Weekly Analysis

By: TheWaveTrading | Sun, Sep 9, 2012
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For a long time I have been maintaining the following "Big picture road map":

From the 2000 top price is tracing a corrective pattern named Double Zig Zag

DZZ= (ABC = W; X; ABC = Y)

In my opinion the wave (W) was established at the November 2008 low. Since then, the wave (X) that by definition is a corrective countertrend move has been in force.

The wave (X) is also unfolding a Double Zig Zag.

Therefore, if the DZZ count is correct, from the October 2011 low price is tracing the last Zig Zag up that once is completed will establish the top of the wave (X). This will be a Major Top since the next price sequence will be the wave (Y) which will be heading back towards the March 2009 lows.

SPX Long Term Count 1
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For the shorter time frame, given the unquestionable corrective price structure of the move off the June lows, and a feeble behavior of breadth indicators I have been considering that price was involved in shaping a corrective pattern from the April top which once completed it would have allowed the kick off of the last wave (C) up with a potential retest of the 2007 highs.

In other words I was not conceiving that price could have resumed the intermediate up trend at the June lows, instead I was expecting one of the following corrective EWP: Flat / Expanded Flat or a Triangle.

SPX Daily Correction
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The 3 corrective options are still possible, but it looks obvious that Central Banks are fully committed to maintain the equity market rallying.

Therefore the wave (X) instead of a Double Zig Zag, it could be unfolding a Triple Zig Zag in which case from the June lows price has began to unfold the wave (A) of the third Zig Zag.

SPX Long Term Count 2
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Consequently to the price action I will now consider the second option as the "alt count" since it would allow, given the corrective price structure of the move off the June lows, the resumption of the intermediate up trend.

In addition, if the EUR has established an "important" bottom this option could have chances.

In order to increase the confidence and turn the "alt count" into the preferred one I need to see where the current up leg tops and what kind of pullback price has in mind.

Lets now move on to the short time frame.

The scenario remains the same:

SPX Daily
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In the technical front:

Summation Index

Summation Index Weekly

-RSI (14) without negative divergence
-RSI (5) has entered the overbought zone-
-Stochastic is not overbought yet-
-MACD is issuing a bullish cross.

SPX Momentum
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A standard topping process would require the appearance of negative divergence in the "last push up" in shorter-term breadth indicators such as the McClellan Oscillator and the Adv-Dec Volume index. Hence, next week, I will play close attention to their readings.

The key event next week is on Thursday with the FOMC meeting. Maybe it is the "turning window".

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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