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Advanced Technical Analysis

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Note: the following analysis is formulated as an assimilation of Fibonacci, DeMark, Elliott Wave and other technical indicators. It is offered as education and not intended as advice in any way.


Friday's new lows in all three indices went unconfirmed by breadth and momentum; given too that all the minimum conditions have been met to consider a full 5 waves down from last Monday's peaks to be in place, we remain decidedly of the view that a 2-3 session bounce is imminent. Such a bounce should labor to upper Fibonacci resistances and then present the best risk/reward to the downside based on the analysis in at least the last 6 months if not longer.

It is possible that each index moves slightly lower today but such a move would only serve to create more bullish non-confirmations for a bounce to 'correct' the impulsive decline from last Monday's peaks. Patience remains key for traders looking for market weakness for the expected longer-term bearish trend. As far as the short term bounce, (which we feel is a far more risky trade) such an opportunity could present itself today but it is unclear what precisely a good lower target is for the completion of the bearish move down that began on Monday.

As such, currently we do not have a good target to trade off of. We will attempt to provide an intraday flash for the very aggressive interpretation should it present itself. But make no mistake; we think the best risk/reward trade will be to position for the bearish case at higher Fibonacci resistances some time later this week. Once again, "those Fibonacci resistance levels that we would look to aggressively position for the downside are: INDU 10680-10775, SPX 1195-1205, NDX 1585-1605, SOX 415-425, and RTY 630-640."

Some very important price action is taking place in the markets here, as important as at least the action that took place around the August 13th lows and the January 2004 peaks before that. Stay tuned.

No positions in stocks mentioned.

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