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SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Wednesday, February 27, 2013


Despite the disparity of the potential corrective EWP between the Dow and SPX I expect more down side action within the scenario of a retracement of the November-February up leg.

As discussed during this week the two US major equity indices are not tracing the same path:

SPX 30-Minute Chart
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DW 5-Minute Chart
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(Chart posted yesterday at eod on Stocktwits/Twitter)

Regardless of the correct explanation of the EWP I expect that the overlapping bounce which began at yesterday's lod to fail preferably in the range of the 0.5-0.618 retracement. I would be really surprised if bulls reclaim the 20 dma = 1511 (eod print).

Regarding my preferred long-term count, its viability depends upon if bears are able break through the September high at 1474.51.

If this is the case than the current pullback could belong to the wave (IV) ed with a potential target in the range 1459-1437.

So I am short and on a stand by mode.

SPX Daily Chart
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As suggested yesterday due to short term oversold extremes the probability of a bounce was large.

Today I expect follow through to the upside (I am not saying bullish from opening to close, we shall see) due to:

CBOE Options Equity Put/Call Ratio Chart

TLT Daily Chart
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TLT Daily Chart
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Conclusion: Too many option equity bears + a likely pullback of TLT and VIX are suggesting that the odds favour a larger bounce of the equity market.

In the technical front I will monitor (as usual) the McClellan Oscillator, since it should maintain the sequence of lower Highs/Lows, hence it should not breach last Friday's lower high at -18.89 (Or if higher it should not recover above the 10dma).

NYSE McClelln Oscillator Chart


Author: TheWaveTrading


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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).

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