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Weekly Technical Analysis


Lets begin the analysis with a monthly chart highlighting the following:

  • The pattern from the March 2009 is corrective. If price if unfolding a Double Zig Zag the next theoretical extension target is located at 1936.

  • Price is hovering at a potential trend line resistance that connects the March 2012 peak with the May 2013 peak.

  • The loss of the 3 mma (End of month print), which stands at 1750, would open the door to a correction.

  • The loss of the 10 mma (End of month print), which stands at 1648 and almost coincides with the 200 dma would endanger the intermediate up trend.

SPX Monthly Chart
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Next in the following weekly chart we can make the case that from the March 2012 price is forming a bearish rising wedge.

I can remark the following:

  • Price is slamming against the upper trend line of the assumed wedge.

  • Seven consecutive winning weeks.

  • Second consecutive weekly print above the upper Bollinger Band.

  • Weekly Hanging Man. The potential bearish candlestick will be confirmed with the loss of 1777.23.

  • The up leg from the October 9 low will not be jeopardized as long as price does not breach the September high located at 1729.86.

SPX Weekly Channel Chart
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While it seems that there is no end in sight of the persistent buying pressure we do have warnings from breadth indicators, which are displaying negative divergences. The negative divergences are suggesting that price should be approaching at least a short-term top:

  • Summation Index: Bearish cross and negative divergence.

NYSE Summation Index Daily Chart

  • Weekly Stochastic of the Summation Index with a sell signal in force since the beginning of November.

NYSE Summation Index Weekly Chart

  • NYAD Cumulative is displaying a negative divergence since the October high.

NYSE Adv/Dec Cumulative versus SPX Chart

  • SPX BPI at an overbought reading and displaying a negative divergence in the last SPX higher high.

S&P500 Bullish Percent Index Chart

Regarding the long-term EW count, provided that the October 9 low located at 1646.47 is not going to be breached I am considering two options:

  • Double Zig Zag: If this is the case price is now unfolding the last wave (5) of (Y). Since the advance off the October low is clearly corrective the assumed wave (5) has to form an Ending Diagonal.

SPX Weekly Double Zig Zag Chart
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  • Triple Zig Zag: If this is the correct count, from the October low price is unfolding the last Zig Zag, hence we are now in the third wave (A).

SPX Weekly Triple Zig Zag Chart
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Therefore, being valid for both options, I soon expect a pullback with a likely target at the rising 50 dma - gap fill located at 1733.16 followed by either the last wave (Z) of the Triple Zig Zag option or the wave (III) of the Ending Diagonal. (Double Zig Zag option)

Short-Term EWP:

Since it is unquestionable that from the October 9 low price has unfolded a 3-wave up leg, it means that price is now involved in the late stages of an impulsive wave (C). But since this is the count that the majority is following and the assumed wave (C) is shallow, as it has not even reached the 0.618 extension I am bit sceptical.

SPX 60-Minute Chart
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As a matter of fact the DOW instead of an impulsive wave (5), it could be forming an Ending Diagonal.

DOW 60-Minute Chart
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Lastly due to the positive correlation of SPX and USDJPY we need to see a reversal of this pair in order to have confidence of the expect a pullback of SPX.

SPX versus Japanese Yen Chart
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Maybe the USDJPY with Friday's Spinning top has completed a wave (A) off the October 25 low. (Confirmation needed: No higher high and eod print below 100.92 next Monday)

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