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Weekly Technical Analysis

BULLS HAVE BEEN SAVED ONCE AGAIN

The sell signals discussed in my last weekly update have not materialized. Instead SPX continues to resist with boldness establishing new ATH.

I have failed to perceive that price had no intention to retreat and worst of all I have not used a stop so now I am trapped short.

Lets review the long term EWP.

In my opinion the pattern off the 2009 low is corrective. Therefore price is unfolding either a Double Zig Zag or a Triple Zig Zag.

If price is unfolding a Double Zig Zag since the equality extension target at 1752 has been surpassed the next theoretical extension target is located at 1936.

As long as price does not breach the 10 ma which today stands at 1649 the intermediate trend will not be in danger of being reversed.

SPX Monthly Extension Chart
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The Ending Diagonal that I was suggesting has been invalidated but the "essence" of the long-term pattern remains unchanged.

The two options that I am working with require an Ending Diagonal since I am considering that at the October reaction low price has established either a wave (4) or a wave (B) and the current up leg so far cannot be considered impulsive.

  • Double Zig Zag Option: The wave (5) would have a theoretical equality extension target at 1910:

SPX Weekly Double Zig Zag Chart
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  • Triple Zig Zag option: The wave (Z) would have a theoretical equality extension target at 1888:

SPX Weekly Triple Zig Zag Chart
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In the next chart I zoom in the time frame from the August 2 peak (Either the wave 3 of the DZZ or the wave A of the TZZ) followed by a running flat at the October 9 low (Either the wave 4 of the DZZ or the wave B of the TZZ).

We can see that off the October 9 low we have a 3-wave up leg, for this reason I am considering viable that price should form an Ending Diagonal. Once this 3-wave up leg is in place I expect a pullback with a target in the range 1733-1709

SPX Double Zig Zag Zoom Chart
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Due to the absence of an impulsive sequence off the November 13 reaction low the pattern from the October 9 low can be considered a Double Zig Zag. If this is the case the expected second wave (B) pullback should not breach the trend line that connects the November 7 low with the November 13 low. The following up leg wave (Y) should conclude the corrective pattern off the October 9 low.

SPX 60-Minute Chart
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For the short-term time frame I expect a pullback for the following reasons

  • 60 min momentum is extremely overbought. The RSI has a potential Double Top. If the s/t count is correct, during the expected pullback the RSI should not breach the trend line in force off the November 7 low.

SPX 60-Minute Momentum Chart
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  • Daily candlestick above the upper Bollinger Band (It suggests an extended move). A sell signal will be triggered with an eod print below the BB. If the s/t count is correct the expected pullback will be shallow and probably it will not even retest the last break out price level located at 1775.22.

SPX Daily Chart
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  • Weekly candlestick above the upper Bollinger Band. It would be extremely rare two consecutive weekly prints above the BB. If price is approaching a s/t top the appropriate next weekly candlestick would be a Doji.

SPX Weekly Chart
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  • Price is slamming against a potential trend line resistance in force since the April 2012 peak.

SPX Weekly Channel Zoom Chart
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Due to the bullish seasonality surrounding the Thanksgiving holiday any potential weakness will most likely be short lived.

 

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