Despite being oversold, yesterday SPX "knuckled under" the selling pressure from the opening to the closing bell and was not able to hold above neither the 50 d = 1372 MA nor the Trend Line Support from the October 4 low.
The eod print below the Trend Line Support does not give any bullish vibration, but the price structure of this down leg may be completed or in an unfavorable short-term scenario it could need one more down leg.
My "plan" remains the same: I am looking for a corrective phase that is assumed to retrace a portion of the 3 - wave EWP off the October 4 low, afterwards price is expected to resume the intermediate up trend.
I have established 2 target objectives:
- 1340
- 1293 -1288
If price breaches considerably the 200 d = 1270 MA then a more bearish scenario would open the door to a move back to the October lows.
Regarding the potential pattern that price will unfold, if my primary scenario plays out, we will have to expect one of the following EWP:
- Zig Zag / Double ZZ.
- Flat.
- Triangle.
Therefore price is now involved in tracing the first down leg, which I am labeling as wave (A).
Once the wave (A) is in place a multi-day corrective pullback is expected to establish a lower high. As an initial indication Tuesday's gap down at 1398.08 should not be closed by the wave (B).
The wave (B) will be followed by one impulsive wave (C) down.
If this option plays out once we have the ZZ over I will reassess the outlook.
Probably the final target will be closer to 1293 then to 1340.
Keep in mind, that yesterday both the Russell 2000 and the Dow have broken their equivalent Target 1 objective.
In addition, if price rebounds strongly from yesterday lod, the DOW could be shaping the right shoulder of a Head & Shoulder. If this bearish pattern plays out then the 200 d= 12120 will come into play (for the time being it is just a bearish idea).
As I mentioned yesterday: "If we are talking about a correction of the 3-wave up leg off the October 4 low then the time factor has also to be taken into account:
- ABC time length = 124 trading days
- Potential Pullback = Fibo. 0.5 = 2 / 3 months è Potential Bottom by June?"
Short-term price action:
I am "working" with 2 potential short-term counts. Either we have the bottom of the wave (A) or one more down leg is needed.
The line in the sand between the 2 options is an eod print above the 50 d = 1372
Yesterday's Mc Clellan Oscillator reading at -103; Trin = 249 & Price below the lower BB are warning that the odds of a "large rebound" are increasing.
Regarding the momentum indicators, Stochastic has entered the oversold zone (it can remain oversold for some time) while the RSI (as long as below the 50 line I will maintain a bearish stance) and MACD are giving bearish vibrations.
