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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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SPX: Follow Up of the Short Term EWP

A couple of weeks ago I gave up counting the up leg off the December 31 low given the lack of clarity due to an overlapping internal structure. Instead I opted to focus my attention in attempting to locate the final impulsive up leg or an Ending Diagonal, since an EWP always ends by forming either a 5-wave up leg or a rising wedge.

Last week I discarded the impulsive option and I began working with the Ending Diagonal option, which in my opinion makes a logical choice.

Ending Diagonals are formed in the final wave 5 of an impulsive sequence or in the final wave C of a Zig Zag/Double Zig Zag or Triple Zig Zag. I believe that price is involved in one of the latter corrective options.

Therefore as I show in the SPX 120 min chart below price could be forming the assumed Ending Diagonal within the two black converging trend lines:

SPX 120-Minute Chart
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If price is forming an Ending Diagonal then price should be in the late stages or might have finished the wave (III) at yesterday's hod. Once/if the Ending Diagonal plays out I expect price to begin a multi-week correction that will retrace a segment of the up leg off the November lows.

In order to maintain valid the ED option, since I don't know where is the beginning of the wave (I) hence I cannot calculate the maximum length allowed of the wave (III), I need price to carry out sooner rather than later a corrective pullback that carries price below the peak of the assumed wave (I) at 1514.41 If this is the case and today we finally have a correction I expect the 10 dma = 1510 +/- to hold a shallow pullback.

SPX 60-Minute  Ending Diagonal Chart
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Since with my bearish stance I find myself against the side of the majority I always spend a lot of time to reflect and study not only the price pattern (EW front) but also what momentum and breadth indicator are suggesting (Technical front).

As I have discussed almost every day there are negative divergence across the board (Negative divergence of the RSI & the McClellan Oscillator, MACD with a bearish cross, Summation Index that is rolling down..) that are suggesting that the uptrend from the November lows is in its late stages.

So I have a potential ending pattern and technical indicators no aligned with this bullish trend but price has to confirm my scenario.


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