"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 15 mins Economic Pressures Weigh On Banks And Borrowers
  • 2 hours U.S. Political Uncertainty Keeps Stock Markets On Edge
  • 17 hours Gold: The Religion Of Currency
  • 2 days Economists Polarized On Trump’s Tariff Plan
  • 3 days Why Are Investors Overlooking Gold Stocks?
  • 3 days The App That Democratized Trading Is Now Worth $5B
  • 3 days Super-Cycles: Why Gold Is Set For A Breakout
  • 3 days U.S. Sanctions Russia For Election Meddling And Cyberattacks
  • 3 days Snap Shares Tank Over ‘Slap Rihanna’ Campaign
  • 3 days How Low Can Bitcoin Go?
  • 3 days Amazon’s Japan HQ Raided In Anti-Monopoly Push
  • 3 days Is Barrick Gold Close To Finding A Bottom?
  • 4 days Morgan Stanley’s Top 10 Short-Term Stock Picks
  • 4 days China: The Land Of The Ultra-Rich
  • 4 days Alibaba Soars On Reports Of China Listing
  • 4 days What Killed Toys ‘R’ Us?
  • 4 days SEC And IRS Take An Aggressive Stance On Cryptocurrencies
  • 4 days Bears And Bulls Face Off In Gold Markets
  • 4 days Bitcoin Is Winning Over The Housing Market
  • 4 days Markets Slide Sideways As Trade War Fears Linger
Consumer Confidence Fails To Boost Retail Sales

Consumer Confidence Fails To Boost Retail Sales

Consumer confidence measured by market…



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…

More Info

Weekly Technical Analysis

As I mentioned last week I have been reassessing my long term preferred EW count.

I have to admit that I was not expecting this break out. The unquestionable corrective internal structure of the rally from the June lows and the weak performance of breadth indicators were strongly suggesting that the logical path was a larger corrective pattern from the April 2 top that would have allowed the resumption of the March 09 up trend with an impulsive move. This is why I was expecting a potential Flat / Expanded Flat or a Triangle:

SPX Corrective Scenario
Larger Image

As I mentioned in my last weekend technical analysis: "The 3 corrective options are still possible, but it looks obvious that Central Banks are fully committed to maintain the equity market rallying."

Now I have to take for granted that price at the June lows has established an intermediate bottom and that the CORRECTIVE trend from the March 09 has been rebooted by an aggressive FED response.

The "heart" of the scenario remains the same: From the 2000 Top Price is involved in unfolding a large corrective pattern that could end up being a Double Zig Zag. If this long-term scenario plays out then price is approaching a major top since the next price sequence will be the wave (A) of the second Zig Zag that will be heading back towards the March 2009 lows.

Therefore this long-term scenario is valid as long as the current corrective move from the March 09 lows does not substantially breach the 2007 Top.

SPX Monthly
Larger Image

So where are we within the large corrective (countertrend move) off the March 09 lows?

Since I cannot consider the rally from the June 4 low as impulsive but at the same time it seems obvious that price has resumed the intermediate up trend then we have to consider the EWP options that allow the market to head higher with a corrective internal structure instead of an impulsive one:

1. Double Zig Zag (ABC = W; X; ABC = Y).

From the October 2011 low Price with another DZZ is unfolding the wave (A) of the second Zig Zag:

SPX Weekly
Larger Image

2. Double Zig Zag (ABC = W; X; ABC = Y)

From the June 4 low price has began to unfold an Ending Diagonal wave (Y):

SPX Weekly XY
Larger Image

3. Triple Zig Zag (ABC = W; X; ABC = Y; X; ABC = Z)

From the June 4 low price has began the third Zig Zag:

SPX Weekly
Larger Image

Now lets move to the shorter time frame analysis where the main issue is WHERE THE UP LEG FROM THE JUNE 4 LOW WILL TOP?

Price has reached an extension target at 1468.69 and it is now at a striking distance of the weekly gap at 1478.49.

