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SPX: Follow Up of the Short Term EWP

By: TheWaveTrading | Sunday, January 12, 2014

SPX has ended the week with a bullish Hammer candlestick reducing the odds of a larger correction from the December 31 high, which, would have been likely, anyway, a shallow larger pullback with a potential target in the range 1818.36 (weekly gap fill) - 1813.55 (November 29 peak).

Therefore next week it is probable that price will resume the advance off the October lows with another up leg.

SPX Weekly Chart
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As I have posted on January 7 on Stocktwits/Twitter, in my opinion the pattern from the October 9 low is not impulsive, instead price is unfolding a Double Zig Zag. Hence the pending up leg should conclude the advance from the October lows establishing either the wave (I) of a potential Ending Diagonal wave (Y) or the wave (A) of a Triple Zig Zag off the March 2009 low.

In the SPX Daily chart I posted on January 7, as you can see I, was expecting either a Zig Zag or a Triangle.

SPX Daily Jan 7 Chart
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After a clear 3-wave down leg to the Jan 6 low of 1823.73, price action has been range bound suggesting absence of selling interest. So far the potential bearish Zig Zag pattern has not materialized.

Even though there is a potential "bearish" Triangle that could still pan out, if next Monday we don't see an impulsive decline we will have to conclude that instead of a s/t bearish triangle price has formed a bullish one (The initial triangle idea).

If the "bearish" Triangle pans out, the pattern from the December 31 high could be a Double Zig Zag with a theoretical equality extension target for the wave (Y) located at 1817.

SPX 15-Minute Bearish Triangle Chart
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Therefore if price breaks above 1843.23 or the pullback is corrective and establishes a higher low above 1832.43 I would consider that price has completed a bullish Triangle which will open the door to a thrust up wave (Y) completing the Double Zig Zag from the October 9 low. The target could be located in the range 1869 (Upper BB) - 1883 (0.618 extension of the assumed wave A)

SPX 60-Minute Double Zig Zag Chart
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Furthermore, a potential impulsive advance off last Friday's lod increases the odds that the correct pattern is the "bullish" Triangle. Hence if next Monday price unfolds a corrective pullback with a target in the range 1839 - 1837 It will most likely be the wave (2) of (Y) and I will probably go long UPRO with a stop below Friday's lod.

SPX 15-Minute Bullish Triangle Chart
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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).

The advantage of ETF investments is that it allows getting involved in equity indices & sectors, currencies, fixed income, commodities etc.

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