SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Thu, Sep 27, 2012
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I begin today's brief technical update with a look at the EUR, which is down 7 out of the last 8 trading days. Yesterday it bounced off the important 200 d MA = 1.2823 & 20 d MA leaving in the chart a bullish Hammer. Therefore price could attempt to carry out a multi-day bounce, which I consider as an "oversold rebound".

The resistance to watch is at 1.3000.

If EUR rebounds then the equity market should follow the currency move.

EURO Daily Chart
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Let's now go to the SPX charts.

Yesterday I mentioned that in the range 1440 - 1435 price could have attempted to establish a short-term bottom.

Why?

Because the 20 d MA was standing at 1436 and at 1435 we have the previous wave (4) and also we had the FOMC QE3 launch of an "exhaustion" thrust up.

But the daily candlestick does not give much confidence that such a bottom is in place.

Therefore today we have to watch the EUR closely.

In the daily chart below we can see that the range 1429 - 1422 has to hold otherwise there is only thin air until the rising trend line in force since the June 4 low.

Above yesterday`s eod print we now have the 20 d MA = 1438 then the 3 d MA = 1444, which has to be recovered in order for price to attempt a multi-day rebound.

The previous pivot support at 1450 is now the major resistance.

SPX Daily Chart
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As I mentioned yesterday: "price should be now involved in the initial stage of a pull back that should grow in size but it should not endanger the intermediate up trend."

Therefore I expect more downside price action ahead.

Lets now analyze the short-term price action, which so far can be labeled as a Double Zig Zag.

Despite the daily candlestick is "neutral" the short term count is suggesting the price could have established the bottom of the wave (Y), but we have to proceed with caution since corrective patterns can easily morph, so we have the immediate time frame picture not clear.

If a short-term bottom is in place then the strength of the bounce will help us define the correct EWP. At the moment I can say that if we are dealing with a wave (2) or (X) then price should not achieve an eod print above 1450, while if price is unfolding a wave (B) then it should top in the range of the 0.618 retracement = 1458.

SPX 15-Minute Chart
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In the technical front:

SPX MACD
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NYSE Advance/Decline Volume

 


 

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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