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.
Given the move above key Fibonacci resistances in each of the 3 indices today, we have two important technical observations: (1) in exceeding key Fib resistances, stocks are suggesting the intermediate term (multi-week) trend is bullish to at least new peaks in each index. But it has done so in an overlapping and non-impulsive manner. As a result, the best Elliott wave count for this move off the recent lows is as a 5th wave off March 2003 (the overlap suggests it is a terminal wave off the respective lows of the last few months). What does that Elliott wave interpretation imply? That new peaks in all three indices above the Q1:04 peaks will fail and lead to a potentially very bearish 2005 with a clearly bearish trend.
The second important technical observation is this: the internals of this advance, the price pattern it has taken from its respective lows, and the short term hourly divergences we have been talking about suggest the short term is highly prone to correction (3-5 days) to lower Fib support before we can expect any sort of stab at the Q1:04 peaks.
This environment, given the choppy, non-impulsive nature of the advance from the last few months' lows for each index, combined with the fact that it is a 5th wave, should be conducive to short term trading. The bearish interpretation will eventually become very attractive on a risk/reward basis but that point cannot yet be confirmed until we get a new annual high in each index and/or we get a clear "5" wave impulsive move down on the daily chart. Until then, trading around the indices may be beneficial given where we are in the Elliott wave count and the underlying technical weakness of this advance.
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