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SPX: Follow Up of the Short Term EWP


Today we have two key risk events that may trigger the overdue equity pullback (Bernanke testimony before Congress and the FED minutes).

I will begin today's update with the chart of TLT since there is a potential Double Bottom pattern with positive divergence of the RSI (The DB has a theoretical target at the 200 dma). Obviously if the DB pans out it should concur with the expected and overdue equity pullback:

TLT Daily Chart
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Next lets have a look at VIX.

Here I don't see yet a clear reversal pattern unless it is forming an Inverted H&S with a theoretical target at 14.67.

Despite the reversal pattern may be still in the makings the Bollinger Band is narrowing, which is an omen for the closeness of a large move.

VIX Daily Chart
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VXX has a better-looking reversal pattern if the wedge pans out:

VXX Daily Chart
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I am not going to review breadth and momentum indicators since we already know that the readings can be classified as "extremely overbought."

What still stands out is the McClellan Oscillator, which continues to be favouring some type of a pause. From its May 8 peak it is clearly in a downtrend. This should favour the bears for the short term time frame:

NYSE McClellan Oscillator Chart

So if today is the day, as a reminder of my scenario, I am looking for a retracement of the up leg from the April 19 low and I don't expect price to breach on a weekly basis of the 10 wma = 1599.

Also lets monitor how a potential weekly Evening Doji Star will evolve during the rest of the week:

SPX Weekly Chart
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Regarding the EW count of the current up leg (From the April 18 low) I maintain the TZZ count.

Yesterday I suggested that price had to complete the last ZZ up. We got it but at yesterday's eod print there is no clear ending pattern yet, unless price is forming an Ending Diagonal:

SPX 30-Minute Chart
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If the ED pans out it would complete the last ZZ within the corrective pattern unfolded since the April 18 low:

SPX 15-Minute Chart
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But what really matters of my scenario is that price has not concluded yet the advance from the November lows as I expect one more up leg:

SPX Daily Chart
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In the case of NDX, the pattern from the April 18 low is also suggesting that price should embark in just a corrective phase and probably the gap at 2911.14 will be filled but not closed:

NDX Daily Chart
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