SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Fri, Nov 2, 2012
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Yesterday bulls removed the uncertainty regarding if price had completed a bullish falling wedge or if it was unfolding a bearish triangle wave (B).

SPX 30-Minute Chart
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Bulls reclaimed the pivot resistance at 1422 with strong technicals.

So now we have the confirmation that price has established a short-term bottom (Assumed wave A) hence price should carry out a multi-day rebound wave (B) with a theoretical target in the range 1433 - 1441.

Once the wave (B) is in place I am looking for a wave (C) down which should at least match the 60.74 points drop of the wave (A). In other words I am expecting a Zig Zag down from the October 18 peak.

The assumed Zig Zag could establish the bottom of the corrective pattern from the September 14 high.

Now lets go back to the wave that is now underway.

Where will it top?

As it is always the case we need:

I am going to follow SPY, establishing a wide target box, which encloses in the lower range a gap at 145.09, and in the upper range a kiss back at the June's trend line.

SPX  Chart
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If bulls are able to brave the potential "storm" of today's NFP release then given the fact that next Tuesday we have the US presidential election, then probably price will establish the top of the current countertrend rebound by the end of next week.

In the technical front:

NYSE McClellan Oscillator

SPX Momentum Chart
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As you when we have directional move in progress, which is expected to be a countertrend wave, I always watch VIX in order to have clues regarding the longevity of the move.

Hence now we have to wait for a reversal candlestick, which may take a few days since downside inertia usually takes some time to mitigate.

Here the obvious support is located at the 50 d ma = 15.90 & lower trend line of a potential large Bear Flag.

VIX Daily Chart
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The etf that I am also going to watch closely is XIV since the pattern from the October 18 top rarely could be just one leg down hence it substantially strengthens my call that SPX's rebound will eventually fail.

XIV Daily Chart
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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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