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SPX: Follow Up of the Short Term EWP
It is not the Ending Diagonal that I was looking for, as I posted last Tuesday:
But maybe price is still forming a different bearish rising wedge:
In order to increase the odds that this Ending Diagonal will pan out price, despite yesterday's consolidative session, which usually means a continuation pattern has to surprise the majority with a corrective pullback.
This "unexpected" short-term pullback can pan out if a Double Top is confirmed today. This pattern has a theoretical target at 1509 (More or less where the 10 dma is located).
Below is the SPX 5 min chart I posted yesterday at the eod on Twitter/Stocktwits:
If the wedge discussed above is confirmed then I maintain the scenario that calls for a multi-week pullback wave (IV) of the large Ending Diagonal scenario discussed lately.
The potential target should be located in the range: 1458 (50dma) - 1434.
In the Technical front there is no change: the warnings that this up leg is long in the tooth remain omnipresent across the board of both short-term and long-term breadth & momentum indicators
Below I show a few examples:
- McClellan Oscillator: Huge negative divergence both vs its January peak and vs Friday's hod and below the zero line.
- RSI is also showing a huge negative divergence both vs its January peak and vs last Friday's hod.
- The MACD remains with a bearish cross.
- NYSE Adv-Dec Volume also with negative divergence vs Friday's print and in addition yesterday it was negative.
- The weekly stochastic of the Summation Index is issuing a sell signal, which will have to be maintained by Friday's eod print.
So if the wedge discussed above is correct, there should be marginal upside but the downside risk could be worth 60-80 points, hence R/R in my opinion is clearly leaning against the bulls.
I am watching KBE (In addition to an already long position in SPXU) as a possible candidate for a short setup (Long FAZ).
Here we have another potential wedge.
If/when price breaches 26 I might go long FAZ.
Lastly, but I don't have time now to post any chart, both the EUR and the European indices have already began a correction, which should be far from over. In my opinion odds are larger for SPX playing catch up to the down side.