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SPX: Follow Up of the Short Term EWP

In the last weekend technical update I have discussed why I am "enlisting" an alternative long-term count, which would resolve the issue of the resumption of the intermediate up trend with a corrective up leg.

But at the moment I don't care, since we have to wait for the next pullback in order to assess the long-term EWP options.

Now I am only focused on the short-term time frame since it is my belief that the unquestionable corrective price structure from the June 4 low should be almost completed.

In addition to suggesting that price has unfolded a complex Triple Zig Zag, and within the EWP price should be now involved in the final wave (Z) it is quite obvious that price has formed a potential bearish rising wedge.

Keep in mind that rising wedges usually open the door to "violent" moves to the down side.

SPX Daily
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An ideal reversal would occur at the upper trend line, in addition one more up leg would probably allow the appearance of negative divergence in my preferred short term breadth indicator = The McClellan oscillator.

NYSE McCLellan Oscillator

An Ending Diagonal is the "dream" terminal move, which would put the icing on the cake:

SPX Triple Zig Zag
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Yesterday two issues clearly stand out:

  • NDX has a 3-days candlestick bearish set up. It is not a perfect Evening Dojy Star" but it has the connotation of a potential reversal.

NDX Daily
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In addition here we also have a negative divergence on both the RSI and Stochastic while the MACD has failed to issue a buy signal during the last up leg

The RSI trend line support has to be breached if the EWP off the June 4 low is completed.

NDX Momentim
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  • VIX yesterday jumped 13.21%. This move is "big" and the candlestick is clearly signaling a potential bottom. A higher low of the "fear indicator" is showing a clear divergence vs SPX and has to be seriously respected.

VIX Daily
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Conclusion:

  • NDX and VIX price action are suggesting a potential top for the equity market.
  • But the absence of negative divergence of the Mc McClellan oscillator is suggesting that one more push up could be in the cards.
  • Therefore we have to closely monitor the weaker NDX since if the gap at 2766.95 is closed then odds that the move off the June lows is finished would substantially increase.

 

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