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Advanced Technical Analysis



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.

All three indices made slight new lows yesterday, however those new lows were unconfirmed by breadth, momentum, or volatility (VXO): each were diverging at yesterday's lows, though ticks did confirm the new lows. Hourly DeMarks have recently or will shortly register for each of the indices (SPX, INDU, NDX, RTY, SOX) as well. Down volume relative to up volume has contracted from the peaks registered on January 4th.

And, as our Monday note suggested, all the necessary minimum conditions have been met to consider the impulsive pattern down from the peaks on January 3rd to be complete. To these (short term) bottoming indicators we would add the potential that today's prices may register a short term daily DeMark trend exhaustion indicator (a "9") which typically results in a 1-4 day bounce before the resumption of the dominant trend (in this case down).

All of these factors continue to point toward a bounce very soon that could take prices back to a range of Fibonacci resistances for each index: they remain INDU 10680-10775, SPX 1195-1205, NDX 1585-1605, SOX 415-425, and RTY 630-640. Once prices reach this Fibonacci resistance area, the analysis suggests positioning for our bearish scenario for the market, looking for the next leg down to be at least as large as the -5% (NDX) and -3% (SPX) that we just witnessed from the January 3rd peaks.

The analysis suggests remaining patient: some very important price action is taking place and a good risk/reward downside opportunity should be in the works over the next few sessions (not advice).

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