It looks like someone linked you here to our printer friendly page. Please make sure you go Back to Safehaven.com for more great articles just like this one!

SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Friday, January 11, 2013

Recall that my preferred EWP form the November lows is a Double Zig Zag.

This count implies that from the December 31 low price has to unfold a Zig Zag in order to complete the pattern therefore now we are in the wave (A).

Yesterday I was looking for a contracting pattern = Triangle.

This pattern + the upward thrust could have completed the Double Zig Zag from the November low and it would have opened the door for a meaningful correction. Instead bulls had another unexpected strong performance and when price breached last week's peak the Triangle scenario was aborted.

Yesterday I mentioned that: "If instead of forming the Triangle, today, price breaks to the upside (I don't expect this scenario) then price would be still involved in extending higher the wave (A) off the December 31 low".

So price keeps moving higher with overlapping waves, giving misleading interpretations of the EWP as instead of consolidation moves which usually suggest Flats / Triangles bulls achieve short-squeezes pushing price higher.

The fact of the matter is that if the count that I am following is correct price is still involved in the wave (A) of the second Zig Zag (most likely in the final stages), therefore the EWP is not complete yet.

Below in the SPX 60 min chart I show my preferred count.

As you can see the overlapping up leg off the Jan 8 could be suggesting a potential Ending Diagonal. If it is still not done I would be looking at the upper trend line for a reversal pattern, keep in mind that the September 14 high at = 1474.51, today it will probably be a magnet.

At the moment what I can say is that price has to breach the last higher low at 1461.20 in order to increase the odds that the wave (A) is in place. If I see an ending pattern I will post it on Twitter/Stocktwits.

SPX 60-Minute Double Zig Zag Chart
Larger Image

Hence EW wise I expect an immediate short-term top (Today or next Monday), which will be followed by a wave (B) pullback, which will eventually be bought once again. Therefore a meaningful pullback will be delayed until the DZZ is over maybe by the end of January.

In addition to my short-term bearish stance (bias) we have negative divergences on both the daily RSI and the McClellan Oscillator. Negative divergences usually are the "warm-up" phase of a pending correction.

SPX Momentum Chart
Larger Image

NYSE McClellan Oscillator Chart

Enjoy the weekend.

 

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.

Disclaimer: The content of this article is for educational purposes only, the information supplied is not a recommendation to buy or sell any security or financial instrument.

Thewavetrading.com nor the owner can not be held responsible for any loses occurred from the information provided within the website.

The Information supplied cannot be copied or reproduced without the permission from the owner.

Copyright 2011-2014 TheWaveTrading