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SPX: Follow Up of the Short Term EWP


  • It is evident that the trend is up

SPX at the August 28 low has concluded a smaller correction than the majority was expecting (including myself).

Given the negative divergences of long-term momentum and breadth indicators we should not rule out that price is engaged in the late stages of the advance from the 2009 lows, although an ending pattern is not visible at the moment.

The negative divergence of the BPI remains a "Big" concern.

SPX Bullish Percent Chart

For the short-term, it is likely that the upper weekly Bollinger Band and the converging trend line (From the May peak) should hold back the astonishing impetus of the bulls.

Next week I expect a test of the break out line at 1709.67.

If it does not hold it could open the door to the gap fill at 1687.99.

In the case of the kick off of a pullback I don't expect a move below the 10 wma which today stands at 1680.

SPX Weekly Chart
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  • It is blatant that it is short-term overbought

Daily Momentum is overbought: RSI (14) has crossed the overbought line while the RSI (5) is at 85.

SPX Momentum Chart
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I am monitoring the McClellan Oscillator which in addition of being "extremely" overbought it is displaying a negative divergence in the histogram of the MACD.

If next week it loses the 10 dma it would be a yellow flag.

NYSE McClellan Oscillator Chart

Yesterday's candlestick is suggesting a potential exhaustion. (Unconfirmed yet)

The first indication needed in order to consider that a "pullback" is in progress is an eod print below the 3dma.

But we will not have the confirmation until we can see a lower high. More likely than not, if 1709 goes the range 1692 - 1688 (10 dma - gap fill) will come into play.

SPX Daily Chart
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Short-Term EWP

It is not easy to have a confident count. In my opinion the pattern looks more corrective than impulsive. It could be a TZZ.

Considering the likely Triangle concluded last Friday maybe one more up leg should not be ruled out. But it is just a guess.

Anything larger than the current pullback would most likely signal that the test of the former resistance now support at 1710 is underway.

SPX 60-Minute Chart
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Have a great weekend.


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