View: DAILY 0618 | The wave trading

Sine I have extended my weekend holiday I did not have enough time to study/review the markets so today I can only post a brief update.

So far it has been quite easy to “decode” the EWP from the June 4 low.

As a reminder my preferred count off the April 2 top is calling for a counter trend wave (B).

I had initially assigned as a potential target the range 1344 – 1363

Now the problem is to be in full control of a complex EWP since unfortunately price is not unfolding an “easy to read ” Zig Zag, maybe it is not even a Zig Zag.

Above, the potential topping spots remain at the gap fill at 1353.39, which in addition is also a weekly gap, then at the 1357-1359 area & the 0.618 retracement.

At the moment we cannot rule out a move above the 0.618 retracement since if price is unfolding a Zig Zag the extension target could carry price towards the 1370 area.

Waves (B) are tough, as “they” can do almost anything: Zig Zag, Double Zig Zag, Triple Zig Zag, Triangle etc.

So far there is no indication that price has  completed an ending pattern despite yesterday´s Spinning Top.

The pivot support is at the 10 d MA = 1320

There are plenty of catalysts that could trigger a trend reversal but I doubt that price will establish a top before next Wednesday’s FOMC meeting.

Even though the internal structure should allow more upside we know have several indicators that are now suggesting that SPX is getting overbought.

Daily Stochastic has entered the overbought territory.

So I will be monitoring the Stochastic to see when/if a bearish cross is issued and the RSI´s trend line support.

The 10 d MA of NYSE Adv-Dec Volume is approaching the overbought range.

The McClellan Oscillator is approaching the 60 line

In addition to the “still” bullish short-term internal structure the absence of negative divergences are favoring more upside for the assumed wave (B).

Yesterday the most sensational move was achieved by the VIX, which plummeted 13%, breaching a trend line support in force since the March 16 low and closing below the lower BB.

The next support is at a gap fill at 17.56

Since, often, VIX leads the market in bottoming or topping ahead of the equity market we have to monitor it closely.

Sector wise I am monitoring IWM since if a bullish IHS pattern is confirmed by a break out above 77.85, even though price will not achieve the theoretical target I would not rule out a move towards the gap fill at 81.58, in which case SPX could reach the 1400 area.