Friday, February 22, 2013

MTU Weekend Ed. - Short Term Update (2/22/13)

SP500 lost 2.2% (or 34 index points) over a two-day period this past week, giving back all the gains over the preceding three weeks.

Moreover, the price pattern in SP500 from its high (1530.94) has now traced out a five-wave decline followed by a three-wave rebound (which is itself an overlapping 7-wave structure or 7-up). See Chart 1. This price profile suggests potential reversal at a larger degree or degrees, based on EWP.

Zooming out, we see that the latest sell-off fits nicely with
[1-bullish] wave [a]-down of a wave 4 correction within the post-November-low upswing (Chart 2, green). After the proposed wave [b] rebound exhausts, wave [c]-down should follow to conclude the wave 4 pullback. A 5th wave advance, potentially weak, will likely complete the Hope Rally.

[2-bearish] the initial sell-off (Chart 2, blue) following the end of a major 7-wave rise from the 2011 low (Chart 3) as well as the conclusion of an interesting fractal (Chart 4). Please see 7-Up and Mature Fractal (2/15/13) for discussions.

The price profile in VIX echoes these two near term scenarios. See Chart 5.

Short term trend has likely turned down. It’s reasonable to expect a wave [c] of 4 decline or a wave [iii] sell-off based on these scenarios.