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SPX: Follow Up of the Short Term EWP


A possible concluded TZZ coming together with extended technical indicators are suggesting the likelihood of a "relief" pullback which is also reasonable due to next Wednesday's FOMC awaited monetary policy decision.

I went long VXX following (Commented on Stocktwits/Twitter) a short-term bullish pattern. I will maintain the trade during the weekend since my stop is at the entry price. If next Monday/Tuesday the target is reached (VXX = 15) I will get out.

In my last update I discussed that the impressive improvement of breadth and momentum indicators and the recovery of SPX above its 0.618 retracement of the down leg off the August high was reducing the probability of a larger downward correction, instead price at the August 28 low may have established a "swing low" that should allow price to unfold a Zig Zag up.

In addition as we can see in the 60 min chart below the cross over of the 50 hma above the 200 hma is strengthening the short-term bullish case. If this is the case price should now unfold a wave (B) pullback with a potential target in the range 1671 - 1664 (Gap fill - 200 hma and Trend Line off the August lows).

Theoretically the 0.382 retracement = 1666 is the considered minimum requirement.

SPX 60-Minute Chart
Larger Image

It is still unclear (to me) if price has resumed the intermediate up trend or if this advance can still belong to a wave (B), in which case the correction off the August high would still be in progress.

But for the immediate time frame, in my opinion, it is probable that the advance from the August 28 low has not run its course yet as long as the expected pullback does not endanger this scenario by breaching the 10 d ma which stands way down at 1655.

If this scenario pans out the next up leg will most likely revisit the August peak and I would not rule out a new ATH.

In the daily chart below I show my preferred "road map".

If it pans out, once it is over, I will reassess the long-term count.

If a "healthy" pullback is underway going forward (Until Monday - Tuesday) we need to see at least:

  • TRIN above 1

TRIN Chart
Larger Image

  • Daily RSI should not breach the 50 line and the MACD should not cancel the new buy signal.

SPX Momentum Chart
Larger Image

  • The McClellan Oscillator should not breach the Zero line, and in the expected next up leg the MACD histogram will have to show negative divergence.

NYSE McClellan Oscillator Chart

Also we should be watching VIX since if the bearish short-term scenario is correct it should recover above the 200 dma = 14.56.

VIX Daily Chart
Larger Image

Also the USD should also be monitored since a weak $ is suggesting "Small Tapering" while a strong $ would suggest "Larger Tapering."

Have a great weekend.

Next weekend, due to technical maintenances of the platform I use for chart analysis, I will probably not be able to post the Weekly Technical up date.


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