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

It is not the Ending Diagonal that I was looking for, as I posted last Tuesday:

But maybe price is still forming a different bearish rising wedge:

In order to increase the odds that this Ending Diagonal will pan out price, despite yesterday´s consolidative session, which usually means a continuation pattern has to surprise the majority with a corrective pullback.

This “unexpected” short-term pullback can pan out if a Double Top is confirmed today. This pattern has a theoretical target at 1509 (More or less where the 10 dma is located)

Below is the SPX 5 min chart I posted yesterday at the eod on Twitter/Stocktwits:

If the wedge discussed above is confirmed then I maintain the scenario that calls for a multi-week pullback wave (IV) of the large Ending Diagonal scenario discussed lately.

The potential target should be located in the range: 1458 (50dma) – 1434

In the Technical front there is no change: the warnings that this up leg is long in the tooth remain omnipresent across the board of both short-term and long-term breadth & momentum indicators

Below I show a few examples:

McClellan Oscillator: Huge negative divergence both vs its January peak and vs Friday´s hod and below the zero line.

RSI is also showing a huge negative divergence both vs its January peak and vs last Friday´s hod. The MACD remains with a bearish cross.

NYSE Adv-Dec Volume also with negative divergence vs Friday´s print and in addition yesterday it was negative.

The weekly stochastic of the Summation Index is issuing a sell signal, which will have to be maintained by Friday´s eod print.

So if the wedge discussed above is correct, there should be marginal upside but the downside risk could be worth 60-80 points, hence R/R in my opinion is clearly leaning against the bulls.

I am watching KBE (In addition to an already long position in SPXU) as a possible candidate for a short setup (Long FAZ).

Here we have another potential wedge.If/when price breaches 26 I might go long FAZ.

Lastly, but I don’t have time now to post any charts, both the EUR and the European indices have already began a correction, which should be far from over. In my opinion odds are larger for SPX playing catch up to the down side.