Friday, 13 July 2012

S&P to test June lows

 Recent weeks have seen S&P trade within the 1300-1380 range. QE3 is something that could help the markets push towards higher levels and maybe new highs, but how sustainable this rise will be I don't know and I don't feel very comfortable with. My view is that QE3 will become a reality but the more the FED can delay it, the more they will take advantage of the time they have. Elections will surely play a major part in taking such a decision and as to where the market is heading. Back into technicals, my weekly chart prepares me for the worst to come. The 5 waves down from march are a sign of an impeding bigger decline. Adding to that, the similarities in the weekly chart and previous large declines, makes me expect a test of the June lows is soon to come. This decline could push prices further down towards 1200. This could be the trigger for QE3 but that is just a thought.
Taking a closer look in the 60m chart of S&P, I have 2 highly possible wave counts under consideration. The first count is depicted with red letters and assumes that 5 waves down have completed from the high at the 1375 area. A 3 wave upward pull back towards 1340-50 is expected to top and end lesser degree wave 2. Invalidation of this count would be the break above 1375 price level.

Another wave count depicted in the chart is with yellow letters and is more bearish than the first. The 3rd wave is on its way and a couple of 1-2 waves have been formed. So this could unfold as an extended wave to break 1310 support and test June lows. We will have to wait and see the way the market unfolds in the coming sessions. 

Concluding, bears have the upper hand as long as the prices stay below 1375 and will get stronger if 1310 is broken. Bulls have slim chances of survival, since no clear and complete impulsive 5 wave upward move has completed from June lows. The overlapping structure of the waves implies correction. When the correction will end (it might have already ended at 1375) the downward trend will resume to new lows ( lower than June lows).

Thank you for taking the time to read my post.

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