SPX: Follow Up of the Short Term EWP
Technically and EW wise the "song remains the same":
- September 14 high is not a Major Top.
- The internal structure of the pull back is corrective.
- The pattern is not completed.
- There is plenty of room for a sizable pullback, but the FED will prevent a trend reversal.
- Consensus bottom is at the rising 50 d MA = 1415, where we now also have the lower BB.
- I would not rule out a larger time & price wise pattern.
- A failure of the 50 d MA will bring into play the 0.382 retracement at 1396.
- In order to seriously consider that price is establishing a bottom we
need to see:
- A completed EWP.
- Positive divergences.
- Extreme oversold readings of short-term indicators.
- High CPCE reading.
Below in the daily chart once again I show the price info, MA and 2 support trend lines.
So far bears have not achieved anything meaningful but as I have been discussed the EWP is strongly suggesting that price has a "pending" move below the QE 3 day = 1430. What will happen once 1430 is breached remains to be seen.
The short-term price action remains bearish biased since the bounce from last Wednesday is clearly an overlapping countertrend move, but as it is always the case with corrective patterns as long as we don't see an impulsive down leg or a break down below 1430, the agony of a larger chop move could endure maybe until next Friday's NFP day.
But today Bears have another opportunity if yesterday's converging move has unfolded a Leading Diagonal. If this is the case we need to see a ZZ up followed by a strong impulsive reversal.
We don't have any extreme in short term indicators, but CPCE is getting too low, it could favor the bears.
Spain and the approaching earning season will be the most likely catalysts for a shallow or a larger pullback.
Something different to monitor:
- EUR 600 Banks Index: We can see that the down leg from the September 14 high is corrective but it is not over yet since, if my count is correct, price should unfold a pending wave (C) down.