Daily Analysis

By: TheWaveTrading | Tue, Apr 10, 2012
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Yesterday's price action has officially confirmed that the trend is now down.

The effects of the main idea/road map that I am following have been discussed in the weekend up-date so there is no need to review it in today's post.

Just as a reminder for SPX my preferred scenario calls for a completed Zig Zag off the October 4 low.

The Assumed top can either be a wave (A) or (W). Therefore the pullback in progress will be a wave (B) or (X).

It is tough to know which option will be chosen by the price, hence instead we have 2 price zones that in my opinion are the likely target candidates: either 1340 or the 1290 area (here we have horizontal supports and the 0.382 retracement off the October lows).

If we are talking about a correction of the 3-wave up leg off the October 4 low then the time factor has also to be taken into account:

Also keep in mind that the EWP may not be an easy Zig Zag down since it can easily morph into a more complex Double ZZ - Flat or a Triangle.

Any way I am expecting more upside once the correction is completed.

But I don't want to go ahead of price. We first need to see a corrective and possible weak rebound that has to establish a lower high in order to "think" about a move to the first target area of 1340.


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The immediate obstacles to the down side are the 50 d = 1372 and a new Trend Line Support which today stands at 1363 (it raises 3 points each day).

Judging from the daily momentum indicators "picture" the trend reversal is on track since we have the RSI below the 50 line + the MACD sell signal issued on March 28.


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Despite the current down move feels shallow we already have some oversold readings in the TRIN at 2.42 and the McClellan Oscillator at -76.92 therefore the odds that price may soon attempt a "large" bounce are very large.

When/if the bounce occurs we will have the "moment of truth" for the short-term bearish ideas. Remember that without a lower high bears will not have any chances.

Among the many things that I am monitoring the EUR as usual should play an important role.

I have already mentioned that here I am "working" with a potential Flat EWP that could imply a move back towards the January lows with a Zig Zag or a Double Zig Zag.


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This outcome has to be the correct one in order to expect the continuation of the equity correction.

Hence equity bears need a weak corrective bounce that should not breach the 50 d = 1.3212 in order to be able to attack the critical support zone at 1.3000 that if broken will open the door to a move towards the January lows.

NDX remains a "pain in the neck" for the bears and the Ending Diagonal idea of AAPL is on quarantine.

 


 

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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