Daily Analysis 07-06-2011
WAIT AND SEE
Yesterday I mentioned that we have intermediate momentum and breadth indicators with a buy signal in place but the s/t ones have reached extreme overbought readings.
Therefore we have price in the process of shaping a bullish pattern but at the same time a pull back is due. In addition 4 eod prints above the BB is not usual.
Daily momentum is also suggesting that a pull back should be expected with the RSI at trend line resistance and the Stochastic looking ready to roll over from overbought readings.
And the NYSE add-dec volume also is showing that price is losing the steam with less buyers.
Regarding the s/t count in my opinion price is tracing another corrective up leg which atm can be counted as an (ABC). The (C) wave seems to be needing one more up leg in order to be considered completed which could stall at the last previous lower high in the area of 1345.20
As mentioned in yesterday´s comments I am looking at 3 possible patterns:
2) Ending Diagonal
3) Larger correction since the February peak
Since everything has been 3 -wave moves since the February´s peak the Triangle idea is atm a very valid potential pattern.
But only the following pull back will validate or abort this idea since price will have to reverse hard and lose major supports beginning with the 50 dsma = 1317 and probably it should reach at least the 20 dsma = 1291 area.
If the due pull back is shallow and bottoms in the range 1317-1311.80 then something else should be playing out ….. Maybe the Ending Diagonal idea.
In the weekly chart I have the Triangle option where the 1344 area could be the right spot for the top of the wave (D)
ATM we have a weekly doji. Taken together with the previous white Marubozu, price could be shaping a 3 weeks reversal candlestick pattern called Evening Doji Star. We have to wait for tomorrow eow print
If the Triangle plays out then the wave (E) could bottom in the area of the trend line from the March 09 low.
This is why now it is a “waiting game”.
VIX is not making lower lows and even though yesterday it closed with a bearish Shooting Star, I am waiting to see if it will establish a higher low which should ocurr with SPX establishing the top of the up leg off the June 16 low.
This morning we have the ECB meeting. The market expects a rise of another 25bp to 1.5%
The EUR pattern is a mess of corrective waves.
In my opinion it is tracing a wave (B). A triangle is being widely watched
Honestly I have no idea for the s/t.
ATM the range is 1.4578 above and 1.4100 below
A move above 1.4578 will be bullish for the equity market while the loss of 1.4100 should be bearish for the equity market.