As discussed in the weekly analysis, SPX should be involved in a topping process.
If my EW count is correct, price should establish the top of the wave (3) of (C) off the October 4 low.
Today I don't have much to write, I am on a wait and see mode as all the "ingredients" for the overdue correction are in place, it is only a matter to let price confirm it.
Major Factors:
- Weekly Spinning Top.
- Potential ending pattern.
- Negative divergence of McClellan Oscillator which by eod Friday dropped below the zero line
- 10 dsma NYSE adv-dec volume with negative divergence.
- Daily Stochastic with a bearish cross.
- VIX breaking to the upside a potential massive bullish falling wedge
- Etc......
On Friday we had the first sign of weakness but a 1-day pullback is not enough and as a matter of fact price yesterday completely retraced Friday's sell off, therefore we don't have yet a confirmation that a top is in place.
Even if a top is not in place I am confident that we will "see" a correction of the December 19th. up leg very soon.
Given that yesterday price was once again unwilling to confirm the "awaited" reversal we cannot rule out another attempt to achieve a higher high.
Judging from the Dow Piercing Line candlestick, odds favour another push higher but if the Ending Diagonal is the correct pattern just a marginal higher high / Double Top should be the candidate for the long overdue reversal, therefore today we have to pay close attention on how price reacts once/if a higher high is achieved.
Probably the strongest "warning" is being given by VIX, which by breaking a very large bullish falling wedge to the upside, it should have established some type of a bottom and consequently a trend reversal should be expected.
Yesterday's Hammer may have established the required higher low needed to strengthen the assumed reversal.
