SPX, NDX and DJIA closed the week with impressive bullish candles. However, if we look at the daily ones, there are certain aspects that need to be kept in mind. Let’s explore the candles, indicators and EW.
As expected, the indices continued their advance after Three White Soldiers combos made in previous weeks. However, in the process, price moved over BB and RSI went into the overbought territory.
While indices can continue to advance, the chances of horizontal movement or pullback are a bit higher for the upcoming week(s).
The indices printed very similar Spinning Top/Evening Star candles. While the candles are bearish and their bearishness is supported by the majority of indicators, the theory requires a confirmation. If indices close on Monday/Tuesday below Friday’s low, this would be it.
For a continued rally, the daily candles needs to close at a new high.
SPX/ES extended 2.618 off the September low and I view this level as a possible pullback zone.
Currently I am tracking three possible paths as shown on the chart above:
- Green (primary).
Wave 3 completed. Expected pullback to $4550-4600 in wave 4. Green rectangle.
Wave (1) completed. A bigger pullback to $4450-4600 in wave (2). Red rectangle.
The correction that started in September is not over. Possible wave C, targeting $4250-4300.
I think that on Friday indices made a very clean motive wave down. The chart below shows DJIA. The structure and Fibs are just perfect for wave (1)/A.
Let’s see how indices play at the beginning of the week. If they continue downwards, the lengths of waves should provide enough material for forecasting the next moves.
There is also a chance to immediately continue upwards, but it is of a lower probability now.
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