SPX: Follow Up of the Short Term EWP
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:
- Bullish seasonality.
- Absence of deceleration of the short-term breadth indicators.
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.
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.
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.
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:
- The "oversold" bounce is over ==> the wave (B) is done.
- Price has established the wave (Y) of a larger Double ZZ.
- Price has established the wave (A) of a larger Zig Zag.
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.
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.
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.
I wish a wonderful Thanksgiving to US readers.