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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.

Yesterday's price action, with a spike lower in the AM and a nice rebound into the afternoon keeps our bearish outlook on track for now. Though the SPX and INDU can be acceptably "counted" in a number of ways from an Elliott wave perspective, the larger view that they remain in a bearish trend from the October peaks is still very much valid. That bearish trend has targets well below the August lows, which the INDU nearly took out in yesterday's session. How the SPX or INDU act over the next few sessions remains in question: they could bounce to key resistance in the SPX 1117-1126 and INDU 10026-10119 areas or they could simply start declining immediately today from the open within their third of a third wave down. The technical picture in the very short term remains inconclusive. A move above SPX 1128 and INDU 10241 would negate the bearish near term view and force us to stand aside.

That said, for these two indices, our intermediate term bearish view remains very much on track. Only a move above the cited Fibonacci resistances would cause us to have to reassess this technical conclusion. As we noted in our Tuesday note, the NDX has been nicely outperforming the blue chips for the last several weeks. Indeed, the NDX has not yet taken out its lows registered on 10/12. The SPX and INDU, at their lowest price yesterday were fully 70 basis points and 210 basis point below their October 12th lows respectively. The key to the NDX count so far, at least from the peaks registered on October 7th at 1474.70, is that the moves down very much have the appearance of "5" waves while moves up have had "3" wave appearances. This suggests the dominant trend is then down from the early October peaks.

Specifically, the corrective ABC bounce in the NDX from the 10/12 lows to the peaks on 10/19 took prices past the 78.6% resistance level but in a 3 wave overlapping (corrective) form before falling in what appears to be an impulsive fashion from the 1470 peak on 10/19. In order to keep this immediately bearish interpretation valid, prices will need to fall near today's open and start an impulsive move down below 1430. If trade moves above 1470, then new peaks above 1475 will be expected in the next week or so and we will then step aside.

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