THREE MAJOR EVENT RISKS ARE UPON US
Going forward how price reacts to three major event risks will dictate over the resumption of the intermediate up trend (Advance from the November lows).
-
Today we have ECB meeting, which should have a greater impact over the EUR.
-
On Friday we have NFP. My take is that a weaker than expected # will be positive for equities while a # above consensus will be negative.
-
Next Wednesday we have FOMC day. I expect fireworks and my gut feeling is than Ben will rescue the markets.
Elliott Wave wise we have an unquestionable corrective pattern that is not suggesting a major reversal.
I maintain the Double Zig Zag count, whose outcome depends on two possible variations depending upon the characteristic of the assumed triangle completed on May 31:
- Triangle wave (X): If this is the case in my opinion the final wave (Y) should unfold an Ending Diagonal:
- Triangle wave (B): If this is the correct count price could be on the verge of concluding the EWP (Blue Count) or the wave (A) of second Zig Zag (Red count). Obviously the line in the sand is at the gap = 1631.38, since if this gap is closed the EWP would most likely be over.
In addition I can make the case that price is forming a Bullish Falling Wedge (The final outcome is bullish), which does make sense if Mr Market will postpone the bottom until FOMC day. Additionally this pattern would most likely allow the appearance of positive divergences.
In the mean time we an "extreme" oversold reading of the McClellan Oscillator which is suggesting that the probability that price should be close to establish a bottom is rising. In addition usually when the McClellan bottoms the following move is a breadth thrust up.
The Equity Put/Call ratio is also aligning to the scenario that at least a multi day rebound is approaching.
But the collapse of the Summation Index remains a major concern, and "V" bottoms are unusual. Instead usually the RSI remains in the oversold for some time before triggering a new buy signal (Allowing selling exhaustion and positive divergences).
Therefore even though price should be involved in the late stages of the assumed DZZ, I cannot rule out a more complex pattern (Flat or Triangle). In any case price could be establishing the low point if price embarks in a larger corrective pattern.
In addition the lack of positive divergences reduces the probability of the end of the correction and probably we still need to see the final "washout."
Next in the daily chart we can see that price has entered my target box. I am confident that somewhere inside this box there should be a support that will allow a "swing low."
Lets keep an eye on NDX as well since so far there is nothing too bearish in the daily chart, which is not suggesting that price is unfolding a wave (B) pullback.
Regarding my preferred count of the advance form the November low as long as price does not jeopardize it with two consecutive eod prints below 1597.35 I still expect one more up leg.
If my line in the sand is breached then obviously I will have to reassess the EW count, as price will most likely take the southbound route towards the red box.
