Today the technical update is brief since yesterday I have laid out my preferred short-term scenario, so now I have to wait for a confirmation by the price.
As I mentioned yesterday:
"With yesterday's huge rally we now have a daily White Marubozu. Some upside inertia usually follows this candlestick, but most of the time by eod it is a small range body.
Therefore we will have to wait for Friday's price action, in order to evaluate the bullish/bearish options".
We got the small range body since SPX ended the day with a potential bearish Shooting Star.
A Shooting Star usually is an exhaustion candlestick.
As you know, in my opinion, at the June 4 low price has not completed yet the corrective EWP from the April 2 top due to the lack of impulsiveness in the last down leg from the May 29 lower high at 1334.93.
For this reason I suggested 2 potential short-term outcomes, an Ending Diagonal or a Triangle. Both options will result in lower prices ahead.
If I am on the right side of the current EWP then the missing wave (C) down will establish an important bottom, probably the low point of a larger corrective pattern (Flat / Triangle) that will carry on during the summer.
The majority of EW analysts are looking for a much bearish outcome since they are assuming that price has unfolded an impulsive down leg from the April 2 top which concluded at the June 4 low.
Therefore now price is involved in a multi-week rebound with a potential target in the area of the 50 d MA = 1359 from where a potential wave 3 down will begin its path towards the lows 1200s.
We will soon know if this rebound has more legs. The resolution of the 2 potential scenarios is straightforward, the key is if price fails or succeed to break above 1334.93.
In the mean time we have to wait to see today's price action. So far the initial drop from yesterday's hod has been impulsive in many indices.
We can resume the critical levels with the 20 d = 1316 & 10 d MA = 1307.
In order to increase the probability that the current bounce is over price has to lose by eod the 10 d MA.
In the mean time, as I am writing today's technical update, ES Globex is tracing an impulsive decline, which is presaging with a large probability more down side action.
The EUR and the Bond markets will play a major role in validating the correct short-term equity scenario.
VIX remains the main indicator above all because yesterday's candlestick, an Inverted Hammer, at the critical horizontal support at 20.75 MUST be confirmed today, otherwise a lower low could jeopardize my bearish short-term scenario.
Have a great weekend.