Today only a short and brief update, it is holiday in Madrid so I will try to spend most of the day with my children.
Yesterday we had a gap down and go.
The 1340 SPX key pivot support level was breached. The Dow erased the positive divergence that was sustaining the "live on hopes" scenario of an immediate bullish resolution of the corrective pattern.
It is now a fact that SPX despite it is unfolding a corrective EWP now it has only "thin air" until a potential target box located in the range 1300-1285 where I expect price to establish an important bottom.
The overall picture in my opinion remains bearish. As I mentioned in my last weekend update my preferred scenario calls for a wave (B) pullback.
Sine we are dealing with a corrective EWP we have to be open minded, but so far, from the April 2 top price is unfolding a Zig Zag down (ABC correction) with the wave (C) in force since the May 1 peak. As a reminder the wave (C) has to unfold an impulsive 5-wave structure (or an ending diagonal).
For the immediate time frame, in my opinion, price has two options:
- Embark in a "crash mode" with a "killer" wave (III) of (3) down.
- Undertake a recovery attempt with a wave (2) relief bounce that may reach the 1366 -1375 resistance area.
In my opinion the option of a relief rebound (countertrend move) is more likely since SPX is now oversold, we have yesterday's eod print below the lower BB and we have oversold readings of:
- Short term momentum indicators like the RSI (5) is oversold
- McClellan Oscillator is entering the oversold zone
