Saturday, November 22, 2014

MTU Weekend Ed. - Gaps and Triangles Galore (11/21/14)

The 13.8% upswing in SP500 from its October low is ridden with unfilled gaps and triangles. Since gaps tend to get filled eventually and oftentimes “quickly” and triangles precede terminal moves or are terminal moves themselves, we monitor them with great interest.

Chart 1 highlights 7 unfilled upward gaps in SP500 for the current upswing. 3 of those 7 gaps produce non-overlapping daily bars and the rest 4 are on an intra-day basis.

Note the location of the 3 daily gaps in relation to Friday’s high of 2071.46: 2056.75 (-0.71%), 2001.2 (-3.39%), and 1909.38(-7.82%). Filling these gaps would require a deep pullback. At the moment, the primary support for this upswing sits around 1986.

Chart 2 highlights 3 recent potential triangles in SP500 that shed light on where this upswing may terminate.

The first red expanding triangle is likely wave (iv) of the upswing, also highlighted in Chart 1.

The second red expanding triangle is likely an EDT wave (v), also highlighted in Chart 1. If this is the case, Friday’s high of 2071.46 represents the typical overthrow of an EDT and marks the end of the upswing.

The third blue contracting triangle is likely an EDT wave (v), also highlighted in Chart 1. If this is the case, wave E-up of the EDT is still developing. However, wave E-up should be capped by 2087.72 since this is a contracting triangle.

Chart 3 presents yet another potential long-term expanding ending diagonal triangle discussed in Topping Squiggles (11/14/14). This expanding EDT spans the past 12 months, with the current upswing as its wave [e]-up. Note that wave [e]-up reaches parity with wave [c]-up in price at 2074.13 or 2102 and Friday’s high is 2071.46.

Near Term Wave Counts
Our base case near term scenario is that SP500 is in wave (v)-up off its October low (Chart 1, blue). It's possible that the week-long consolidation in mid-November is a 2nd wave or a B wave (Chart 1, green). In that case, wave 3 or C since the October low is in progress with (much) greater upside potential.

For longer term tracking counts, please see Topping Squiggles (11/14/14).