SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Fri, Jan 25, 2013
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This short-term EWP update is probably the most dull I have ever written since I began publishing TWT on July 2011.

The main reason is that, Elliott Wave wise; I cannot decode the overlapping pattern from the December 31 low into an interpretable count. For me it is like driving at night without lights.

When I am clueless of the location of price within a pattern I just stand aside and wait for clarity.

I remain confident that given the overlapping internal structure if this "nightmare move", the up leg from the December 31 low must be a wave (A), therefore the pattern from the November lows is not done.

If yesterday's hod has established the top of the assumed wave (A), which remains a very questionable statement since there is no ending pattern that can be seen (Impulsive 5-wave advance or an Ending Diagonal), given the stubborn bullish market behaviour despite overbought readings of daily momentum indicators and negative divergence of breadth indicators, It seems reasonable to expect just a shallow correction, maybe no lower than the 0.381 retracement at 1462.

SPX 15-Minute Chart
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What I can say regarding the short-term pattern is that despite yesterday's "bearish" Spinning Top candlestick, so far bears have nothing, only an intraday lower low.

Therefore if some type of a pullback has been kicked off we need to see lower high/lows hence today we need an eod print below 1489.46.

In the SPX daily chart below we can see that if bears achieve a lower low the next support is located in the range:

SPX Daily Chart
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Not only there is absence of an ending pattern (In my opinion) but also VIX and TLT did not do what they where expected to do.

Regarding VIX, it failed to confirm a potential Double Bottom pattern, and it ended the day without even a hammer, instead we have a doji, which suggests a lack of interest in seeking protection by market players.

VIX Daily Chart
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So in my opinion SPX remains vulnerable of a pullback and the risk/reward of being long is not appealing.

Regarding the TWT Swing Picks yesterday I was stopped out in $JO at 33.07 while in $UGL despite price closed below the stop loss I had established at 84.68 I have decided to maintain the position as long as GLD does not breach the 200 dma = 161.24, although with yesterday's large gap down my scenario has been considerably weaken.

Have a great weekend everyone.

 


 

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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