Daily Analysis

By: TheWaveTrading | Fri, Mar 2, 2012
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Let me begin today's update by showing you the chart of the McClellan Oscillator:


A trader that just got beck from holidays, by looking at the NYMO chart would conclude that the equity market is involved in a correction, since from the second week of February the oscillator is in an unquestionable down trend + below its 10 dsma & below the zero line.

The daily reality of this "weird" market tells a different story with US equity indices beating multi-month and in some cases multi-year highs.

SPX price behaviour in my opinion is unsustainable and the risk remains extremely high for an overdue pull back.

"Someone" continues to buy each dip, stretching the Ending Diagonal "nightmare".

The price structure of 3 - wave up legs and failed impulsive attempts to the down side are strongly suggesting that price is unfolding a bearish rising wedge. I remain confident that this EWP is the correct one.

An Ending Diagonal can become a beast, such this one, as it let price to extend higher.

But this creeping higher cannot go on forever, soon another reversal attempt will not find the dip buyer.

In the last few days I have been showing you the clear ED that the Dow has been unfolding. Maybe it is done. Another lower low could "seal the deal"

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SPX is also tracing a likely ending diagonal. Here maybe, given yesterday's bullish Engulfing candlestick I would not rule out another higher high.

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In the immediate time frame, in my opinion price is unfolding another Zig Zag which has a projected target range: 1377 - 1389, in addition if today is the day then the upper trend line of the wedge is at 1382.

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In the mean time the EUR has made a clear statement confirming that a top is already in place and judging from the strength that is gaining to the down side I am not sure if the rising trend line support will hold price once/if it is challenged.

It has happen before: I have seen several times EUR establishing a top before SPX. And when the divergence grows at the end SPX always tends to align in the direction of the EURUSD.

Therefore this is another serious heads up.

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In addition EUR weakness usually triggers a waterfall negative effect on the "risk assets".

Thanks god it is Friday but be on guard as the "scary" reversal can occur any moment.

When a market has a pending reversal (in both directions) there are usually plenty of opportunities. One swing trade that is on my radar screen is FAZ (3 x short Financial etf). Below you can see what I am expecting, of course as long as the pattern is not busted.

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Have a great weekend everyone.




Author: 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).

The advantage of ETF investments is that it allows getting involved in equity indices & sectors, currencies, fixed income, commodities etc.

Therefore the main purpose of TWT will be to establish investment strategies regardless if the market is in an up trend or in a down trend, leveraging the chosen scenario while managing the risk by establishing protective stop losses.

Hence I will always define the risk, I will try to let winners run the wave and I will cut the losses if my strategy is wrong.

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