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Weekly Technical Analysis

By: TheWaveTrading | Sunday, March 3, 2013

WHICH IS THE PREVAILING CANDLESTICK: THURSDAY'S SHOOTING STAR OF FRIDAY'S HAMMER?

Despite this weekend I have family and friends engagements I have been able to make up a brief update.

Lets review the EWP from the November 16 low.

In my opinion it is not impulsive:

If these 2 assumptions are correct the corrective EWP from the February 19 top cannot be considered a wave (4) that will open the door to a wave (5) up.

Therefore relaying on the two potential Ending Diagonals that price has unfolded form the November 16 low, in my opinion, the most reasonable count that is appropriate with EW rules and better explains this complex internal structure is a Double Zig Zag.

SPX 60-Minute Chart 1
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If this count is correct, barring a "metamorphosis" into a Triple Zig Zag which would imply much higher prices ahead, the odds that from the February 19 high price has began a corrective phase are large.

In addition so far we have a sequence of lower highs/lows that is suggesting that the next directional move should be to the down side. Once/if price establishes another lower low and breaks the trend line support in force since the November 16 low then we will have the absolute confirmation that a corrective pattern from the February 19 high is already underway.

If the correction is confirmed then I expect a bottom to be established either on March 15 (Quarterly Opex) or on March 20 (FOMC).

If this is the case then form the February 19 high price could be unfolding another Double Zig Zag (This one downward) that has a theoretical extension target in the range 1479.41 - 1451.

SPX 15-Minute Chart
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Moreover there is a chance that last Friday price has completed with a 3-wave up leg the wave (B) of the second Zig Zag.

Why?

Because there is a potential Leading Diagonal from last Friday's hod:

SPX 5-Minute Chart
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Therefore if next Monday SPX does not break to the upside with another higher high the Leading Diagonal can pan out opening the door to an impulsive decline.

As you can see we have a "seismic risk" where a move of a few points above or below Friday's eod print can make a heck of a lot of difference.

If what I have discussed above makes any sense and above all price confirms the potential downward corrective pattern with a wave (IV) then my preferred long term count which implies that price is unfolding an Ending Diagonal from the June lows could pan out.

So we need to see next Monday who wins: Thursday Bears'
Shooting Star of Friday Bulls' Hammer?

SPX Daily Chart
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Keep in mind that this Ending Diagonal "project" could establish THE MAJOR TOP.

SPX Weekly Ending Diagonal Chart
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In the technical front:

NYSE Summation Index Weekly Chart

Daily Momentum Chart
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NYSE McClellan Oscillator Chart

There are two caveats that could favour the bulls:

CBOE Options Equity Put/Call Ratio Chart

EURO Daily Chart
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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.

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