Brief Weekly Technical Update

By: TheWaveTrading | Sun, Jul 1, 2012
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In my last weekend update I mentioned that:

"In my opinion despite last week's bearish reversal at the 0.618 retracement key resistance supports the "bearish case" that the counter trend bounce off the June 6 low is over, I remain skeptical and I am not going to rush in calling a trend reversal yet, for the simple reason that, if it still matters, the internal structure of the potential reversal has a deficiency for the "bearish case", since it has a questionable impulsive structure.

Therefore if the current pullback is unfolding a corrective EWP then price has not began yet the trending wave (C) down, hence the odds that price will establish a higher low (Above the June 6 low) are large."

The internal structure of the pullback off the January 19 high has mislead the bears that were looking for an impulsive decline, instead once again the down move has been corrective and price has established a higher low, therefore the only reasonable conclusion is that the corrective rebound off the June 6 low is still in progress.

I also mentioned that the overall count from the June 6 low could become a Double Zig Zag. Therefore if next week price breaks above the June 19 peak then the corrective EWP could allow price to reach the following target range:

SPX Daily Chart
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Hence I maintain the scenario that calls for a wave (B) that will unfold a 3 -wave down leg (Zig Zag) from the April 2 Top:

So far I also maintain that if price unfolds a Zig Zag down then this corrective EWP should establish a bottom in the range 1248 - 1207.

But since price has failed to reverse at the 0.618 retracement then we cannot rule out that instead of a downward Zig Zag price could unfold a Triangle or a Flat in which case the June 6 low has already established the low point of the corrective pattern.

The candlestick's picture is bullish with a Hammer both in the monthly & weekly time frame:

SPX Monthly Chart
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SPX Weekly Chart
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To sum up:

I expect that the initial counter trend bounce from the June 6 low will morph into a Double Zig Zag hence the target for the wave (B) is now in the range: 1389 - 1406.

Once the wave (B) is in place I expect a reversal with a wave (C) down with a target in the range 1248 - 1207.

In addition even if the internal structure of the advance suggests higher prices ahead we also have to monitor momentum and breadth indicators when/if price exceeds the June 19 high at 1363.46

SPX
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NYSE Summation Index

 


 

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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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/