It is quite obvious that from the December 31 high SPX is forming a rising wedge.
I have already discussed that if this wedge = Ending Diagonal pans out it could conclude with a Double Zig Zag the entire advance from the 2009 lows opening the door to a major reversal.
The current up leg from the April 11, which is the last wave of the assumed Ending Diagonal could top either at the trend line that connects the April 22 high with the May 13 high (blue trend line) in the area of 1915 or it could reach the upper trend line of the Ending Diagonal in the area of 1930.
In an Ending Diagonal the wave (V) has to be shorter than the wave (III), this is not an issue since if it reaches the equality extension target located at 1974.82 it would kill the pattern since it would not converge anymore.
An obstacle can be the upper Bollinger Band. Usually when price reaches the Bollinger Band it means that for the short-term time frame the pace and extent of the advance has created extremes on intraday charts but it cannot prevent price from grinding higher.
Time wise the wave (III) has needed 58 days to be established; so far the assumed wave (V) has spent 42 days. The equality will be reached on June 11.
The next major event risks are: ECB meeting on June 5, NFP on June 6, FOMC meeting on June 16, Quarterly OPEX on June 20.
If the Ending Diagonal is not busted I guess that probably it would not be completed before the next FOMC meeting.
If SPX is approaching a major top VIX should do the opposite. Maybe with a massive falling wedge as it can be seen in the monthly chart:
If price is involved in unfolding the last wave of the Ending Diagonal scenario the issue is to decipher the complex corrective mess of the current advance bearing in mind that the last wave will have to be impulsive.
I suggest two potential options within a Triple Zig Zag.
- On May 20 price has completed with a Triangle the second wave (X). If this is the correct pattern we are now in the last Zig Zag.
- On May 15 price has began the last Zig Zag and the current advance is the first wave of an impulsive sequence that will complete the TZZ.