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TheWaveTrading

TheWaveTrading

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

SPX's Ending Diagonal it's either completed or the count that I have been following is wrong. What I want to point out is that the ending pattern that has been hiding within the bearish rising wedge in force since the end of January is officially done since bears have finally achieved to break down the rising trend line support, and even though the eod bounce (which is clearly corrective) has left a bullish hammer and saved an eod print below 1363.81, we finally have indications that the long overdue pullback has began.

As a reminder:

My scenario is calling for a wave (4) pullback with a target in the range 1325 -1311


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It is not a 100% secure reversal since unfortunately the internal structure of the down leg in progress is not impulsive but keep in mind that if the EWP of the assumed wave (4) is a Flat or a Triangle, price could be tracing the infancy stages of a wave (A); which can be a corrective wave.

Granted that the death blow to the Dec 19 up leg will only be achieved once SPX has an eod print below 1363.81, with yesterday's price action a trend reversal is very possible as we finally have lower high/low on both the daily and 60 time frame, daily RSI has breached its rising trend line support and we have an eod print below the 10 dsma.


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Therefore I am assuming that:

  • SPX has completed with an ED the impulsive up leg off the December 19 low.
  • 100% confirmed with another lower low.
  • The price structure of the pullback unfortunately is corrective. The absence of an impulsive move will make more difficult the management of short positions since corrective patterns usually tend to morph.
  • On the other hand a corrective pullback is what I am looking for as it can belong to a wave (A) of a Flat or a Triangle.


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Given the statement given by price, which has refused to trace an impulse down in my opinion atm, the potential count "candidate" is an initial Zig Zag provided price does not overlap above 1363.81

Keep in mind that we will not have a confident count probably until price has traced 80% ot the pattern.

If this idea plays out then once have the impulsive wave (C) in place we should expect a "large" rebound attempt, that will have to maintain the sequence of lower highs; either 1372.10 or 1376.17

Therefore bulls will try to "confuse" with strong bounce attempts.

In addition we have:

  • The McClellan oscillator already approaching the "oversold" 60 line.

  • CPCE is quickly approaching the upper BB:

As mentioned on Sunday we already had indications of a weakening market given the bearish behaviour of DJT and IWM.

Yesterday SMH has joined the "club" of the sunken ships by the bears with a text book H&S that has a theoretical target at 32.50:


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The next goal is to achieve the reversal of KBE which will need an eod print below 21.80:


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To sum up there is no doubt regarding that the conditions are ripe for the kick off of the overdue correction, provided the dip buyer will rest for a while.

 

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