View: SPX: Follow Up of the Short Term EWP | The wave trading

Today just a brief update

So far the “working” map is fitting in accordance with my preferred short-term scenario, which calls for a retracement of the June´s up leg.

Last Sunday I highlighted 3 possible EWP.

Today I remove the wave (C) off the September 25 lower high option; the other two candidates are equally balanced.

Potential short-term paths from the September 14 high:

1. Zig Zag :

Therefore yesterday, price should have begun the wave (C) down.

The wave (C) has an extension target in the range 1413-1386

2. Triple Zig Zag:

Therefore yesterday, price should have begun the third Zig Zag (ABC) down.

Yesterday´s reversal at the 0.618 retracement after having completed a Double Zig Zag is strongly suggesting that he bounce off last Wednesday´s lod is over, although there is no confirmation yet since the sequence of higher lows is still in place.

Bears today have to round off yesterday´s bearish set up with follow through to the down side.

The consensus is looking for an overall shallow pullback with a target at 1422 – 50 d MA = 1419. Then maybe 2 lower ranges could come into play:

If, as I expect, there is soon a break down below 1430 instead of guessing where price will establish a bottom, we need to see:

A completed EWP. Positive divergences. Extreme oversold readings of TRIN / TICK High CPCE reading Fear ==> VIX closer to its 200 d MA

Conclusion:

The internal structure of the pullback off the September 14 high is strongly suggesting that price is ONLY involved in unfolding a corrective pattern that once is over it will open the door to the resumption of the intermediate up trend. The potential target is located in the range:

1.   50 d MA – 1396

2.  1396 – 1371

The catalyst for the next “take off” could be the announcement of the Spanish bailout, but earning season is also approaching, hence price may adopt a holding pattern. The immediate time frame is bearish biased since we don’t have a completed EWP off the September 14 high.