SPX: Will It Confirm The Double Top?

By: TheWaveTrading | Sun, Mar 23, 2014
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My son is playing a tennis tournament so I don't have much time for the weekly update. I will just iterate the already discussed potential ending pattern of SPX (Elliott Wave exhasution pattern) and suggest that XLF may also be unfolding the same pattern.

A bearish quarterly OPEX has created a bearish price pattern with plenty of daily reversal candlesticks. As you can see in the chart below it stands out the huge engulfing candlestick of NDX.

Daily Reversals Chart
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However the internal structure of the decline from the March peaks is suggesting that price is unfolding a corrective pattern. For NDX IWM and SPX it looks probable a Zig Zag. Obviously the size of the pending wave (C) down will depend upon if SPX confirms a potential Double Top.

Regarding XLF if during the expected pullback price breaches the January high located at 22.15 then maybe this down leg could be the wave (IV) of an Ending Diagonal, which began at the October 2012 low. The target would be located in the range 21.67 (50 dma) -21.52 (Gap that can be filled).

If the Ending Diagonal pans out it could complete a Triple Zig Zag from the March 2009 low opening the door to a major reversal.

XLF From October 2013 Chart
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This ending pattern would be aligned with the same idea that I have been discussing for SPX. If this is the case then SPX MUST confirm the Double Top, in which case the wave (IV) of the assumed Ending Diagonal should bottom in the range 1813.50 (November breakout) - 1799.84 (Gap that can be filled).

If instead of the Double Top SPX unfolds a Flat the overall pattern will have to be reassessed.

SPX Ending Diagonal Chart
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Obviously one-day reversal pattern is not conducive yet beforehand of a penetration of the March 14 low but Momentum and Breadth indicators are suggesting that al least we should expect further weakness ahead.

SPX Daily Momentum Chart
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NYSE McClellan Oscillator Chart

NYSE Advance-Decline Volume Chart

VIX Weekly Chart
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Next week I will be looking to go long 3x Bear ETFs (SPXU, TZA, FAZ)

 


 

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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