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TheWaveTrading

TheWaveTrading

My goal is to establish the most likely path that the price of a particular asset will undertake and profit through ETF instruments both on…

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SPX New Closing High, What Next?

SPX ends the month of October with a massive Hammer candlestick, which removes the scenario of a deeper correction. Hence higher prices should be expected in an extension of the pattern from the October 2011 lows.

SPX Monthly Chart
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Where are located the next resistance zones?

In the weekly chart we can see that above the September peak (2019.26) we have:

  • The upper Bollinger Band which coincides with a trend line resistance from the July 2014 peak at 2036 +/- (If the Ending Diagonal scenario pans out this trend line should no be breached)
  • Long term trend line resistance in force sine May 2013 which by the end of December will stand at 2095 +/-

Regarding the weekly time frame supports we have:

  • Support 1 at 1986
  • Support 2 in the range 1974-1968 (If the up trend has been resumed the 20 w ma should hold)
  • Support 3 at 1951

SPX Weekly Chart
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Last week I suggested two potential patterns:

  • Retest of the panic lows with a Flat or a Triangle. Obviously today this pattern is not the frontrunner simply because price will have to breach the 50 d, 20 d and 200 dma

SPX Daily Flat Triangle Chart
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  • From the February 7 low price is forming an Ending Diagonal, which will conclude a Triple Zig Zag from the March 2009 lows. If this is the case price should be close to complete the wave (A) of a Zig Zag that will establish the third wave of the Ending Diagonal

SPX Daily Ending Diagonal Chart
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SPX last Friday soared with a gap up and go after the Bank of Japan boosted its asset-purchasing program. We have a daily Marubozu, which per se is suggesting more follow-through to the upside but often a small range body, which would indicate buying exhaustion, follows it.

If we are approaching a short-term top the levels to watch to the downside are:

  • Support 1: Range 1994-1985
  • Support 2: 1968-1964 (Flat 50 & 100 dma)
  • Support 3: 1949
  • Support 4: 1935 (Rising 20 dma)
  • Support 5: 1912 (Flat 200 dma)

SPX Daily Chart
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In the following 60 min chart we can see that price could be forming a small rising wedge. If the wedge pans out and price breaches the accelerated trend line (Blue TL) then probably a sharp but short-lived pullback should not breach the 200 hourly ma which today stands at 1940.

SPX 60-Minute Chart
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The SPX rising wedge should pan out if VIX is forming a falling wedge:

VIX 60-Minute Chart
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