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

Yesterday SPX achieved another marginal new high during the first hour of trading and then it slid during most of the day although by eod bulls attempted a recovery.

This price action formed a 3-wave down leg, which obviously does not give any reversal argument to cheer up for the bears, but if the pattern that I am following (The Ending Diagonal option) is correct, it could be the first step for a shallow wave (IV) pullback.

So far every single 3-wave down leg has been bought and new highs have been achieved, if this time is different then maybe a larger Zig Zag down could trace the wave (IV) of the assumed Ending Diagonal. If price unfolds a Zig Zag down the missing wave (C) down should at least extend 8.76 points.

So this is the moment of truth for my short-term scenario, as today it badly needs a lower high.

If the ED is playing out then yesterday´s hod has to be the wave (III). Now I need a corrective wave (IV) pullback that has to breach the wave (I) peak at 1514.41

The potential target for the assumed wave (IV) is located at the 10dma = 1511 +/-

Once/if this scenario plays out then the missing wave (V) will have to be shorter than 26.20 points (The wave V of an ED has to be shorter than the wave III), probably it could top in the area of 1330-1335

Maybe the ED could be done by next Friday´s OPEX day.

I hope that this is what price has in mind otherwise I would be left without a coherent alternative.

If the ED pans out then, in my opinion, it would establish the top of the corrective up leg from the November 16 low opening the door to a multi-week correction with a potential target in the range 1464-1434 (This would bring forward the larger Ending Diagonal scenario that I have been discussing lately regarding the long-term EWP)

How can I take advantage of this potential scenario?

As you know I am already long SPXU, I should have closed the position last Thursday when SPX dropped to 1498.49, but I was on the way to Baqueira for a long weekend skiing break. So now I am trapped and even if this is not what a disciplined trader should do I will probably keep them, maybe doubling the position during the expected SPX wave (V) ed.

FAZ should offer another potential swing trade set up based upon XLF´s same scenario discussed for SPX

I am also watching VXX since it is obvious that if SPX embarks in a multi-week pullback volatility will rise.

Here we could have price forming a bullish falling wedge. If this is the case once/if it pans out I expect am upward thrust.

In Europe I am looking at the DAX or Euroxx for a long swing trade with a 2x short etf.

I am also monitoring FXY as I expect a large countertrend rebound of the Yen.