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SPX: The Exuberant Uptrend is Back

Since tomorrow I will be traveling for one week and I will be off the screens I want to share my thoughts regarding the current Elliott Wave pattern and the potential outcome.

Despite weekly oscillators remains a major concern:

  • RSI negative divergence in force since July 2014
  • Stochastic bearish cross on January 9
  • MACD bearish cross on January 16

The aggressive advance from the January 16 low has neutralized a potential reversal pattern. Bulls with the help of accommodative action of the ECB have regained the upper hand. Going forward odds favor new All Time Highs.

If this is the case we need to see:

  • Weekly RSI breaching the trend line resistance off the December 5 peak
  • Weekly Stochastic holding the 80 line and canceling the bearish cross
  • It remains to be seen if MACD will cancel its sell signal

SPX Weekly Momentum Chart
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Weekly time frame:

  • Bears have failed once again. The selling efforts have encountered dip buyers and the 20 wma has been reclaimed three times.
  • We need to see if today bulls are able to breach the immediate resistance at 2065
  • Above 2065 we have a pocket of air until 2080
  • Above 2080 there is another pocket of air until the ATH at 2094
  • With the backing of central bankers odds should favor new ATHs. We shall see if Bulls are able to breach the blue trend line resistance in force since the July peak (2114 - 2120)
  • Therefore going forward if the support zone 2054 - 2046 hold the path of least resistance should be the mentioned trend line

SPX Weekly Chart
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Daily time frame:

  • Bulls have delivered two blows by breaching the trend line resistance off the December high and by reclaiming the 50 dma. Obviously this type of action has neutralized for the time being bearish scenarios.
  • In the path towards the ATH, if 2065 were reclaimed, we have three "pockets of air"
  • Bulls are out of the woods if the 50 dma holds (Although if price is forming a Triangle the 50 dma would be breached momentarily)

SPX Daily Momentum Chart
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60 minutes time frame:

  • The advance from the January 16 low is clearly corrective. This has been a customary characteristic of "V" shaped rallies, whereby initially oversold bounces (Assumed bearish wave B) have morphed into powerful moves to the upside (Bullish wave A)
  • In my opinion probably this rally is unfolding a Double Zig Zag with an impulsive wave (Y) underway. When it will be done, if bulls have regained the upper hand, in the following pullback the 200 ma = 2041 must hold, in which case a large Zig Zag (ABC) would be underway. (Ending Diagonal Scenario)
  • If the 200 ma does not hold (It would mean that the 50 dma has been breached) and the decline is not impulsive then probably the Triangle scenario will become the frontrunner

SPX 60-Minute Momentum Chart
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Therefore as discussed in my last update so far with the available price information I am considering two potential scenarios that should lead to a Major Top:

1. Ending Diagonal:

SPX Daily Ending Diagonal Chart
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2. Triangle:

SPX Daily Triangle Chart
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The 50 dma will determine which scenario could be the correct one.

 

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