SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Wed, Nov 21, 2012
Print Email

Probably, if the scenario that I am working with is the correct one, the "easy money" of being long of the assumed "oversold" bounce has been already made, but so far there is no indication that price has established a top.

Furthermore due to the following factors:

Are suggesting that the EWP off last Friday's lod is not over yet.

As I mentioned yesterday: "So far, a breadth thrust is clearly endorsing the counter trend move, so we have to wait for a deceleration of this bullish inertia in order to look for a reversal pattern. Usually, like price, the oscillator unfolds a 3-wave up leg; hence we already know that odds are very large that price has not completed yet the "oversold rebound".

In the chart below we can see that so far the Oscillator has unfolded only one thrust up-leg.

The stochastic is approaching, but it has not entered yet the overbought zone.

NYSE McClellan Oscillator Chart

The combination of technical circumstances and the still not confident labelling of the current up leg recommend caution.

I will pay close attention to the NYSE Adv-Dec Volume for indications of an increase or tame selling pressure in an overdue pullback. And especially, if we get negative divergence in a pending wave up.

The opposite of what occurred at the SPX's November 16 lod.

NYSE Advance/Decline Volume Chart

Yesterday SPX fulfilled the script of a narrow range body, it's the common candlestick (in this case a bearish Hanging Man) that usually follows a white Marubozu. It means consolidation of the previous gains and hesitation.

This pattern could evolve into a bearish reversal pattern " Evening Doji Star" if today we get a gap down and go. But this is not my preferred scenario.

Regarding the overall count from the September 14 high, I don't even change a comma, since I remain firmly confident that the current "countertrend" rebound will top in the target box that I have been highlighting in the last few days. Critical overhead resistance is now not far away, either 1397 or a kiss back at the previous trend line support off the October 2011 now converted into resistance.

Once/if price confirms my preferred scenario the last wave (C) down, which could match the length (89.1 points) of the previous down leg; wave (A), is expected to complete the EWP off the September 14 high, hopefully with positive divergences.

For the short term the 10 d mas = 1375.17 could be the demarcation between a mild pullback and something more bearish.

SPX Daily Chart
Larger Image

Regarding the labelling of the current rebound so far we have a 3-wave up leg or a corrective variant (DZZ) therefore we have 3 options:

So we need to see the internal structure of a pullback in order to increase the confidence on a count.

For the immediate time frame yesterday's down leg after completing an Ending Diagonal suggests that there should be at least one more down leg.

SPX 5-Minute Chart
Larger Image

As I mentioned yesterday I am watching:

1. EUR: "Since in my opinion the internal structure of the rebound off the November 13 lod is clearly suggesting that in the near future price has more business to the down side. So far bulls here are struggling to reclaim the 200 d ma, which coincides also with a strong horizontal resistance, while slightly above there is the steep declining 20 d ma. Barring "good news", with the current weak structure, which could be shaping a bearish Flag, price should reverse in the range of the Trend line resistance in force since the October 17 high and the next horizontal resistance at 1.2876".

So far price is maintaining the sequence of higher lows hence if price breaks above 1.2840 (trend line resistance off the October 17 high) then within the corrective pattern in progress price could extend the move towards the next resistance located at 1.2876.

Euro Daily Chart
Larger Image

2. VIX: we now have to watch the trend line support and the possible "sell equity signal" that would be issued with en eod print above the Bollinger Band of the Envelope > 15.50.

Yesterday's doji + oversold Stochastic are favouring at least a bounce attempt, although ahead of Thanksgiving holiday it may not be a reliable indicator.

VIX Chart
Larger Image

I wish a wonderful Thanksgiving to US readers.

 


 

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.

Disclaimer: The content of this article is for educational purposes only, the information supplied is not a recommendation to buy or sell any security or financial instrument.

Thewavetrading.com nor the owner can not be held responsible for any loses occurred from the information provided within the website.

The Information supplied cannot be copied or reproduced without the permission from the owner.

Copyright 2011-2014 TheWaveTrading

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/