I maintain a bullish bias as long as price remains above the 50 dsma = 1212 (SPX)
The reason is based upon the fact that the November's decline has proven to be corrective therefore the EW pattern off the October 4 low is not completed.
As I mentioned in the weekend post, since the initial up leg off the October 4 has been corrective in my opinion we have 2 potential scenarios:
1. Price is tracing a Zig Zag = (ABC)
This option remains valid as long as the structure of the current move, the assumed wave (C), is impulsive.
The extension (1x1) target is at 1377
2. Price is shaping a Triangle wave (B)
If the current rise proves to be corrective then it should be establishing the wave (b) of potential contracting pattern = Triangle
Unfortunately price atm is hiding its true intentions.
In order to have an impulsive up leg off the November 25 low we now need 13 waves while if we have only 11 it would be corrective.
And as a matter of fact both counts are possible:
- Impulsive:
- Corrective:
Then we have to wait for the "due" pullback, which will kick-off with an eod print below 1243.
Since last Thursday we have eod potential reversal candlesticks that atm have been aborted, signalling underlying strength, but when yesterday's news of S&P placing all 17 EU nations on downgrade watch hit the tape it immediately cooled down the buying enthusiasm seen earlier in Europe.
I suspect that it has to be considered as a mean of placing pressure to EU leaders!!!!
We have a double-edged sword, with equity price that is willing to go higher based on the expectation of firmer response from ECB & EU officials next Thursday.
But if THEY disappoint you better not be long the market.
Not only the equity market is "betting" on end of week good news also EU Government bonds are rallying as it can be seen also by:
- Large weekly drop of the yield of the Italian BTP:
- The large rally in progress of the EU Banks:
As it can be seen in the 60 min chart price could have completed "only" the wave (III) of 3
EUR is atm a worry since it has not joined the "party".
The EWP has not an impulsive look, hence it is "suggesting" of being prudent on the upside potential for the equity market but it is far from being bearish and we are used to corrective rallies in this pair.
Here I am working with at least a potential Zig Zag, with a pending wave (C) up.
We shall see how price reacts at the first potential target for the wave (B) in the 1.3300 = (1 x 1) extension target.
Technical Front:
Amongst the indicators that I follow, daily momentum should show us the "way"
The behaviour of the RSI above the 50 line and the MACD bullish cross and zero line will determine which bullish set up is in the cards.
