Weekly Technical Analysis

By: TheWaveTrading | Sat, Sep 22, 2012
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All week long I have been suggesting that probability that SPX on September 14 has established the top of the up leg from the June 4 low is quite large.

As I mentioned on Friday the major reasons of my bearish stance are:

Lets begin this weekend technical update with a look of what is going on in the DJTA and SMH.

We all know that one of the basic elements of the Dow Theory is that in an up trend DJTA has to confirm the new highs achieved by the DJIA. When this fails to occur it is considered a "red flag" for the sustainability of the price trend.

In addition here we have a bearish cross of the 50d & 200d MA and price from the September 14 peak has collapsed. In my opinion the odds are very large that price has began an impulsive sequence to the down side.

In the chart below we can see that the DJT, from the June 4 low, has been not capable to overtake the May top. Instead it has been engaged in a large and complex corrective patter that may have been completed on September 14, coinciding with SPX daily shooting star. If this is the case then price from the May top should be involved in unfolding a Zig Zag down.

Dow Transports Daily
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Semis (SMH) have also the same problem. I don't think that this huge divergence with NDX can be maintained much longer.

Like in case of DJT here we also have a bearish cross of the 50 d & 200 d MA and last week price has broken down with a large gap losing both MA. Next week, Thursday's gap down = 32.63 should not be closed if the trend is now down.

SMH Daily
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Remaining in the technology front it is obvious that we need a terminal pattern of AAPL in order to consider feasible a reversal of NDX.

Maybe we do have one, although so far the Ending Diagonal ideas are not panning out.

Apple 15-Minute Chart
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Lets move on.

We have a weekly bearish Harami in several important equity indices. The one that clearly stands out is KBE (btw this one also has not been able to achieve a break out above the March top).

An Inside week candlestick (Harami) can be considered as a warning of a sudden deterioration of the trend. The probability that the trend is about to change is very large.

KBE Weekly
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In the case of SPX, the weekly Harami is not strongly marked, but the previous week candlestick can be considered an exhaustion bar (eow print above the upper BB).

SPX Weekly
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As I have mentioned several times last week, the internal structure of the pullback "per se" does not offer enough confidence that a reversal is in progress, therefore we cannot rule out a Double Top or even a marginal higher high, but the deterioration of daily momentum indicators and the McClellan Oscillator are rising the likelihood of an imminent correction phase.

I have no idea of the potential target since the action of the FED has busted a logical path and now we have to deal with the consequence of a corrective up leg that we have to fit within the large countertrend move from the March 2009 lows. Last week I suggested 3 possible options. For the time being I maintain that:

In the daily chart below we can see that:

SPX Daily
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VIX once again has to be closely monitored for clues.
The negative divergence (for the equity) is still in place.
The lower horizontal Trend Line that is in force since the April 2010 lows is a huge support.

Maybe there is a bullish falling wedge almost done.

VIX Daily
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In the technical front:

NYSE Summation Index

NYSE Summation Index Weekly

Daily Momentum. We already have a sell signal issued by the Stochastic but the loss of the 80 line is needed. The RSI has already breached the September Trend Line. If the scenario of a correction plays out then the RSI should be heading towards the June Trend Line.

SPX Momentum
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As I mentioned on Friday: Today we have Quarterly OPEX and the statistics is overwhelmingly favoring the bears: Since 1990, the week after the September OPEX has been positive ONLY 4 years. Will Ben instruct his generals to abort the bear's chance?

I have an issue with Feedburner, the Google application that sends the new posts by e-mail to subscribers. Therefore I cannot guarantee that you receive new posts regularly. I usually post on the web site the weekend technical analysis on Sunday at 20:00 (CET), while daily updates are posted at 13:00 (CET).

 


 

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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