Unfortunately SPX`s Ending Diagonal that I have been monitoring for more than two weeks has been busted.
However given the technical reasons discussed in my last Weekly Technical Update I maintain the assessment that price is involved in a topping process that will establish the end of the corrective up leg off the November lows.
At the beginning of February I changed my approach. Due to the lack of clarity given the overlapping internal structure of the up leg from the December 31 low I gave up attempting to decode the pattern with useless counts, instead I focused my attention to locate either an impulsive up leg or an Ending Diagonal, since an EWP always ends by forming either a 5-wave up leg or an ED.
I remain very doubtful that price is unfolding an impulsive move hence if SPX will eventually conclude the up leg from the November 16 low it should form an Ending Diagonal.
The SPX 60 min chart below, which I posted yesterday on StockTwits/Twitter after the close, depicts this EW outcome.
Additionally, as it can be seen in the daily chart below, since the end of January (Until price does not break above the upper converging trend line) price is tracing a rising wedge with a bunch of overlapping waves.
Conclusion for the short-term time frame:
There is no ending pattern, therefore I assume that there will be at least one more higher high in the near future.
But due to the following reasons for today I expect a pullback:
- White Marubozu = Usually it reflect a short term buying exhaustion.
- EOD print above the upper BB = It reflects an extreme move.
- TICK eod print of 1217 = As well it reflects a short-term buying extreme.
I keep watching TLT and VIX for clues of when Risk ON will be switched to OFF. (Divergences means yellow flags)
At the moment the conclusion is a draw:
TLT has maintained the higher low while VIX by establishing a lower low has most likely aborted the Double Bottom pattern suggesting that it will need more time to form a reversal pattern.
VIX, as well as SPX it is wedging down with positive divergence of its RSI. Once/if the fear index closes the gap at 13.50 it will most likely confirm a trend reversal.
Lastly I am monitoring the DAX, which I would be really surprised if the current bounce is more than a wave (B) that should establish a lower high.
Therefore at the moment I have two options either I leave for a holiday (I cannot do it) or I patently wait for the outcome that in my opinion remains the one with the higher probability.