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TheWaveTrading

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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…

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Daily Analysis

In an extended move it is often the case that price does not unfold the perfect last wave of an ending pattern. This is what most likely happened yesterday with the Dow failing to complete with a higher high the potential Ending Diagonal while SPX achieved the higher high with an unclean fifth.

The fact of the matter is that we have another potential topping action, and this one feels different from the other 2 failed attempts to complete the up leg off the December 19 low.

Probably the best example of the potential reversal can be seen in the AAPL chart below where the stock gapped up (exhaustion gap), traded to new highs and reversed strongly to the down side leaving a very bearish shooting star with huge volume.

AAPL
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Momentum indicators are now undoubtedly flashing a sell signal:

  • RSI: Negative Divergence and breaching the T L 1 support
  • Stochastic: Bearish cross.
  • MACD: Bearish cross

Regarding SPX yesterday's bearish action has not inflicted yet any damage on the daily time frame, as price is struggling not lose the lower tl support of a likely bearish rising wedge.

SPX
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Therefore as I always reiterate: when price is involved in a reversal pattern it has to establish a lower low & a lower high. In the case of SPX we just had an intraday lower low of only 3 ticks, but this "failed" attempt can quickly change today if/with a gap down and go.

The level that should likely trigger sell stops is at 1337.35

Therefore even though SPX does not have the "official" kick off the overdue correction, I am giving a much larger probability that the correction has been "activated".

Recall that may preferred scenario calls for a top of the wave (3) of (C), within the Zig Zag that price is unfolding from the October 4 low.

Then the wave (4) pullback could last a couple of weeks at least if it unfolds a Flat or a Triangle (EW alternation guideline)

The obvious target is located in the 1300 area. If price closes the gap at 1289 I will reassess this scenario.

Regarding the EUR with 5 consecutive down days it is getting oversold but the short term outlook can deteriorate considerably with and eod print below the horizontal support at 1.3020 - 50 dsma

With only a 3 -wave rebound we have to be aware that it can be fully retraced. Keep in mind that SPX could drop +- 5%.

EUR/USD
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