Weekly Technical Analysis

By: TheWaveTrading | Sun, Sep 2, 2012
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Since I would like that the weekly technical review should not be a boring analysis I am not going to repeat every week my preferred long-term and intermediate-term scenarios as long as price does not invalidate my technical reasoning.

Therefore, please read my last long-term update posted on July 9 under the thread Equity USA (Long Term Analysis).

Just as a reminder the 3 major components of my technical assessment are:

Regarding the shorter time frame scenario:

The expected wave (C) up could have an extension in the range of 44 - 72 points.

In addition we have: The weekly BB at 1437 and a trend line that connects the May 2011 high with the April 2012 high in the area of 1445.

SPX Daily
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I have been suggesting that the current pullback should have unfolded a shallow Zig Zag down with a potential target in the range 1390 - 1382 but so far the potential set up for the third leg down have been invalidated therefore given the refusal of price to unfold a Zig Zag, in compliance with EW rules and guidelines, we have to be open minded and respect the option that price may want to go higher, omitting a logical pattern.

The Bollinger Bands in the daily time frame are narrowing. Usually when the distance between the upper and lower BB becomes small price has the tendency to brake with an intense move the trading range. If my scenario plays out the break out should be to the upside.

SPX Daily
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Therefore the direct consequence of my technical reasoning should result in a topping process that can open the door to an entirely retracement of the summer rally.

Regarding the immediate time frame, last week, I have been attempting to discover a set up that would allow a 3-wave down leg off the August 21 high, form where price would launch the last wave (c) up but the continued price hesitation has denied so far the kick off of an impulsive decline. So we have a bunch of 3-wave moves, which makes the short-term action difficult to predict.

So, as long as the trend line off the June 4 low is not breached, I maintain a short-term bullish bias with a limited upside potential while the potential down side move can be substantially larger.

I have no idea regarding the correct short-term EWP, I can only highlight:

SPX Triangle
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SPX Ending Diagonal
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Regardless of the unknown short-term EWP, it looks like price is shaping a bearish rising wedge.

We can establish 2 horizontal levels that will allow the launch of the last wave up or delay it:

SPX 60-Minute Chart
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Short-term breadth indicators like the McClellan Oscillator and the NYSE Adc-Dec volume have a positive divergence hence we have a bullish signal.

If NYMO moves above the zero line and its 5 d crossed the 10 d MA we will have a buy signal (Although given the whipsaws seen since the end of July it is not very reliable).

Advance/Decline Volume

NYMO

Next week VIX should be the best gauge in order to determine the price intentions.

VIX Daily
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Next week we have 2 major event risks:

Conclusion:

 


 

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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