Saturday, June 14, 2014

MTU Weekend Ed. - Near Term Scenarios (6/13/14)

The 1.52% drop from its record high in SP500 this past week bodes well for the proposed ending diagonal triangle (Chart 1 and Chart 2), following a proper overthrow (6/6/14). If the EDT scenario plays out, SP500 is likely to see 1750 before the end of Q3.

Moreover, a market cycle based analysis projected a major top (but not the top) on June/5/2014 or June/6/2014.  SP500 in fact topped on June/9/2014 and so did NDX on June/11/2014.  If the cycle is in play, the next low in SP500 is likely around 1800 and on or about July/16/2014. The pullback in this case is likely paired with the green wave (4) in Chart 3.

However, price actions this past week could signal that the pullback was already over.

[1] SP500's retest of the upper EDT line support has been successful so far (Chart 1). There's additional support below at the inverse head-and-shoulders breakout area (around 1900).

[2] This past week's pullback can be comfortably counted as an ABC corrective structure. Since NDX peaked two days later than did SP500, we may be looking at an expanded flat in NDX (Chart 4) and a flat in SP500 (Chart 5).  Moreover, wave A-down conveniently divides the entire pullback range into 0.382 and 0.618 Fibonacci segments.

[3] The short lived pullback in this case fits the larger complex three structure discussed before (Chart 6). It would be the small-pullback before the final overthrow.

While it is a challenge to decide which of the above scenarios is most likely, selling opportunities are emerging from a big picture perspective.  Let's see where the market brings next week.