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.
Friday's action did nothing to change the near term analysis: we're still expecting the bounce that started on Thursday to stall at important Fibonacci resistance and turn back down impulsively once again to lower Fibonacci supports. All the indices we follow have put in a "5" wave move down (read: impulsive) and so far have only put in corrective looking 3 wave moves higher. Friday saw volume and ticks decline while breadth as marginally positive: this suggests that the bounce from 12/9 is indeed corrective and could be entirely retraced soon.
As we stated on Friday, how prices decline to the next layer of potential Fibonacci support (SPX 1150-1160, INDU 10250-10350, and NDX 1530-1550) is key to understanding what degree of peak was seen on December 3rd. Again, there is solid long term technical evidence to suggest a major peak but it is not one-sided: another run to SPX 1250-1260 over the next 2 months is also a possibility. The dividing line will be whether prices continue to fall in a 5 wave and rise in a 3 wave fashion. As long as the price pattern adheres to this rule, we can remain comfortable that lower and lower prices will be experienced. But given the level of bullishness and end-of-year seasonal tendencies, we cannot be sanguine about the bearish case. Traders should keep stops tight and time frames short in this environment until we can make a more confident long term (multi-week/month) assessment.
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