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SPX: Follow Up of the Short Term EWP


When price completes a cycle and peaks the warning signals are displayed by breadth and risk on / risk off indicators before the correction begins to unfold.

Regarding breadth:

  • McClellan Oscillator:

When the McClellan Oscillator, from the overbought line loses the Zero line, odds favour equity bearish set ups.

NYSE McClellan Oscillator versus S&P500 Weekly Chart

In addition we can see in the following chart than when the McClellan Oscillator loses the zero line in conjunction with the histogram of the MACD we should expect a correction phase at least until the Oscillator drops below the lower Bollinger Band.

NYSE McClellan Oscillator Daily Chart

  • NYUD:

When the NYSE Advance-Decline Volume reverses off the overbought line, obviously bed things tend to happen in the equity market probably until the NYUD reaches the oversold line.

NYSE Advance/Decline Volume Daily Chart

Regarding Risk on / Risk off:

When Staples outperform RUT odds favour a retracement of the equity market:

XLP:RUT Weekly Chart

Next in the weekly chart of SPX we can see that so far (Pending confirmation of by today's eod print) we have a bearish weekly Shooting Star (The upper Bollinger band has rejected the bulls).

Here we have three clear support levels: 1740, 1729.86 and 1709.67.

If the Ending Diagonal is going to pan out, the wave (IV) pullback MUST bottom below the August peak located at 1709.76.

SPX Weekly Chart
Larger Image

Next in the 60 min chart I have labelled the advance from the October low as a TZZ. (Commented in Twitter/Stocktwits the fricking triangle wave B).

A crack is already visible with he loss of the 50 ma. If today's the gap at 1752 is closed the first target will come into play. Afterwards the path will depend if the following targets hold or price will fill the white space underneath them.

All things being equal if breadth and momentum indicators have to drop to oversold before a tradable bottom is in place then the 0.618 retracement is not out of the question. (But I need a bit more if the ED is the correct pattern)

SPX 60-Minute Chart
Larger Image

Yesterday morning I posted on Twitter/Stocktwits a potential Head & Shoulder of ES Globex. Despite the right shoulder is a bit too large the bearish pattern can be considered valid. If it pans out, SPX would breach the T 1 = 1740.50.

ES 30-Minute Chart
Larger Image

So today we will know if price confirms the warnings that breadth is displaying.

As you might have noticed I have reduced the frequency of posting in the site. Instead I am fully involved in seeking short term pattern which I am posting in Twitter/Stocktwits.

Yesterday I closed with 4% profit the GLL I bought on Thursday.

I remain long SPXU, FAZ and QID.

One brief comment regarding the QID set up:

As you can see NDX has most likely concluded a Rising Wedge. Usually the movement in the opposite direction should fast and furious. If the gap at 3362 is closed the T 1 is doable.

NDX 30-Minute Chart
Larger Image

Have a great weekend.


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