SPX: Follow Up of The Ending Diagonal Scenario

By: TheWaveTrading | Mon, May 26, 2014
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It is quite obvious that from the December 31 high SPX is forming a rising wedge.

I have already discussed that if this wedge = Ending Diagonal pans out it could conclude with a Double Zig Zag the entire advance from the 2009 lows opening the door to a major reversal.

The current up leg from the April 11, which is the last wave of the assumed Ending Diagonal could top either at the trend line that connects the April 22 high with the May 13 high (blue trend line) in the area of 1915 or it could reach the upper trend line of the Ending Diagonal in the area of 1930.

SPX Daily Wedge Chart
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In an Ending Diagonal the wave (V) has to be shorter than the wave (III), this is not an issue since if it reaches the equality extension target located at 1974.82 it would kill the pattern since it would not converge anymore.

An obstacle can be the upper Bollinger Band. Usually when price reaches the Bollinger Band it means that for the short-term time frame the pace and extent of the advance has created extremes on intraday charts but it cannot prevent price from grinding higher.

Time wise the wave (III) has needed 58 days to be established; so far the assumed wave (V) has spent 42 days. The equality will be reached on June 11.

The next major event risks are: ECB meeting on June 5, NFP on June 6, FOMC meeting on June 16, Quarterly OPEX on June 20.

If the Ending Diagonal is not busted I guess that probably it would not be completed before the next FOMC meeting.

If SPX is approaching a major top VIX should do the opposite. Maybe with a massive falling wedge as it can be seen in the monthly chart:

VIX Monthly Chart
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If price is involved in unfolding the last wave of the Ending Diagonal scenario the issue is to decipher the complex corrective mess of the current advance bearing in mind that the last wave will have to be impulsive.

I suggest two potential options within a Triple Zig Zag.

  1. On May 20 price has completed with a Triangle the second wave (X). If this is the correct pattern we are now in the last Zig Zag.

SPX Triple Zig Zag 60-Minute Chart
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  1. On May 15 price has began the last Zig Zag and the current advance is the first wave of an impulsive sequence that will complete the TZZ.

SPX Triple Zig Zag 60-Minute Chart 2
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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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