Weekly Analysis

By: TheWaveTrading | Sun, May 27, 2012
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Since I don't have any reason to modify neither my long-term nor the short-term scenarios, this weekly technical update is going to be very brief.

I maintain unchanged the long-term count of both SPX and NDX from the last update I made on February 18.

If my scenario plays out I expect significant higher prices during the last quarter of 2012.

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As I mentioned in my last weekend update:

"My intermediate term scenario remains unchanged. I still consider not completed the wave (X) that began at the November 2008 lows. My preferred count calls for a Double Zig Zag in progress. Within this EWP, price on April 2 has completed the wave (A) of the second Zig Zag. Hence now we are in a wave (B) pull back that will be followed by the last wave (C) up, that should take place during the fourth quarter. Regarding the EWP of the current wave (B) move it is not clear at this stage if it will be a steep decline like the previous two corrections occurred on May 2011 and April 2010 or it will unfold a more time consuming flat or a triangle. In the monthly chart below we can see that price has now reached an important horizontal support at 1293. If this area is breached then the next key down side levels are 1258 then the 100 MA = 1222 Further more we can establish the Trend Line Support in force since the March 09 lows as the last "defense" zone that should not be breached under the current scenario."

Therefore as long as price does not deny my scenario I am confident that price at the October 4 low has began the last Zig Zag (ABC) that will establish the top of the wave (X) which should be followed by a major decline.

Within the assumed Zig Zag, price on April 2 has completed the wave (A), hence now the current pullback is the wave (B) which has key down side levels the range: 1258-1220.

So far, if the pattern does not get into a tangle, the "road map" is quite clear.

As I have been suggesting since last Monday:

"On Friday the critical support at 1292 withstood the Bear's raid. Yesterday bulls brightened up and achieved a "solid" upside move. If we don't forget that last week, momentum and breadth indicators had reached extremely oversold readings, yesterday strong move to the upside should be considered a relief bounce that will palliate those extreme readings. But we cannot rule out that the current bounce may be more than a one-day affair and could have the intention to check the solidity of the resistances. Therefore if a critical support has not been breached and the market is hugely oversold then the "pendulum" could now lean towards the bull's side and price could now attempt a move up to test the critical initial resistance in the area of 1340."

In the weekly chart below we can see that SPX ended the week with an inside week candlestick (Harami), which is strengthening my short-term scenario of a larger rebound. The obvious target is located in the range 1340 (horizontal resistance) - 1353.39 (weekly gap).

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Short-term price action

I also maintain unchanged the short-term EW count which I resumed last Friday:

"Regarding the short term one I maintain the "idea" that SPX on May 18 has established the wave (A) within a Double Zig Zag which began on April 2. Therefore now price is involved in a countertrend bounce wave (B) with an assumed target in the range 1340-1353. Keep an eye on the 20 d ma that today stands at 1352. Once the wave (B) is in place I expect a wave (C) down that will most like break the 200 d MA on the way towards the target range 1258 - 1220 where I expect price to establish an "important" bottom."

If my short-term scenario plays out then price now has to unfold an upward Zig Zag (ABC) or Double Zig Zag (ABCXABC). Therefore I am waiting for an impulsive up leg that has to break above Tuesday's hod at 1328.49

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Author: 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).

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