Today the technical update is brief since yesterday I have laid out my preferred short-term scenario, so now I have to wait for a confirmation by the price.
As I mentioned yesterday:
“With yesterday´s huge rally we now have a daily White Marubozu. Some upside inertia usually follows this candlestick, but most of the time by eod it is a small range body.
Therefore we will have to wait for Friday´s price action, in order to evaluate the bullish/bearish options”.
We got the small range body since SPX ended the day with a potential bearish Shooting Star.
A Shooting Star usually is an exhaustion candlestick.
As you know, in my opinion, at the June 4 low price has not completed yet the corrective EWP from the April 2 top due to the lack of impulsiveness in the last down leg from the May 29 lower high at 1334.93
For this reason I suggested 2 potential short-term outcomes, an Ending Diagonal or a Triangle. Both options will result in lower prices ahead.
If I am on the right side of the current EWP then the missing wave (C) down will establish an important bottom, probably the low point of a larger corrective pattern (Flat / Triangle) that will carry on during the summer.
The majority of EW analysts are looking for a much bearish outcome since they are assuming that price has unfolded an impulsive down leg from the April 2 top which concluded at the June 4 low.
Therefore now price is involved in a multi-week rebound with a potential target in the area of the 50 d MA = 1359 from where a potential wave 3 down will begin its path towards the lows 1200s.
We will soon know if this rebound has more legs. The resolution of the 2 potential scenarios is straightforward, the key is if price fails or succeed to break above 1334.93
In the mean time we have to wait to see today´s price action. So far the initial drop from yesterday´s hod has been impulsive in many indices.
We can resume the critical levels with the 20 d = 1316 & 10 d MA = 1307.
In order to increase the probability that the current bounce is over price has to lose by eod the 10 d MA.
In the mean time, as I am writing today´s technical update, ES Globex is tracing an impulsive decline, which is presaging with a large probability more down side action.
The EUR and the Bond markets will play a major role in validating the correct short-term equity scenario.
VIX remains the main indicator above all because yesterday´s candlestick, an Inverted Hammer, at the critical horizontal support at 20.75 MUST be confirmed today, otherwise a lower low could jeopardize my bearish short-term scenario.
Have a great weekend
