Momentum and Breadth indicators are rolling down:
- Stochastic has issued a bearish cross:
- McClellan Oscillator is in a downtrend below the zero line while the 5d-10d MA has issued a bearish cross:
- 10 dsma NYSE Adv-Dec Volume is rolling down:
As I mentioned yesterday, SPX up leg off the March 06 lod is expected to establish the top of the Zig Zag from the October 4 low. Therefore as this scenario seems to be on track, once the ABC is completed I am expecting at least a corrective multi-week decline.
What began as a clear impulsive up leg has morphed into a doubtful EWP pattern. In addition, since so far, the shallow down side action lacks impulsiveness I am wary to consider that price has established an intermediate top.
If price has established a "multi-week top" we know that price has to breach the rising trend line support that connects the wave (2) & (4) where we also have located the 20 dsma in the area of 1376. Therefore as long as price does not lose this area I would not rule out that price will only retrace a portion of the March 06 up leg.
If this is the case then the assumed pullback should be a wave (II) of a larger impulsive structure or of an ending diagonal.
I will monitor CPCE since for the short-term time frame until we see a spike towards the upper BB probably the current price down trend should continue.
In addition to a doubtful reversal pattern I don't have "yet" a 100% commitment to the bearish side for 3 reasons:
- Sell in May and go away axiom time wise is still far away.
- AAII Bull Ratio is not an extreme:
- Weekly Stochastic of the Summation Index is in the extreme oversold zone with a potential pending multi-week buy signal.
Yesterday I also mentioned that for the immediate time frame the EWP structure of the up leg from the March 6 low seemed unfinished and I was looking at 2 potential ending patterns, now with two consecutive down days it seems less likely that price is unfolding an internal wave (IV) while the ED option does not look right either.
Therefore it seems more likely that price has established some type of a top and will at least retrace a % of the move off 1340, as long as the critical 1376 support zone is not breached.
Even though SPX "real price intentions" are not clear, we have a couple of interesting bearish set ups with "unknown" scope:
- KBE has a potential H&S EWP (60 min time frame)
- AAPL has a bearish rising wedge (15 min time frame)
The recent weakness of EUR is also suggesting that equities should suffer in the immediate time frame. The bounce off the March 15 lod has been clearly corrective, but even though the EWP is not clear, we have a potential H&S with a theoretical target at 1.3074
To sum up: Even though the EWP of the assumed wave (C) (off the November 25 low) does not have a "sound" reversal pattern, we have enough technical reasons to consider that the most likely price action will be to the down side. The extent and price structure of the current pullback will give us clues regarding the if the up leg off the March 06 lod is over or, as I am atm guessing there will be more upside left.
