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SP500: Bulls Have Regained The Upper Hand

In spite of the set up for further weakness last week's decline was abruptly halted at the first key support (2020). Price has recovered most of the loss neutralizing the prospects of a larger pullback. Bull have regained the upper hand

A short-term pause is probable but the bias is once again bullish

Monthly time frame

  • Potential long-term count: Double Zig Zag (DZZ)
  • The second wave (A), which began at the March 2009 low is most likely not in place yet

S&P500 Monthly Chart
Larger Image

  • If we connect the March 2000 high with the May high, SP 500 could be carving out a Rising Wedge with limited upside for the assumed second wave (A) of the DZZ count.

S&P500 Monthly Chart 2
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  • If we zoom in we can see that above the May high the next resistance is located at the suggested trend line which coincides with the upper Bollinger Band in the area of 2160 (Usually a move above the upper Bollinger Band is not sustainable)
  • With four trading days left to end the month of November it seems probable that the monthly candlestick will be either a Spinning Top or a Hanging Man (Both candlesticks have potential bearish connotations)
  • The support is located at the 10 mma = 2058
  • I don't expect a test of the 10 mma during what is left of November.

S&P500 Monthly Chart 3
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Weekly time frame

  • Bears have once again failed. A Shooting Star followed by a Black Marubozu should have given the edge to a larger pullback but buyer stepped in aggressively negating the bearish setup with a uber bullish Piercing Line.
  • The support is at the 50 wma = 2061
  • The key resistance areas below the All Time HIgh are located at the weekly gap = 2099,20 then 2116.48 (November peak)

S&P500 Weekly Chart
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  • Weekly Oscillators are aligned with the bullish bias. No reversal is in the horizon as long as the RSI breaches the trend line and the MACD reverse the bullish signal cross

Weekly Momentum Chart
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Daily time frame:

  • The rally from august low has unfolded a sequence of higher highs/lows but it is not impulsive hence probably a Double Zig Zag is in progress, in which case we are now in the second wave (A).
  • Elliott Wave wise this advance cannot be an ending move. (Potential scenarios: Wave (B) of a Flat /Triangle or wave (I) of an Ending Diagonal)
  • Friday's Shooting Star could open the door to a retracement provided the 20 dma, which stands at 2079, is breached. If this were the case, the 200 dma would come again in play (Opportunity to open long positions) but the bullish seasonality of the shortened week of Thanksgiving should prevent a large pullback.

S&P500 Daily Chart
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  • Daily oscillators are mixed. Above all it stands out the MACD bearish signal cross which has not been cancelled. But the RSI (5) has not entered the overbought zone yet so more follow through to the upside is feasible.

Daily Momentum Chart
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15 minute time frame

  • We could have two bullish scenarios provided Friday's gap remains open or it is closed:

S&P500 15-Minute Chart
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VIX

  • The loss of the trend line from the October low and the 200 dma is suggesting a probable move towards the lower Bollinger Band. As long as VIX remains below the 200 dma = 16.27 it is signaling a positive environment for the equity market.

VIX
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In the technical front:

  • NYSE Adv-Dec Volume (Cumulative): So far muted response (Barely above the down sloping 10 dma)

NYSE Adv>dec Cumulative Volume Chart

  • McClellan Oscillator: It has risen from the oversold line closing last Friday slightly above the zero line. With the RSI approaching the overbought zone the odds of a pullback will increase

NYSE McClellan Oscillator Daily Chart

  • The ratio VIX:VXV (Event risk ratio) is approaching the 0.80 line. As it drops into the "red zone" the odds of a pullback will substantially increase

VIX:VXV Daily Chart

 

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