Weekly Analysis (07-03-2011)
WHAT A WEEK !!!!!!
Price shrugged off the potential risks (Greek insolvency, weak economic growth, US debt ceiling … etc etc etc …..) with a powerful rally.
This is a VERY BULLISH action that has to be respected.
SPX Long Term EW possible count:
The main “theme” is that price is tracing a corrective wave (B) up from the November 2008 low at 741.02
Once the wave (B) is in place, price should begin a large wave (C) down that has a potential down side target at the March 09 low tracing a large Flat correction.
Therefore Elliot Wave wise the “assumed” current wave (B) up can trace:
1) A Triple ZigZag (blue count) in which case, once we can confirm that the corrective pattern from the February peak is in place, an impulsive or an Ending Diagonal wave (C) up will establish the TOP of the wave (B) off the Novemeber 09 low.
2) A ZigZag or a Double ZigZag (black count).
If this scenario is going to play out then the Wave (B) will most likely considerably exceede the October 2007 peak.
SPX Short Term possible EW count:
Taking into account the above scenarios, we know that from the February peak everything has been corrective:
a) First down leg to the March low = (ABC)
b) Rebound to the May peak = (ABC)
c) Second down leg to the June 16 low = (ABC)
Therefore we could label the pattern as a completed DZZ which would allow the resumption of the up trend.
But unfortunately also the initial internal structure of the rebound from the June 16 low is corrective – possible wave (A) –
Therefore with the price information available atm the current rebound may also be tracing another corrective (ABC).
Hence we don´t know yet if the corrective pattern that has been in play for the last four months is over or if price is going to trace even a larger corrective pattern.
With the current price structure atm the most reasonable pattern is still a Triangle.
The alt counts :
a) With a likely ABC up in progress (off the June 16 low) price could trace an ED or LD (same pattern that ocurred last July 2010)
b) A large corrective pattern from the February peak is still in progress tracing a TZZ.
Therefore atm I am going to wait for the impulsive up leg off 1262.87 to be completed as I think that we are still in a wave (III) hence a small pullback should be followed by one more push up.
Once I can count a 5 -wave completed then the following pullback will give us clues regarding if the current price explosion has been the wave (D) of the Triangle, the first segment of a Leading Diagonal/Ending Diagonal or if price is still involved in a larger correction.
The key issue is the pull back and I am sure that we will be able to work out which option has the lager odds of being the correct one.
1. Despite last week “huge rally” in my opinion we don´t have a confirmation that the correction that began at the February peak is over.
2. Based upon the 3 -wave moves the Triangle remains a reasonable pattern, but unfortunately we cannot rule out the beginning of a LD/ED or a larger correction
3. Friday´s hod may not be yet the high of the current 3 wave up leg as in my opinion price is establishing the high of wave (iii) off 1262.87
4. Once the “assumed” (ABC) off the June 16 low is completed the following pull back should help in identifying the correct option.
4. Last week breadth thrust has given intermediate buy signals (weekly Summation Index) but at the same time s/t indicators like the McClellan oscillator is now extremely overbought, suggesting that a pull back is coming.