Thursday, 18 October 2012

S&P confirms bulls strength

 Last time we analysed S&P, the index was near the 1430 level and we were expecting an upward move towards 1450. The index at the beginning of this week started to move higher in an impulsive pattern. We favoured the bullish scenario that a new upward wave is starting that will give new highs. The index closed yesterday just above 1460 showing that the bullish strength is dominating. This is most probably the 1st wave of a bigger upward movement rather than part of a corrective wave. However I think this 1st wave has pushed to its limits and its time to turn back down for a correction towards 1440.
As shown in the above chart, the move from 1425 is still inside the upward channel. Once broken the correction towards the middle pitchfork support will begin. Initial target is 1440 or 50% retracement. Of course for our bullish scenario to remain valid, prices should not fall below 1425.

Zooming in the 1 minute chart we observe the impulsive pattern this move has taken even at such a small time frame. The upward sloping trendline remains intact. Once broken, the correction may start towards 1440. First stop will be the area of 1454-50 as wave A and will be followed by wave B and C. Until then we have lots of time to calculate other potential targets of the expected wave 2. The form this correction will take when prices unfold, will make us more accurate regarding the correction target of this wave. 

The above analysis is based on our favourite bullish scenario that we propose and support for some time now. Bears were proven weak as important support levels have been held. On the other hand selling pressures were not strong enough. What the market has lost in 5 sessions, it has taken it back, almost 100%, in just 3 sessions. Nevertheless, bulls should be cautious at these levels and specially if 1425-15 area is breached. 

Thank you for taking the time to read my post.

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