SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Thu, Oct 25, 2012
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Despite the "bullish" reasons I mentioned yesterday which favored an oversold bounce, price did not kick off the expected rebound.

However since bears did not take the opportunity to extend the down leg in progress towards the next obvious support at 1396 and SPX ended the day with a an inverted hammer I maintain my short term bullish bias.

Therefore if bulls are able to regain the old support now resistance at 1422 then the bounce could reach the range 1434 - 1437.

I expect the overdue bounce a selling opportunity since price should carry out at least one more down leg, which could complete the Double Zig Zag off the September 14 high.

I add this scenario to the Ending Diagonal option in the daily chart below (Black Count).

If the wave (B) rebound materializes then once it is in place we will have a potential extension target for the pending wave (C) down.

SPX Daily Chart
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I suggest playing close attention to NDX since price is at the 200 d MA. Yesterday's candlestick could be an exhaustion bar.

Here if we do get a multi-day bounce I don't expect price to close the gap at 2744.17.

NDX Daily Chart
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The following down leg will be very interesting since if the positive divergences of the Nasdaq McClellan Oscillator are maintained then a double bottom at the 200 d MA could be possible.

If not then price could bottom in the range 2625 - 2610.

Look at the Oscillator, which is not collapsing and stubbornly is maintaining a positive divergence.

NDX McClellan Oscillator Chart

Another bullish reason can be found in the NDX internal structure of the down leg off the October 17 lower high.

We have a 7-wave down leg (Assumed wave (A)) that could be completed with an Ending Diagonal. If the ED plays out then the expected countertrend wave (B) rebound should top in the rage 2703 - 2734.56.

NDX 15-Minute Chart
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Finally yesterday I mentioned that VIX had an unusual bar above the upper BB. Well we now have a second day in a row with the body completely above the BB. This is not sustainable hence I expect a pullback.

If this is the case then VXX should confirm a potential Double Top with a target at 35 from where it should carry out at least one more up leg.

VXX 30-Minute Chart
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Conclusion:

 


 

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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