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

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

SPX: FOLLOW UP OF THE SHORT TERM EWP

Content added from thewavetrading.com/2013/01...-term-ewp-67/

No Change of the short-term scenario

The risk remains high for a multi-day pullback. The overdue pullback should not endanger the intermediate up trend since I am confident that price will only undertake a partial retracement of the November up leg.

Given that the current up leg can belong to one of the two Ending Diagonal options discussed in my last SPX long-term EWP update it is not an easy task to establish the exact location of price within the ED´s up leg (wave III or wave V).

We know that these waves subdivide in Zig Zag so I assume that given the extreme overbought reading of the daily stochastic price should be on the verge of completing the wave (A) of a larger Zig Zag.

If this is the case then price should soon begin a multi-week pullback wave (B)

As you know I have been following a potential Ending Diagonal that could complete the assumed wave (A)

Yesterday I suggested that price could have truncated the mentioned ED, well I was wrong but the Ending Diagonal project is still valid.

As we can see in the SPX 30 min chart below, price has achieved a marginal higher high, hence if the ED pan out a reversal can occur today.

If the ED is the correct pattern then the loss of 1463.76 should trigger sell-stops intensifying downs side action.

Once/if we get the overdue correction underway and the pullback is the assumed wave (B) then it should at least reach the target box in the range 1434 – 1419, we might see a battle between bulls & bears at the trend line support in force since the November 16 low.

In the technical front:

The Stochastic of the McClellan Oscillator has issued a sell signal

Momentum keeps flashing heads up with the RSI possible Double Top and persistent negative divergence and a stochastic extremely overbought.

I will begin publishing a “virtual” swing-trading table. The setups will be established in the daily updates or during trading hours I will post the ideas on Twitter/Stocktwits. I will review the swings planning in the weekly technical analysis.

The first trade has been opened yesterday with a long position in UGL (Ultra long Gold ETF). This set up has been discussed recently and it is based upon a countertrend rebound out of a potential Leading Diagonal.