• 509 days Will The ECB Continue To Hike Rates?
  • 509 days Forbes: Aramco Remains Largest Company In The Middle East
  • 511 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 911 days Could Crypto Overtake Traditional Investment?
  • 916 days Americans Still Quitting Jobs At Record Pace
  • 918 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 921 days Is The Dollar Too Strong?
  • 921 days Big Tech Disappoints Investors on Earnings Calls
  • 922 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 924 days China Is Quietly Trying To Distance Itself From Russia
  • 924 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 928 days Crypto Investors Won Big In 2021
  • 928 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 929 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 931 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 932 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 935 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 936 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 936 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 938 days Are NFTs About To Take Over Gaming?
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

  1. Home
  2. Markets
  3. Other

SPX: Follow Up of the Short Term EWP

BEARISH DAILY CANDLESTICK vs CHOPPY INTERNALS

Countdown of three major event risks:

  • NFP (Tomorrow)= - 1 trading day
  • Quarterly Opex (March 15) = - 6 trading days
  • FOMC (March 20) = - 9 trading days

Logic suggests that there will not be a meaningful pullback in front of the FED announcement, in addition this time we also have Ben press conference.

But given that short-term momentum & breadth indicators are now overbought the odds of a pullback are large. A pullback does not necessarily mean a meaningful retracement.

I will use the SPY daily chart to show you what I expect if we get in the next two days (Today and tomorrow's NFP day) a pullback.

  • If price remains above Wednesday's gap at 152.92 then the corrective up leg off February 26 should extend higher.
  • If the gap is closed than the odds will favour a test of the 20 dma at 151.88, but the pullback will be likely corrective and eventually it will be bought again. EW wise I expect price to unfold a Zig Zag off the Feb 26 lod.

SPX Daily Chart
Larger Image

Keep in mind that breadth and momentum now is aligned with the bulls so going forward until I don't see a deterioration I expect that the market behaviour will be buy the dip.

In addition to the discussed breadth thrust SPX daily MACD yesterday it has issued a "buy signal", hence barring a an immediate failure, the probability of a meaningful pullback are nil.

Probably once the RSI reaches the trend line resistance in force since its January's peak we should be on the look out of a reversal pattern.

SPX Momentum Chart
Larger Image

For the immediate time frame (1-2 days) due to the following reasons odds of a pullback are increasing:

  • Equity put/call ratio is getting too bullish.

CBOE Options Equity Put/Call Ratio Chart

  • The stochastic of the McClellan Oscillator is overbought and could issue a s/t sell signal.

NYSE McClellan Oscillator Chart

But as long as the McClellan Oscillator does not break down through the zero line, any pullback will most likely be corrective and it will be bought.

Hence until the trend (Higher highs/lows) is not reversed and it gains traction below the zero line I don't expect anything meaningful to the downside for the equity market.

NYSE McClellan Oscillator Chart

Lets move to see yesterday's choppy price action:

In the SPX 5 min chart we can see that the marginal higher high was achieved with a 3-wave up leg, followed by a corrective sideways pattern. With this price information we already know that even if bears are able to break down the short-term pivot support at 1539.79 the EWP in progress suggest a shallow pullback.

SPX 5-Minute Chart
Larger Image

In addition there is a chance that if the mentioned pivot is not breached yesterday's sideways moves could have formed a bullish Triangle, which in my opinion could open the door to another Zig Zag higher.

SPX 15-Minute Chart
Larger Image

I will keep watching TLT and VIX for clues.

  • TLT has an Inverted Hammer (It could mean a bottoming attempt). Here even though I don't expect the resumption of the intermediate down trend, with the loss of the 0.618 retracement I cannot rule out a retest of the February 20 low, but in the mean time if TLT catches a bid SPX should carry out a pullback:

TLT Daily Chart
Larger Image

  • VIX: It is maintaining the divergence vs SPX and it could be forming a bullish falling wedge:

VIX Daily Chart
Larger Image

 

Back to homepage

Leave a comment

Leave a comment