Daily Analysis

By: TheWaveTrading | Tue, May 8, 2012
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Where do we go from here?

It is all about waves (C) in several markets.

In my last weekend update I discussed that Momentum and Breadth indicators are suggesting that price has established "some type" of a top.

In the case of SPX the needed confirmation is en eod print below 1358.

I would not dare, at the moment, to talk about targets since it is obvious so far, that Mr. Market seems reluctant to cooperate with the bears.

In addition we have the European equity market that has already undertaken a corrective down leg off a mid-March top and consequently it is attempting to establish "some type" of a bottom. I have mentioned, but I have not analyzed yet, that the Spanish IBEX looks like it is now involved in a bottoming phase.

Also the EUR's EWP is suggesting that even though the pattern is not completed yet, price is involved in corrective wave structure, hence the odds that price will revisit the February peak are large.

Going back to SPX, the short-term wave analysis is not reliable and could be misleading. Therefore I will pay a close attention to the daily readings of the McClellan Oscillator.

Now we are below the zero line and we also a have a bearish cross of MA therefore the odds are larger for further weakness then for a bullish move.

But we still don't have the confirmation that a bearish wave (C) down is in progress since, despite yesterday ES Globex was under serious pressure SPX has not breached yet the pivot support.

So now we also have to deal with a disconnect between SPX which was able to remain above 1358 while ES Globex dipped briefly below the equivalent pivot support establishing a lower low and aborting the Triangle & the Ending Diagonal bullish options.


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Regarding the SPX potential EWP, even though I maintain the option of a Triangle, I think that the odds of being the correct pattern are small as long as price does not recover the 20 d MA = 1383.

Yesterday's Doji is suggesting that today price will attempt to extend the rebound.

If the bearish wave (C) will pan out, then we have 2 # to watch: 1340 and 1300, as potential targets.


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The EUR should give us clues if the SPX bearish wave (C) is based on a valid reasoning. We have to wait and see if the down leg off the May 1 top has more business to the down side unfolding a Zig Zag.

Yesterday's bullish hammer presage an attempt to extend the rebound. The strength of the bounce will depend if price will fill or close yesterday's large gap down.

In my opinion the internal structure of the current bounce suggests that we are dealing with a counter trend move.


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With so many reasonable doubts maybe Gold will help clear up the uncertainties by enlightening the next EUR and Equity move.

It is very simple: It depends if it confirms a Triangle that will open the door to a down thrust. If gold goes down, also with a wave (C), then the EUR should follow it.


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It might be just an "anecdote" but if we get the waves (C) down they should be done by May 18 when Facebook is set to kick off an IPO that could reach $ 100 Billion.

To sum up: in my opinion, pending the required confirmation, the most reasonable SPX scenario calls for a wave (C) down. Once/if we get it, we will talk about targets.

 


 

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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