SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Wed, Oct 24, 2012
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SPX has finally breached the pivot support at 1422. Price is no longer in a trading range and clearly now the trend within the corrective pattern from the September 14 high is clearly heading south.

It is a fact that given the internal structure of the move from the September high price is involved in carrying out a Fibonacci retracement of the up leg off the June 4 lows.

As I have mentioned several times once 1422 is breached the next potential bottoming area is located in the range of 1396 and the trend line support in force since the October 2011 lows. Given that the rising 200 d MA is standing just below the trend line I don't not rule out that price may want to test its solidity.

SPX Daily Chart
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Having potential critical pivot prices in the radar screen where the correction could conclude is not enough. A multi-month bottom can only occur if:

We should not be too far away since:

NDX Daily Chart
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DJIA Daily Chart
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Going back to SPX in the daily chart below I highlight the 4 numbers that depending upon the technical indicators are the candidates for the bottom

SPX Daily Chart
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Regarding the location of price within the EWP off the September 14 high if the DZZ count that I have been following is correct then price is now involved in unfolding the last wave (C) down. But we have a technical issue since the down leg in progress is not impulsive then if it is a wave (C) it has to unfold an Ending Diagonal.

In the 5 min chart below (which I posted on Twitter before the close), it can be clearly seen that the down leg in progress is not impulsive hence price should be completing the wave (I) of the assumed Ending Diagonal.

SPX 5-Minute Chart
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The Alt count: Within the Double Zig Zag option price is still unfolding the wave (A) of the second Zig Zag.

In the technical front:

NYSE McClellan Oscillator Chart

SPX Momentum Chart
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Lets move on to the "fear index"

VIX is now clearly in a short term up trend. It has woken up with a delay but now we have higher highs/lows.

There is a potential Double Bottom target at 20.50.

Yesterday it closed with the daily bar (Shooting Star) completely above the upper Bollinger Band, hence the odds of a pull back are large but as long as the previous resistance now support at 17 is not breached the trend is up.

Also the RSI has no negative divergence yet hence I expect more fear going forward.

VIX Daily Chart
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For today I expect a rebound of SPX (Odds are large) given:

CBOE Options Equity Put/Call Ratio Chart

I am clueless regarding the target. Lets watch the range 1434-1444.

But keep in mind that it should be a selling opportunity.

If despite the above short term bullish reasons SPX fails to rebound then things could get really nasty for the bulls.

I don't have time now to post an updated chart but keep an eye also on the EUR & USD Index since without a bottom of the former and a top of the latter SPX down side pressure will not abate.

 


 

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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