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

  • 17 hours Why Criminals' Cryptocurrency Choices Matter To Average Investors
  • 2 days OPEC ‘Supergroup’ Keeps Oil Exports Subdued
  • 2 days One Belt, One Road, One Direction for Precious Metals
  • 2 days Vicious Trio Keeps Bitcoin in Chokehold
  • 2 days How Infrastructure Is Driving A Commodity Boom
  • 2 days What’s Really Happening With Venezuela’s “El Petro?”
  • 2 days Gold Bull and Bear Markets
  • 3 days 5 Big Drivers of Higher Inflation Rates Ahead
  • 3 days U.S. And China To Face Off Over Aramco IPO
  • 3 days Gold Bulls, Brace Yourselves – Fed Hikes Are Coming!
  • 3 days Stocks Fail to Hold Gains, But Still No Correction
  • 3 days Cryptojacking: A New Threat Vector To Critical Infrastructure
  • 4 days Why The Next Oil Boom Will Be Fueled By Blockchain
  • 4 days 5 Things Investors Should Know About China this New Year
  • 4 days Is The South Korean Crypto-Drama Finally Over?
  • 4 days Miners’ Rally? What Rally? Watch Out for More Fake Moves!
  • 4 days Four Percent 10-year Note Yield Will Be a Floor Not a Ceiling
  • 4 days The End Is Near
  • 5 days 5 Record Breaking Gemstones Even Billionaires Can’t Buy
  • 5 days Irredeemable Currency De-tooths Savers

SPX: Follow Up of the Short Term EWP

Given the following reasons summarized below in my opinion the odds that the up leg off the November low is done are very large. The "bearish deal" will be sealed with a lower high.

  • Sentiment: As discussed in the weekly update on February 3 reached extreme bullish readings (AAII Bull Ratio and NAAIM Survey).

  • Breadth is confirming a weekly sell signal: The weekly stochastic of the Summation Index has confirmed the sell signal issued during the last week of January. The next buy signal should occur when the stochastic drops to the oversold zone.

NYSE Summation Index Weekly Chart

  • Momentum Indicators are now aligned with the scenario of large pullback. The RSI will have to lose the 50 line.

SPX Momentum Chart
Larger Image

  • European peripheral markets have most likely began a corrective phase of the up leg from the July's low. Below I show you my preferred count for IBEX.

IBEX Weekly Chart
Larger Image

  • The EUR from the July lows with a Double Zig Zag has most likely completed a wave (A). If this count is correct price could retrace towards the 200 dma = 1.2827.

This weekend I will review the EWP, but I want to show you a potential H&S that has a projected target at 1.2880:

Euro Weekly Chart
Larger Image

  • SPX's wedge should have completed a Triple Zig Zag from the November lows (In my opinion the overlapping internal structure denies an impulsive count). If the up leg off the November low is corrective we already know that a major top is not in place and that it is reasonable to expect a pullback in the range of the 0.382-0.5 retracement = 1460-1437.

The new pivot support is at 1498, once/if it is breached there is only white space (Except the BB at 1491) until the next support at horizontal support which coincides with a rising 50 dma = 1474.51 If this area is also breached then my preferred long term count could pan out with a wave (IV) of the ED option.

SPX Daily Chart
Larger Image

  • We have a 5-wave decline, setting the first step of a trend reversal. Once/if the current bounce off yesterday's low proves to be corrective and stalls in the range 1510-1518 establishing a lower high the Trend Reversal will be officially switched on. My preferred candidate range is 1510 (20 dma)-1514 (Previous support and 0.5 R).

SPX 5-Minute Chart
Larger Image

  • Depending where the current bounce stalls there is a potential H&S with a projected target at 1464 target.

SPX 60-Minute Chart
Larger Image

  • VIX is finally showing FEAR. After the last 2 days' surge yesterdays Shooting Star is suggesting a likely pullback but as long as long as it establishes a higher low the trend is now clearly up. The potential target may be larger that initially thought.

VIX daily Chart
Larger Image

  • We should see a flow back into bonds. In my opinion TLT (proxy for the bond market) is forming a reversal setup. Below is the TLT chart I posted yesterday on Stocktwits/Twitter (Price is not updated).

TLT Daily  Chart
Larger Image

Conclusion: There are overwhelmingly reasons that are suggesting that price is involved in the initial stages of a meaningful pullback.

This weekend we have a major event risk with the Italian elections.

Enjoy the weekend.


Back to homepage

Leave a comment

Leave a comment

Don't Miss A Single Story