I cannot fight THEM with EWP rules and guidelines, so if the wave (5) of (C) is already in progress let be it.
I have discussed several times the technical reasons that in my opinion are suggesting that the wave (4) should have carried out a larger EWP correction, but the fact of the matters is that as long as bears are only able to achieve 3 -wave down legs then the odds that price can move higher are large as we have witnessed during the entire December up leg.
So maybe I am a stubborn EW guy, looking for the proper price path but either way the price structure from the November lows is uncompleted and I also was looking for the final wave (5) of (C) up.
The option that price is unfolding a wave (B) is still valid but it is hanging by a thread.
As I mentioned on Sunday: "But If price remains above the 20 dsma = 1360 then a deviation from a proper EW rule will have occurred and lamentably my short-term scenario will be killed. In this case then I will have to respect that the final wave (5) of (C) is already in progress with a projected target in the range: 1407-1448."
In the technical front:
- Daily Momentum indicators are giving mixed signals: RSI has negative divergence; Stochastic has a new bullish cross while the MACD remains with a sell signal in force.
- McClellan oscillator remains below the zero line, but If the 5d crosses above the 10d MA then the oscillator will most likely cross the zero line strengthening the scenario that calls for a wave (5) already in progress.
The APPL wave (B) option I was suggesting is on quarantine while BAC Triangle is still valid, but again here we would be talking about just a (+/-) 3% correction.
Therefore to sum up:
The short-term price action still suggests that the correction could have more business to accomplish but my confidence atm is only 50%. Certainly a wave (5) requires more conviction from buyers, which has to translate in an improvement of the Mc Clellan oscillator and the NYSE Adv-Dec Volume.
Despite a non-eventful day with SPX closing with a spinning top two issues are standing out:
- VIX yesterday it collapsed, dropping almost 9% with 4 consecutive gaps down and an eod print below the BB of the envelope. It could be considered an exhaustion move and a potential bottoming process could be in progress maybe unfolding another bullish falling wedge. Theoretically an eod print above 16.17 would trigger a sell equity signal.
- The EURUSD disconnect from SPX price trend is widening. The price structure suggests that the corrective countertrend bounce of the January up leg is over and the longer term time frame trend has resumed the its path to the down side with a potential impulsive wave (C) down. In my opinion if price remains below the 50d MA the odds of a pending impulsive wave (III) down are very large. A divergence of EUR / SPX usually is not sustainable for a long period of time.
Today the main event is FOMC rate decision; the focus will be on wording regarding any signal of an earlier reversal of monetary policy since Ben is expected to leave policy on hold.