SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Fri, Oct 19, 2012
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You already know my point of view regarding the corrective pattern in progress since the September 14 high.

I maintain a doubtful stance that the EWP is over and price has resumed the intermediate up trend, but price and breadth have to confirm it as soon as possible.

The main reasons of my skepticism are:

1. Internal structure:

Therefore the scenario that calls for an incomplete Double Zig Zag is not dead. (There is a pending wave (C) down).

Regarding the immediate time frame probably the assumed wave (B) is not in place yet as long as bears claim an eod print below 1451.39.

SPX 30-Minute Chart
Larger Image

2. Negative Divergence of RSI at the October 12 reaction low.

But the strong momentum of the current bounce has to decelerate and reverse. For instance, if the RSI breaks above the October 5 peak it will invalidate my short-term scenario.

SPX Momentum Chart
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3. Major US equity sectors are badly lagging behind SPX & DJIA.

Last Wednesday I discussed the KBE pattern. We can also add to the list NDX and Russell 2000.

Below we have the daily chart of NDX.

My preferred count calls for a pending wave (C) down that will most likely challenge the October 2011 trend line support.

Here bears are in control as long as the 2 gaps at 2785.92 and at 2811.94 are not closed.

NDX Daily Chart
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Conclusion:

It is premature to consider that price has resumed the intermediate up trend, but only the strength of the next pull back will confirm if the bears are still in the game validating the scenario of at least a pending wave (C) down.

SPX daily Chart
Larger Image

Have a great weekend.

 


 

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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