Daily Analysis 07-08-2011
Yesterday we got another one = 5 eod prints above the BB
Today I begin the daily analysis with the SPY( SPX etf) daily chart since I believe here we have meaningful price information :
- The Elliot wave pattern from the June 16 low can be counted as an ABC up leg since on June 23 price established an eod lower low.
- The wave (C) should be almost completed as we can now easily see a 5 –wave up leg.
- Yesterday’s gap up and go can be an exhaustion gap.
- Yesterday SPY ended the day with a Spinning Top candlestick
Therefore we know that the rally is not tracing an impulsive up leg instead given the above reasons the potential ABC should be almost completed.
– if a top is not in place yet the next resistance is in the range 1359.44 -1361.22
– The following correction should at least establish a lower low below 1330.92
– Given the strength seen the pull back is not expected to breach the 50 dsma = 1317.50
The intensity of this up move is breath taking as it took the bears 7 weeks to reach the 200 dsma while in 3 weeks price has almost recovered the previous highs.
Elliot Wave Pattern:
I have already mentioned that I was looking at 4 potential patterns:
- Triangle wave (B).
- Ending Diagonal wave (C).
- Leading Diagonal wave (1) of (C).
- Larger corrective pattern in progress since the February peak.
Based on the bullishness we are witnessing the probability of a larger corrective pattern is almost nil while also the odds that price is tracing a Triangle are decreasing dramatically. A Triangle to be even remotely viable would need a wave (E) sell off with a minimum target in the area of 1300.
Then price should be involved in tracing either an ED or a LD therefore at the June 16 low we have a major bottom, something that we were getting aware given the buy signals triggered by intermediate breadth & momentum indicators
In the weekly SPX chart I have potential Double ZZ (WXY) from the February peak that can have completed the correction at the June 16 low which in my opinion is a wave (B). Hence a wave (C) is now in progress. Keep in mind that a (C) wave has to be either impulsive or trace an Ending Diagonal.
Here we can also see the importance of the mentioned 1317.50 area as it is were the 50 day and 20 week MA are located
In the technical front we have s/t momentum & breadth indicators with overbought readings but longer term ones are suggesting that it is reasonable to expect higher prices ahead.
This is why it is obvious that a s/t pull back is coming but the price action is suggesting that a bullish pattern is in the makings.
Regarding the potential Ending Diagonal idea below I have a “draft”.
Today we have NFP
Have a great weekend everyone