Momentum has stalled just beneath the likely reversal zone published last Sunday and we have fallen below trend. The closing Doji-like candle on Friday suggests indecision.
Some believe we are working on wave C, while other believe we are working on a wave 5 or a minor iii but among the three EW experts I follow none have declared an intermediate top. They pin events after the fact.
But as a trader, I am inclined to believe we have put in an intermediate top and are likely to see moderate weakness through much of next week after putting in a at 2169 ( real number) during an OPEX week which, as of late, tend to be marked by major strength. I would not rule out a run at 2177 followed by weakness.
This view of likely weakness is supported by the for the S&P 500 which is starting to roll over after a number measures of sentiment reaching extremes.
Any retracement is likely to be limited and based gains following 2073, not the bottom at 1990. A 23.6% retracement would take us down to around 1950 where there is ample support. Yellow lines mark other areas of potential interest.
Should the pullback be deeper than expected, it’s highly unlikely to fall below 2131…a major EW and area of support.
Scores of companies will be reporting next week with some of the larger names including BAC , V, JNJ , EBAY , GM and YHOO . Analysts are highly focused upon outlook as it is widely believed there will be an revival in the second half of the year after five consecutive quarters of declines.
Depending upon the results, large swings in either direction are possible. should increase, supporting anticipated declines.
Lastly, geo political risk has increased with the attempted coup in Turkey but with its suppression this risk has likely been reduced.