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SPX: Follow Up of the Short Term EWP


Today we have the major NFP risk event. It seems that bulls want a below consensus number.

The die is cast but the outcome can change in the blink of an eye depending on the reaction to today's NFP.

The line in the sand has been tested. It seems that bulls are aware of the critical level that must hold in order to avoid an unknown bearish outcome, despite the internal structure of the sell off from the May 22 high is clearly corrective (All things being equal the current pattern is not suggesting a major reversal).

Bulls have a huge opportunity to repair the technical damage and knock the bears against the ropes.

The following arguments favour the resumption of the intermediate uptrend (From the November low).

  • Corrective pattern.

  • Two consecutive dips below the lower Bollinger Band.

  • Apparent successful test of the 50 dma + Trend line support in force since the November low + Horizontal support located at 1597.

  • Extremely oversold reading of the McClellan Oscillator.

  • VIX Bollinger Band buy equity signal.

  • Hammer candlestick.

Lets begin today's update with the McClellan Oscillator.

As we can see in the chart, during the last two years, when the Oscillator bottoms below the oversold line the following move triggers a breadth thrust above the zero line, in addition most of the times it goes from oversold to overbought.

NYSE McClellan Oscillator Chart

My preferred count of the advance from the November 16 low, by the skin of one's teeth, is still valid, but bulls are not out of the woods yet as they must reclaim the 20 dma = 1646 with an impulsive sequence.

SPX Daily From November 16 Chart
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Next in the daily chart we can see that yesterday's strong recovery has left in the chart a bullish Hammer, which auspicate a serious attempt to establish a bottom.

SPX Daily Chart
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Now bulls have to improve their chances by closing Wednesday's gap down at 1631.38.

If a bottom is in place then the Double Zig Zag option that I have been following can be considered over.

The bottoming process will begin only if we can see a higher low, in addition bulls will have to close the gap at 1631.38 and reclaim the 0.618 retracement with an impulsive up leg.

SPX 30-Minute Triangle Chart
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If bulls fail then maybe price is forming a wedge in which case the bullish outcome would be delayed after another lower low.

SPX 30-Minute Wedge Chart
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VIX has been rejected at the April 18 high:

The Shooting Star + the Bollinger Band equity buy signal is a serious warning for the bears.

VIX Daily Chart
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Have a great weekend.


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