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SPX: Follow Up of the Short Term EWP

THE PULLBACK IS NOT OVER

Yesterday SPX breached the support located at 1626.74 but ended the day in a positive note leaving in the daily chart a bullish Hammer candlestick which is suggesting for today a likely follow through to the upside (But what is important is the eod print). Bulls also have in their favour the always-bullish Tuesday.

This is all I can say for the Bulls' side.

In the mean time Bears are maintaining the upperhand:

  • From the May 22 high ===> Lower high/lower low.
  • The down leg from Friday's hod is not impulsive in addition the bounce off yesterday's lod is clearly corrective ===> The EWP cannot be considered over.

  • In addition TRIN is in overbought territory (Usually the bottom of a pattern coincides with selling exhaustion)

TRIN Chart

I maintain unchanged my preferred scenario, which implies:

  • Price has concluded the up leg from the April 18 low but not the advance from the November lows.

  • If this is the case price is unfolding a corrective pattern that should not endanger the November uptrend.

Therefore price should conclude the corrective EWP in the range 1611-1593.

The stand out # are:

  • 0.5 Retracement = 1611.61

  • 10 wma = 1611

  • 50 dma = 1602

SPX Daily Chart
Larger Image

Regarding the labelling of the corrective pullback from the May 22 high, the lack of an impulsive down leg from Friday's hod has invalidated the idea that price was unfolding the wave (Y) of a DZZ.

So if it is not a wave (Y) it has to be a wave (A) therefore maintaining the DZZ count I modify the count considering that last Friday price concluded a Triangle wave (X), in which case now price is unfolding the wave (B) of the second Zig Zag. The wave (B) should not breach the extension of the upper trend line of the Triangle. The following the wave (Y) down has an equality extension target at 1608.

SPX 15-Minute Chart
Larger Image

As I motioned in the weekly update barring a huge bullish reaction to next Friday's NFP release it seems more probable that price should unfold an "holding" pattern until the June 19 FOMC policy update.

 

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