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Weekly Technical Analysis

MISERABLE BREADTH

Despite Friday's impressive recovery how can I even think to have a bullish stance when the "trio" of swing trading indicators have a bearish cross over?

  • MACD has a sell signal in force since November 6. In spite of Friday's frenzy bullish activity the Stochastic bearish cross has not been cancelled.

SPX Momentum Chart
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  • The NYSE Summation Index has a bearish cross and its slope is clearly pointing south.

NYSE Summation Index Daily Chart

  • The weekly Stochastic of the Nasdaq Summation Index has issued a sell signal. Usually a new buy signal will be issued once the stochastic drops below the Oversold line.

NASDAQ Summation Index Weekly Chart

  • SPX BPI has as well has a bearish cross and a failure to cancel it.

S&P500 Bullish Percent Index Daily Chart

EW wise the good news is that the DOW is now probably aligned with the same Ending Diagonal pattern that I have been suggesting for SPX.

In addition here we also know the price level that will invalidate the pattern. Since the wave (III) cannot be larger than the wave (I), even if the wave (III) is not in place yet, it cannot exceed 15826.59.

Recall that if my preferred long-term count is correct the Ending Diagonal, if it pans out, it will conclude the Double Zig Zag from the March 2009 low opening the door to a multi-year retracement. (If the 200 dma does not hold)

DOW Ending Diagonal Daily Chart
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In the case of SPX keep in mind that if the ED is the correct pattern the following wave (IV) will have to bottom below 1709.67.

SPX Ending Diagonal Daily Chart
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I would not rule out that XLF is also forming an Ending Diagonal. In addition despite Friday's huge rally I tend to believe that the wave (III) is already in place, hence the current rebound is a wave (B) that will establish a lower high.

XLF Ending Diagonal Daily Chart
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SPX short-term EWP

Due to the corrective internal structure of the decline off last Thursday's hod I rule out that price can establish a new ATH.

I am considering two potential patterns:

  • From the October 30 high price is unfolding a DZZ. If this is the correct pattern, the up leg off last Friday's lod is the second wave (B), which should stall below 1774.50 Once the wave (B) is in place it will be followed by an impulsive or Ending Diagonal wave (C) down

SPX 60-Minute Double Zig Zag Chart
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  • Price could be forming a Triangle wave (B), if the following pullback is corrective and price maintains the sequence of higher lows and lower highs.

SPX 60-Minute Triangle Chart
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I maintain the following ETF:

  • Long SPXU stop SPX > 1776
  • Long QID stop NDX > 3410
  • Long FAZ stop XLF > 21.10

 

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