As I mentioned in my last weekend update SPX short-term price action is clearly bearish:
"It does not happen so often to have a "crystal clear" set up such as the one that price has been unfolding from the April 2 peak:
- Step 1: wave (A) down bottoms on Apr 10.
- Step 2: wave (B) countertrend bounce in progress.
- Step 3: Wave (C) down that should at least match the length of the wave (A) = 64.80 points
Once the wave (C) is done price could complete the first part of a larger corrective EWP = wave (A) of a Flat /Triangle or a larger ZZ".
Unfortunately, judging from the DOW and SPX price action, I am afraid that price has not completed yet the wave (B).
The 3 potential short-term EWP I proposed on Sunday have been killed. It is now very questionable that the wave (B) is in place unless we deploy it with a truncated wave (c), something that is always very tricky.
The Dow certainly does not have an ending pattern and in addition the down side action is clearly corrective suggesting that the countertrend "sideways move" is not over yet.
The immediate time frame "scene" is confusing, but I am confident that this pattern will ultimately lead the way to one more down leg.
NDX maybe could help clarifying the corrective mess of SPX and the DOW if it accelerates to the down side the thrust out of a potential Triangle wave (B).
Today we should keep an eye at yesterday's gap down since it should not be closed if price is involved with an impulsive wave (C) down.
This could be the SPX truncated wave (B) idea:
The EUR is the key market to watch since yesterday's impulsive down leg should result in a potential trend reversal. A bearish resumption should switch the equity market to a risk off mode.
VIX should also provide insights regarding the "true nature" of the assumed SPX bearish set-up.
Here there are no counting issues. It either confirms the bearish equity scenario by confirming the Inverted H&S or it fails.
Momentum in the mean time keeps giving bearish vibrations:
- RSI has broken the support trend line and it is back below the 50 line
- Stochastic has a new bearish cross
- MACD continues to slide in negative territory
Today after the close we have AAPL earnings release and tomorrow the "ominous" FOMC day.