If this gap weekly gap is closed the next resistance is at 1500

SPX Weekly
Larger Image

I maintain the count from the June 4 low, which calls for a Triple Zig Zag therefore if this count is correct a top should be around but we need some type of confirmation in order to consider feasible even a short-term reversal. Keep in mind that the last higher low is at 1429 and there is a steep trend line from the July 24 low that has to be breached.

The trend line from the October 2011 low will most likely reject bearish reversals attempts (the 200 d MA is aligning within the trend line); therefore going forward pullbacks could be muted.

SPX Daily
Larger Image

On Friday we had another spike above the upper BB + a potential bearish Shooting Star, but the internal structure of the pullback off the hod looks corrective therefore I don't trust this reversal candlestick unless on Monday we have an eod print below the 3 dMA = 1454.

SPX Daily
Larger Image

Once more we can see in the daily chart above why pullback can be shallow, as dip buyers will most likely step in the range of:

  • Previous break out area at 1428.68.
  • 20 day MA and Trend line support from the July 24 low.

If this support area is breached then we have the pivot support at 1396.56 and the 50 d MA = 1392.

While any larger pullback should be contained by the 200 d MA and the rising trend line from the October 2011 higher low.

Now let's have a look at what momentum and breadth indicators are suggesting:


  • Weekly:

SPX Weekly Momentum
Larger Image

  • RSI is approaching the overbought territory. We have a "nice" trend line form the June lows that will maintain the trend up or notify a reversal.
  • Stochastic is overbought.
  • MACD has a bullish cross in force since the beginning of August.

b) Daily: Overbought and stretched

  • RSI is overbought but it is has erased the negative divergence. Here we have a trend line in force since the beginning of September that once/if it is breached it will be issuing s sell signal.
  • Stochastic is overbought and could easily issue a bearish cross.
  • MACD ha a bullish cross in force since September 7.

SPX Daily Momentum
Larger Image

Breadth: No sign of weakness but getting overbought.

  • Summation Index has erased the negative divergence. The RSI is entering the overbought zone and still maintains a negative divergence.

NYSE Summation Index

  • The weekly Stochastic of the Summation index has issued a new bullish cross from the middle line. If this signal is not reversed next week SPX could "go to da moon".

NYSE Summation Index Weekly

  • The McClellan Oscillator is entering the overbought zone but as of Friday we don't have any indication of "selling pressure". I have added the Stochastic in order to detect initial weakness if it issues a bearish cross. But as long as we don't see a bearish cross of the MA and the loss of the Zero line I would not bet a dime on a large pullback.

NYSE McClellan Oscillator

  • The 10 d MA of the NYSE ADV-Dec Volume is approaching the higher range where in the past price has reversed to the down side.

NYSE Advance/Decline Volume

Regarding market sentiment, as I mentioned on Friday: "judging from the following CPCE chart (Contrarian Indicator) we can see that it is approaching extreme low readings, often a market top is around."

CBOE Options Equity Put/Call ratio

Regarding VIX:

  • The long-term pattern (from the 2008 top) could be unfolding a bullish falling wedge, therefore if during the next weeks/months the lower trend line is not breached odds of a major break out to the upside would substantially increase.

VIX Weekly
Larger Image

  • In the short-term time frame the fear index is maintaining a bearish (for equity) divergence, as it keeps holding above the August low.

In the daily chart below, I have included the envelope (10,10). It is a tighter BB. Usually when the "body" falls below the lower band, the next day an eod print above it can issue a sell equity signal.

VIX daily
Larger Image

Lastly it is quite obvious that without a rebound of the USD index chances of expecting a pullback of the equity market are nil.

Here we have the May 1 higher low and the 0.5 retracement of the entire rally from the May 2011 low = 78.56 that may hold and allow an "oversold rebound".

US Dollar Index daily
Larger Image

Next week the main risk event is Quarterly OPEX on Friday.


Back to homepage

Leave a comment

Leave a comment

Sign Up For The Safehaven Newsletter