SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Fri, Sep 28, 2012
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Yesterday I suggested monitoring the EUR since with Wednesday's hammer odds were very large that the 200 d MA would act as a brake on the pull back from the September 17 peak.

At yesterday's eod, this pair formed another bullish hammer therefore it is "obvious" that price should attempt to achieve more gains in the next few days, until we see a reversal bar.

The immediate resistance is located at 1.2992.

My view here is that the correction from the September 17 top is not over yet. We have the first leg in place of a potential 3 -wave down leg correction.

For the immediate time frame we have to be aware that as long as the EUR bounce extends higher the equity market will not resume with another down leg its corrective pattern.

EURO Daily Chart
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The same scenario can be applied to SPX:

Price has completed the first down leg of a potential larger corrective pattern, hence now we should have a countertrend bounce in progress.

I rule out that price is kicking off the resumption of the up trend.

So now we have to wait for short-term extremes of breadth indicators (TICK, TRIN etc) and contrarian sentiment indicators like CPCE as warnings of an exhaustion of the current bounce.

As we can see in the daily chart below we have 3 key numbers to watch: 1450, which was tested yesterday, 10 d MA = 1455 then the lower high at 1467.07.

SPX Daily Chart
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Regarding the short-term price action and the EW count in the 30 min chart below I have labeled a potential map:

SPX 30-Minute
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If it is a wave (B) then the rebound should carry price above 1452 and breach the trend line resistance, if it is a wave (2) of (C) or a wave (X) price should remain below 1453 - 1455 (10 d MA).

So far we have a 3-wave up leg so the chances for the 3 potential counts are not defined yet.

In the technical front:

SPX MACD
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NYSE McClellan Oscillator

Lastly just a short comment on the VIX.

Yesterday it collapsed by dropping almost 12%.

Usually such a big move has residual inertia until we see a bottoming candlestick. I have 2 speculative small trend lines that could act as support but at the moment we cannot rule out a retest of 13.61 or even the huge trend line support at 13.20.

What seems to be working are the buy/sell equity signals triggered by the envelope bands (Bold blue bands).

It is worth noting that VIX could be shaping a large bullish falling wedge.

VIX
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Have a great weekend everyone.

 


 

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).

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