SPX: Follow Up of the Short Term EWP
This is just a brief follow up, my thoughts have been discussed in the last weekend technical up date so now we have to see how the pattern from the November low evolves.
The suggested Triangle played out but with a shallow thrust higher as price did not even reached the 0.618 extension = 1433 which also coincides with a cluster of resistance (November 6 peak and Bollinger Band), instead it reversed at the 50 dma= 1420.80.
Now we know where a ton of buy stops is located.
This can be considered a sign of weakness and it is a negative for the discussed bullish EWP options that consider the November low a major bottom.
However if price is unfolding a wave (B), in which case the EWP from the September high is not over yet we need to see a deterioration of breadth indicators (The biggest positive for the bulls) since so far the message is bullish.
The bearish reversal is meaningful and it is strengthened by a daily Shooting Star.
Therefore I consider that the Double Zig Zag off the November 16 low is done.
I also believe that this has not ended a likely larger rebound, since there are no negative divergences, hence I expect a multi-day pullback that could be complete by Thursday (Ahead of Friday's NFP).
I establish the expected target box for the assumed wave (B) pull back in the range 1403 (10dma) - 1393 (20dma).
Yes it is all about moving averages. Obviously the expected pullback has to hold above the 200 dma = 1385.
If the wave (B) bottoms in the target box then the next wave (C) up will have an equality target in the range 1468 -1479 (Extension targets are only a reference so we cannot rule out a failure at 1433.
Lets move to the price action of the current EWP:
- Odds are very large that at yesterday's hod price has finished a Double Zig Zag = wave (A) of a larger Zig Zag.
- If this count is correct price can unfold either a downward correction (Zig Zag / Double Zig Zag ) or a sideways one (Flat/Triangle) but both options require much more from the bears.
- Usually a "logical" target is the 0.382 retracement but in order to achieve it bears have to break through the 1403 support line.
- Yesterday's bearish action rarely is just a one-day event hence I expect more down side action which will give clues regarding how much downside progress will be achiebed by the bears.