My long-term count remains the same:
- Double ZZ off the 2000 peak. The wave (X) topped on July at 1347. The wave (Y) down will challenge and may exceed the March 09 low.
Or
- July's nominal high is wave (A) of (X). Price is now tracing a corrective wave (B) that should bottom no lower than the 927 area. We have a tough market since the lack of impulsive action off last summer highs casts doubts regarding a potential bearish outcome, but if the long-term count that I am working with is correct then we are dealing with either a wave (B) or a wave (Y) that by their nature have to trace corrective patterns.
Therefore I am assuming that:
- The intermediate trend is down: At 1347 price has completed a wave pattern, either a wave (X) or a wave (A).
- At the October low we don't have a major bottom in place, since despite it has been established with a corrective Zig Zag, the following advance has also traced a corrective pattern.
- Therefore we should expect more weakness ahead.
- The confirmation that the trend has reversed to the down side needs a lower high.
- The odds that the trend has reversed to the down side are large since we have a potential impulsive down leg off the October high, which has been followed by a corrective rebound which has stopped at the 0.618 retracement.
But:
The bearish set up has to be confirmed.
If price recovers above 1263 the bearish scenario could be killed.
In addition CPCE is on the bullish side:
And:
ES Globex has corrective down side action + a five up off Friday's lod which is suggesting that there could still be a pending wave (C) up in order to complete the Double ZZ
Anyway the EUR should limit any unfinished business to the upside if the its Double ZZ is completed, shaping a likely bear flag. (As I am writing it has opened with a gap down)
On the Technical front we have:
a) Mixed signals from momentum indicators.
- Weekly momentum indicators are bullish
- Daily Momentum indicators have the Stochastic on the verge of reversing a bearish cross while the MACD has no bearish signal cross yet.
b) Overbought readings of Breadth indicators:
Judging from the NYSE % of stocks above the 50 dsma & the weekly stochastic of the Summation Index the market is overbought. The odds of a large reversal are large.
c) Negative divergence of the NYSE 10dsma of the Adv-Dec. Volume
