Technicals | Jun 17 2013
Bottom Line 13/06/13
Daily Trend: Down
Weekly Trend: Up
Monthly Trend: Up
Technical Discussion
We are going to continue to run with the very bullish chart interpretation [on the US S&P 500] we presented to everyone via the weeklies a few reviews back. It is certainly an interesting representation of where price sits in relation to the trend since the 2009 lows were locked into place. We have been bullishly corrective for quite a long period of time now, yet the corrective labelling was finite as far as how high price was going to travel short to medium term. Whereas the more bullish and impulsive wave labelling we are presenting here now is far more robust across the longer time frames. Which basically means higher price levels are going to continue to be sought for a lot longer than first thought. As we keep saying though, the labelling we are presenting here has very precise and clear price points in relation to when it fails. So it will be these levels that will be keenly watched over the coming months.
Off the 2009 lows, we have labelled price here as unfolding within a Wave-[3] of (3) of 3 of (iii). Basically you can't get more impulsive than that !! With such a labelling, if correct, reflecting that we are in the midst of a very strong uptrend, with any dips continuing to be well supported longer term. Quite a compelling argument and not a scenario I've heard mentioned anywhere outside these pages. It doesn't mean we are right though. And as mentioned, the great thing about Elliott Wave theory is that we will know exactly when we are wrong. And that will be if price breaks into the Wave-(i) high circa 1474 which will be a core ruling break. More immediately, we have now locked in the wave-(iii) high at 1687 with the typical 1.618x W(i) extension target measuring in at 1680. So almost to the tick where price has now decided to take a breather. The price targets for the wave-(iv) align the 38.2% – 50.0% retracement zone which come in at 1556 and 1515 respectively. And by all accounts, basis the strength of this trend, the shallower option is going to be a likely candidate if all continues to remain positive. The wave-(ii) by all accounts was a pretty straight forward double zig zag type pattern.
So using the laws of alternation, this wave-(iv) we are presently monitoring is likely to be a little more complex and drawn out. With the initial a-b-c move down potentially only being a more intermediate wave-(a) with further consolidation still required thereafter. Wave-a vs wave-c equality would see the first stage of this move complete near 1560. A nice price confluence to our more shallow target at 1556. Another area of price confluence comes in around here as well on a potential line of new support aligned to the S&P 500's old historical high zone. With a retest of this area more than typical as well. Watch also for the expected lower swing high dip from here also triggering some Type-A bullish divergence. Further compelling evidence supporting a shallow type dip only, and continuing to build our argument that whatever we are witnessing now will simply be a precursor to higher price levels being achieved in the second half of the year. Continuing to like the longer term bullish prospects here.
Trading Strategy
If you have been riding this long, Nick recommended in our last review to take profits right up at that initial rejection bar around the 1650 price area. Savvy advise. The recommendation now is to simply stand aside. We have provided a pretty forceful longer term bullish argument based on the analysis provided yet now is not the time to just jump in. Price is in corrective mode so we just need to see if our expected targets zones down towards 1560, or perhaps a little lower, can be achieved. Watch for buyer support to return, and we will then time another long entry from there. Remember, the potential for this move to be more than a simple a-b-c zig zag pattern is also very real, so patience will likely be required before our next trading opportunity finally presents itself.
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