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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

I maintain a bullish bias for the equity market since in my opinion the odds are very large that SPX has not completed the EWP from the October 4 low, therefore as long as price does not break the critical pivot support at 1357 I am expecting a wave (5) up. This final wave will establish an intermediate top.

If this scenario plays out then it will then it will require some time to be accomplished. I will be looking for an ending pattern once we get determining factors such as extreme AAII bullish readings and overbought market breadth indicators.

As a proxy of the market breadth I will monitor the weekly stochastic of the Summation Index. As I have already mentioned in several updates once a weekly buy signal is triggered, usually it remains in force several weeks until it reaches the overbought zone and a new sell signal can be expected.

A likely pending wave (C) up of the EUR is one of the major arguments that, if it pans out, will strengthen my preferred bullish scenario for the equity market.

It is unquestionable that price is unfolding a corrective pattern from the February top, and then the logical conclusion is that there is a pending wave (C) up from the January lows. It could be a large one if price satisfies the equality-projected target, although price will find a major obstacle once/if it reaches the 200 dMA that today stands at 1.3450.

We are dealing with corrective EWP hence it is tough to marry a particular count.

I have been working with a complex Triple ZZ, but maybe the EWP could be as simple as a Descending Triangle. If this is the case then price would be now involved in a down leg that will establish an intermediate bottom from where to launch the assumed wave (C) up. At the moment it is only a "nice project", but worth to be monitored.


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If this pattern plays out, it will probably need at least one week to be completed, then the lagging European equity market could play some catch up and the Spanish IBEX could even outperform; it is the time to monitor for reversal patterns of B. Santander & BBV.

Therefore I have the two requirements that MUST be fulfilled in order to maintain the bullish bias:

  • The EUR has to establish a bottom
  • SPX has to remain above 1358

Regarding the SPX short-term EWP I have to admit that it is still "up in the air", in other words I am clueless.

But I have 2 potential projects, either an Ending Diagonal or larger corrective pattern that could unfold a Triangle.

We have to wait and see how price behaves if today there is more follow through to the down side once it reaches a cluster of support in the range 1387-1385 (0.5 retracement, 50 dMA & 20 dMA) or the 0.618 retracement at 1380.


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Yesterday's candlestick forebodes more down side action for today, but also the pending weekly one does not inspire too many bullish vibrations. Recall the importance of the 10 w MA = 1388, being above or below it (eow print) may dictate over a quick bullish resolution or a more time consuming one.


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Therefore maybe today by eod we will have more clues regarding the EWP that price is committed with.

On the technical front watch the RSI as it is approaching the 50 line & Trend Line support and the MACD buy signal in force since April 26.


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Interesting things are taking place in the Gold and Oil markets, lets see if I am able to find any appealing EWP there, that can be discussed in the weekend update.

Today we have NFP. It seems there is more agitation then usual. On Sunday we have French and Greece elections. In France if Sarkozy departs the EUR may cheer.

Have a great weekend everyone.

 

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