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.
Monday's new lows came amidst some material short term divergences and reinforced our call for some degree of bounce soon that could result in a move back to Fibonacci resistance. Today's early price action only acts to reinforce that call. So far, prices look like they are bouncing impulsively off yesterday's lows and since they have not put in a clear corrective pattern (3 waves up from yesterday's low) then we can assume that prices still have a bit more to travel before the bearish interpretation unfolds (not advice).
Recall that our last note suggested that there were two possibilities for interpretation of the price action off the peaks from 12/31 and 1/3: the very bearish interpretation (70% probability) and the bullish one (30% probability). The action from Friday to today changes those odds somewhat: we now place a higher confidence on the more bearish 3rd wave down thesis, placing it at 80% probability. The fact that prices broke below SPX 1169 and NDX 1515 in a material way on Monday, along with the bad internals (momentum, breadth, etc.) bolsters the bearish interpretation.
Having said that, ultimately, as we have said before, the bearish case rests on prices NOT moving materially higher than the open gaps that remain from January 20th (SPX 1185 and NDX 1546). If our current count is correct then, prices are within a 3rd wave down from the peaks on the 18th and should lead to at least SPX 1140, NDX 1445, and INDU 10200, if not lower if this third wave 'extends'. For now then, in the short term we'll look for the impulsive wave down that started on the 18th to correct with a bounce to Fibonacci resistance in the SPX 1176-1184, NDX 1516-1546, and INDU 10470-10540. If our interpretation is correct of the current pattern, prices should not move materially above those Fibonacci resistance areas. If they do that would cause us to reassess our count and may, even though we believe it's a 20% probability, cause us to entertain the more bullish of the two count options. For now then all the following levels remain key: SPX 1193, NDX 1565, INDU 10615, and RY 625. A move through those levels would force us to stand aside from this bearish view.
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