Friday, November 16, 2012

MTU Weekend Ed. - Follow Through (11/16/12)

SP500 has now retraced about fib-0.618 of the prior upswing from the June low to the September high.

It has also approached a major support area around 1338 which coincides with the upper edge of its 2011 topping zone. It should be noted that the next major support area is around 1276.

The proposed corrective wave structure has likely run its course or approached its end (Chart 1-ES, Chart 3-SPX, blue and green). Moreover, the decline in ES from its October high counts better as a corrective double zigzag (Chart 2, black) rather than impulse waves.

As a result, Friday’s rebound has the potential to start the next upswing according to our baseline scenario (Chart 3 blue/green, Chart 4). Follow-through to the upside is necessary.

Likewise, this rebound (as a  potential wave [iv]) needs to be reversed soon for the top bearish count to hold (Chart 3, red). Further meaningful declines from current levels would likely imply a larger trend reversal (Chart 3, red) or a correction at a larger degree, both scenarios being bearish.

SP500 E-mini (December, 2012)

SPX cash index