that the wave (3) is already in place will be very large.

I would not rule out that price before breaking the critical horizontal support at 6651 may shape a bearish Head & Shoulder.

The potential target for the wave (4) is located at the rising trend line support and 0.382 retracement = 6457.

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Regarding the EUR, I maintain the idea that the EWP from the January lows in not completed yet but for the short term in my opinion price is on the verge of completing a wave (B), hence above the key pivot level is 1.3325, while the immediate support is at 1.3194, which is needed to be broken if a top os already in place.

If 1.3194 is not breached with an eod print, then maybe price is attempting to unfold a small continuation triangle, which should lead to a top.

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Author: TheWaveTrading


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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.

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