Daily Analysis

By: TheWaveTrading | Wed, Mar 28, 2012
Print Email

Due to Monday's rally induced by Bernanke, the SPX impulsive up leg off the November lows which was at risk of being completed; the door has been reopened for another extension higher.

Basically this translates into a wave structure where the pullback has been corrective while the large upward move has been impulsive; hence unquestionably the trend is once again up.

If the trend is still up then the impulsive up leg off the November 25 low is not completed, therefore price is still involved in the wave (5).

I will maintain this scenario as long as price does not breach Friday's lod at 1386.8.

A wave 5 can either be impulsive or unfold an ending diagonal.

In my opinion given the overextended move it is not out of the question that price might not have the required "vigour" to trace another impulsive move hence the odds of an Ending Diagonal are large.

I have already highlighted that the potential target range for the unfinished wave (5) is located in the range 1440 - 1500. We also have extensions targets at 1448-1511-151.


Larger Image

Yesterday's price action, in my opinion, can be interpreted, as the common "digestion" after a strong and somewhat not expected rally.

In addition the EWP is also suggesting that price's intention is to retrace a % of the recent up leg. We could expect a Zig Zag or a Double Zig Zag with a target in the range of the 0.382 - 0.5 retracement = 1406 - 1403. Maybe the 10 dsma = 1404 could be tested.

We are getting close to an inflection point but given the exogenous factors that are the main reason behind the strength of equities, it is not wise to anticipate trying to pick the top.

Momentum Indicators are suggesting that price is losing its exuberance, since we have negative divergences on the 3 indicators in addition to the Stochastic in overbought territory.


Larger Image

But we cannot rule out a bullish thrust of breadth indicators since the NYSE Adv-Dec Volume is not overbought and I also mentioned several times that the Summation Index is already quite oversold.

In addition we don't have a negative divergence in the Cumulative Adv-Dec Volume.

For the Immediate time frame I would not rule out further weakness with a potential move towards the 10 dsma, and a most likely choppy rally into Friday (End of month & quarter).

Next month we will have plenty of events that can interrupt or extend the bullish party. The major events are.

April 6 NFP.
April 10 AA kicks off the earning season.
April 25 FOMC.

In addition, news from Europe can hit the tape any day.

I have also mentioned to monitor the EUR and VIX.

Also don't lose sight of KBE (Bank etf) because without them, SPX will have a hard time to maintain the trend u.

Here depending upon the depth of the current pullback we could have a wave (II) in progress, if price does not loses the Trend Line Support or something more bearish below it; a potential wave (B.


Larger Image

As a matter of fact the Energy Sector (XLE) may have already established the top of the October EWP with a wave (B) down already in progres.

It is common in the last stages of an extended EWP to "see" diverging price actions among major sectors.


Larger Image

 


 

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.

Disclaimer: The content of this article is for educational purposes only, the information supplied is not a recommendation to buy or sell any security or financial instrument.

Thewavetrading.com nor the owner can not be held responsible for any loses occurred from the information provided within the website.

The Information supplied cannot be copied or reproduced without the permission from the owner.

Copyright 2011-2014 TheWaveTrading

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/