You already know my point of view regarding the corrective pattern in progress since the September 14 high.
I maintain a doubtful stance that the EWP is over and price has resumed the intermediate up trend, but price and breadth have to confirm it as soon as possible.
The main reasons of my skepticism are:
1. Internal structure:
- The bottom of the October 12 low lacks of a terminal pattern.
- The strong rebound in progress looks more corrective than impulsive.
Therefore the scenario that calls for an incomplete Double Zig Zag is not dead. (There is a pending wave (C) down).
Regarding the immediate time frame probably the assumed wave (B) is not in place yet as long as bears claim an eod print below 1451.39.
2. Negative Divergence of RSI at the October 12 reaction low.
But the strong momentum of the current bounce has to decelerate and reverse. For instance, if the RSI breaks above the October 5 peak it will invalidate my short-term scenario.
3. Major US equity sectors are badly lagging behind SPX & DJIA.
Last Wednesday I discussed the KBE pattern. We can also add to the list NDX and Russell 2000.
Below we have the daily chart of NDX.
My preferred count calls for a pending wave (C) down that will most likely challenge the October 2011 trend line support.
Here bears are in control as long as the 2 gaps at 2785.92 and at 2811.94 are not closed.
Conclusion:
It is premature to consider that price has resumed the intermediate up trend, but only the strength of the next pull back will confirm if the bears are still in the game validating the scenario of at least a pending wave (C) down.
Have a great weekend.
