Technicals | Apr 18 2013
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Bottom Line 17/04/13
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Technical Discussion
Clearly we are at a very critical juncture right here . The analysis has followed the script perfectly to this point. Yet standard price targets have now been achieved and our time equality target is end of April. And here we are past the mid way point in April and I'm starting to twitch in my seat a little. Looking straight at the Wave count without bias and without trying to force the issue one way or the other, all I see is a clear 5-wave pattern. We do have some slight variations in our Elliott Wave counts across our 3 U.S majors. And we have spoken about the possibility of a 5th wave extension in our last couple of reviews. Not an unusual phenomenon as we have mentioned before, within both Indices and futures markets.
That said, price has recently tagged 1597 and a typical 5th wave target aligns Wave-5 and Wave-1 equality. And this measures in at 1590. So a typical 5th wave target has now been achieved. That said, check out the higher degree Wave-A vs Wave-C equality target directly related to this move. It comes in at 1691. And if it wants it, then I can't help but feel it will need the small caps more on board to help it achieve. This is starting to look very interesting indeed.
Tops (and bottoms) often see price start to become a little volatile as a means of signalling that an impulsive run is about to come to a close. And certainly a little volatility has entered the fray over the past couple of sessions. Not enough to be overly concerning right at this point in time. Yet with all the other factors we've mentioned at play here, I am sitting up and taking notice regardless. The DJIA is easily in historical high territory yet only being made up of a minimal amount of blue chip stocks , the S&P 500 is the one I tend to take more notice of. And as you can see on the chart, it is struggling to come to terms with being in blue sky territory.
On top of all this, we also have some Type-A bearish divergence lingering around that looks as though it wants to trigger. Yet to this point has yet to fully commit. We've run a rising support channel off the Wave-4 low now as well with any drop below 1550 likely to see it start to break down. So to say we are at a very interesting stage of the trend here really is an understatement. We can keep going higher of course as stated, yet I think a cautionary approach from here is certainly a valid strategy.
Trading Strategy
I do not think this is the time nor the place to just jump on board. As mentioned we have one compelling higher end target that is still far from being achieved, yet there are too many other factors presently creating some potential short term head winds. And we certainly do not wish to get caught in a trade if these start to erupt. Our goal is to capture smooth clean waves as part of a sustained trend in either direction. And even though we clearly captured that for a good part of the trend off those November 2012 lows, these clean patterns are now potentially starting to mess up a little. Lets see if things can clean up over the coming days, with price providing another low risk opportunity to get on board for another leg to the upside. If not , then our next trade may well be on the short side.
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