Weekly Technical Analysis

By: TheWaveTrading | Sun, Dec 22, 2013
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Despite there were plenty of technical reasons that were suggesting a larger correction bears have failed to breach the 50 dma. At the same time in spite of the persistent negative divergences a breadth thrust of the McClellan Oscillator will most likely allow the weekly stochastic of the Summation index to bottoming out and issue a multi-week buy signal. If this is the case the next sell signal will be issued once the stochastic enters the overbought territory.

NYSE Summation Index Chart

Therefore going forward we will have to monitor the McClellan Oscillator since as long as it remains above the zero line bulls will remain in control.

NYSE McClellan Oscillator Daily Chart

And buying "exhaustion" will probably not occur until NYUD reaches the overbought line.

NYSE Advance/Decline Volume Daily Chart

Long-Term EWP

I maintain the idea that from the March 2009 low price is unfolding a corrective advance, probably a Double Zig Zag. If this is the case the next theoretical extension target is located at 1936. As I have discussed in my previous weekly updates once the corrective pattern is completed SPX will be vulnerable for a meaningful decline, which will probably not bring into peril the long-term up trend.

The monthly candlestick, with only 6 trading days left, could end up being a Spinning Top, if this is the case odds would favour a pullback in January. As long as the 5 m ma which today stands at 1739 is not breached the up trend will not be in danger of being reversed.

SPX Monthly Chart
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If SPX is unfolding a Double Zig Zag, in my opinion, at the October 9 low price has began the last wave (5) of (Y).

If price achieves the equality extension target with the assumed wave (1), the wave (5) could top at 1910.

SPX Weekly Chart
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As I discussed in my last weekly update there is an issue with this EW count. Since the advance off the October 9 low has unfolded a clear 3-wave up leg, this pattern can only result in an Ending Diagonal. If the Ending Diagonal pans out it will open the door to a meaningful trend reversal.

Therefore if price is forming an Ending Diagonal we should have two options:

  1. "Large" Ending Diagonal: Price is unfolding the wave (I)

SPX Ending Diagonal Chart
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  1. "Small" Ending Diagonal: Price is unfolding the wave (III)

SPX Small Ending Diagonal Chart
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I wish everyone happy holidays and a fantastic 2014 (I will be off until January 2)




Author: 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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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/