Tuesday, 15 May 2012

Has the longer term trend in S&P changed?

The move from March 2009 lows up to now, has been one of the most discussed topics among elliotticians whether it is a new impulsive or a big wave 2 of C. Until now bulls have proved dominant. Bears don't give up and 1422 in S&P cash was one more top they called that it was the final one. As you have read in previous posts we called the top quite soon and we gave the area of 1340 as the most probable target as it was the previous 4th wave. The level of 1340 down to 1300 is very important in my opinion. A decisive break below 1300 is strengthening the scenario that the trend has changed.
Until now we see 3 clear waves down from 1422. The market is trending lower and 5 waves could get real as european debt crisis and instability in southern european countries puts pressure among risky assets. One sign I'll be waiting to check is to see if my two EMAs will cross. Most of the time, when they crossed, a big move followed.

Taking a closer look at S&P, we could be in an extended 5th wave with target towards 1315. The most bearish scenario however is that we are already in the next wave down. 1345 should hold for the market to continue downwards in the short term. However we should have in mind that there is also a chance that this whole move from 1422 will end as a 3 wave down in these levels, and new upward move may start. We have to consider the most probable scenarios and be ready to trade as easily the long side as the short one.

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