Technicals | Oct 17 2012
Bottom Line 16/10/12
EW Trend: Corrective
Price Trend: Up
Trend Strength: Strong
Technical Discussion
LAYMANS:
The S&P 500 index is staying steadfastly robust. And whilst it remains in such a state, all roads will continue to lead to higher price levels. We have performed an extended review tonight in our video to not only reinforce this point, yet to also convey the complexities of the patterns at hand. In this case I'm not defining complexity as being unsure on the point of trend direction. Because we continue to remain convinced that this is up. Yet what we are unsure about is the Elliott Wave patterns that are going to unfold as part of the overall process. We'll explain these options a little more in our technical section tonight. Be it the underlying theme remains the same. We are bullish. At least over the coming 6 months or so. And depending on the type of pattern that unfolds, perhaps even a lot longer. I'll only be concerned if support / resistance circa 1350 gets broken below with conviction. Yet from where I presently sit, price is continuing to indicate that it wishes to head nowhere near this critical price area.
TECHNICAL:
As expressed in our video tonight, there are a number of ways in which the patterns could play out here. None of them are bearish, with all of them searching for new historical highs eventually. So the short to medium term price patterns for mine are continuing to look higher. Be it within a longer term corrective frame work. The double zig zag continues to position itself off the March 2009 lows. So an A-B-C-X-A-B-C type pattern with the final Wave-C potentially now in play via a 5-wave upside pattern evolving off the June 2012 lows. Wave equality on the second half of this pattern targets 1614. So nicely above the all time 1576 highs set back in 2007. If the Wave-B is still playing out via a running flat, then it is quite possible that the final Wave-C, when it does finally kick into gear, is going to test 1700. The third option, where a higher degree Wave-(B) has only completed back in June 2012, would see a longer term push higher take shape, with 1970 aligned to higher degree Wave-(A) vs Wave-(C) equality. This option for mine, as things presently sit, is less likely. I've mentioned it here purely out of interest only and it will only be revisited well and truly down the track if price patterns continue to play out to its advantage.
Right here and now though, the double zig zag pattern is the higher probability outcome. Even more so if price immediately pushes past 1475. Especially as a breakout past this price point would make the intermediate (a)-(b)-(c) running flat pattern very unlikely indeed. Oversold at present levels combined with a solid session last night and minor degree wave equality tagged to the tick yesterday at 1426. As such I see no reason why another push higher cannot be witnessed here. With a break past 1475 leaning everything towards a larger double zig zag move off the March 2009 lows , with the final Wave-C presently working its way through a Wave-v of (iii) of 3 . And what this simply means over the coming months is that we witness a series of higher highs being achieved, with any retracements being shallow at best, and continuing to lock out traders looking for a deeper pull back to climb on board. Robust really is the only way to describe price action at the moment.
Trading Strategy
Price continues to lack the depth we are looking for within our running flat proposition. A view that would see price head back towards 1350 – 1370 and provide a swing trade opportunity at lower prices to trade off. Yet the robust nature of price could leave us stranded at the station if we continue to pursue that trading strategy. Nothing more frustrating than being bullish a market, yet due to the way price has unfolded, a low risk opportunity has just failed to materialise. As such I'm going to offer up a trading strategy in this review that is for aggressive traders only. It is low risk yet it is not without its hurdles. Especially as our stop position will be so tight. Trade the S&P 500 long on a break above last nights high at 1442 with stops below 1425. Be warned that whilst price remains below 1475, then the deeper running flat is still a possibility. As such we could easily be stopped out pretty quickly. Same applies if price decides to take one last quick dip lower more immediately before reversing bullishly intra day again. Mind you this would be another opportunity to jump back in, especially via a bullish key outside reversal day with levels closing on or near the sessions highs. There is no doubt price action has done an excellent job trying to lock us out here .
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not FNArena's (see our disclaimer).
Risk Disclosure Statement
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