Daily Analysis

By: TheWaveTrading | Wed, Mar 7, 2012
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Daily Analysis

Today's up date is shorter than usual and I will only analyse SPX.

Yesterday SPX finally confirmed the Ending Diagonal terminal pattern by a gap down and go and intense selling pressure during the entire day. This is what I was looking for as the common script of a finished ED.

The selling was quite intense, but, we already have NYSE Trin at 2.42 while the McClellan oscillator in extreme oversold territory.

While CPCE is too high; yesterday it closed above the upper BB.

Therefore without analysing the internal structure of the sell off from the Top of the assumed wave (3), these readings should be respected and treated as a warning of a pending possibly large rebound attempt.

In the mean time the RSI has dropped below the 50 line, which is a concern facing the idea that the pullback belongs to an EWP of a wave (4). While the Stochastic has further room to the down side before it gets oversold.


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So far the "plan is on track":


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Therefore I maintain the scenario, which calls for a corrective pullback that should establish the wave (4) of (C) from the November 25 low.

I have already mentioned several times that if this scenario plays out then, probably, price will unfold/should unfold a Flat or a Triangle; (alternation guideline)

Regarding the potential target for the low peak of the wave (4) EWP I consider that the 50dsma - Rising trend line support from the October 4 low is an obvious "magnet" = 1320 zone. Therefore I am not expecting a "huge" sell off.

But moves below 1300 could jeopardize this count.

Regarding the potential internal structure of the decline in my opinion it is corrective since we have "only" a 7 -wave down leg.

Hence if the eod small wedge is confirmed, price should have established the first down leg of the correction = Potential wave (A).

Usually in a multi day/week corrective pattern the initial wave down consist of 2 down legs therefore if the possible rebound takes place we could have 2 short-term scenarios:

  1. If the rebound fades below 1358: Zig Zag with one more leg down before a meaningful rebound should come about

  2. If price recovers above 1362 then the odds of a retest of the previous high will increase.


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Keep in mind that dealing with corrective EWP is not an easy task since they can easily morph.

 


 

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).

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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