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SPX: Follow Up of The Rising Wedge

Brief update: I maintain the scenario of SP500 carving out an ending pattern

  • The Rising Wedge (From the October 2014 low) in my opinion remains the most likely scenario. SPX should be now involved in the last wave up.
  • If the Ending Diagonal pans out the following pullback should retrace the entire rally from the October low
  • The weekly Hammer (Achieved a new all time closing high) is suggesting probable more follow through to the upside.
  • Above the ATH established on April in the weekly time frame there is "white space" until the upper Bollinger Band which today stands at 2146

SPX Weekly Rising Wedge Chart
Larger Image

During last week there has been an improvement of the Breadth Indicators:

  • The McClellan Oscillator is back above the zero line

NYSE McClellan oscillator Daily Chart

  • The SP500 Advance - Decline Line is maintaining the sequence of higher highs/lows (So far absence of negative divergence)

SPX Advance-Decline Line Daily Chart

  • The SP500 New Highs-New Lows Percent has began to expand above the the April peak

S&P500 New Highs-New Lows Percent Daily Chart

  • The SP500 Percent of Stocks Above the 50 dma after having touched the oversold line during the first week of May is showing an increase of participation. There is still room to the upside before reaching the overbought line

S&P500 Percent of Stocks Above 50dma Daily Chart

  • The SP500 Percent of Stocks Above the 10 dma has not crossed yet the overbought line:

S&P500 Stocks Above 50dma Weekly Chart

  • However the "Event Risk" Indicator (VIX/VXV) has crossed the cautionary line. Going forward the lower the reading the higher the probability of a reversal

VIX:VXV Daily Chart

There is a peculiar issue in the landscape of the Breadth indicators that is unusual. We have an oversold NYSE Summation Index (The RSI is standing in the oversold zone) while SP500 is establishing new ATH. Obviously it is displaying a massive negative divergence but at the same time it seems unlikely to expect a substantial decline if SPX concludes the Ending Diagonal. Another scenario, which in my opinion is also improbable, is that a breadth thrust allows a new buy signal.

NYSE Summation Index Daily Chart

Therefore breadth indicators should allow more follow-through to the upside. In the weekly time frame above the ATH we have as resistance the upper Bollinger Band.

Daily time frame:

In the daily time frame we have two potential targets/reversal zones

  • The Upper Bollinger Band, which coincides with the trend line that connects the February and April highs at 2126
  • We could make the case that from the March low SPX is forming a Bearish Flag. If the resistance at 2126 is breached the upper trend line of the assumed Flag would be the next resistance in the area of 2135 +/-
  • For the short-term time frame Friday's Spinning Top is suggesting a probable pullback which would not jeopardize the up trend is the 3 dma, which stands at 2114 (eod print) is not breached

SPX Daily Bearish Flag Chart
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60 minute time frame:

  • Lets see if from the May 6 low price is unfolding a Zig Zag
  • If this is the case the assumed impulsive wave (C) needs a wave (IV) pullback with a potential target in the range 2113 - 2109 followed by the last wave (V) up
  • If the Zig Zag pans out it could complete the Ending Diagonal

SPX 60-Minute Chart
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