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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.

Little change to our ongoing call for a week long drop from recent peaks for at least 150-300 bps in the major indices. Friday's price decline looked orderly and though it provided some very short term positive divergences, this does not change our call for a move to at least SPX 1183-1193 from the peaks on the 16th. As we have been stating, there are a number of potential possibilities for how and when the markets decide to peak; from the recent peaks on the 16th or later at slightly higher prices. But we have been consistent in our message, and that message is thus: all of the major indices we follow are suggesting that a major bearish trend is about to start and that bearish trend should last several months at least and, if our long term indicators are correct, could be the re-start of the bear market that started in 2000.

And once again, we want to highlight the fact that you are not going to hear this from traditional strategists, technical analysts, or economists who rely on linear econometric models for prediction (of the economy, of company fundamentals, of asset prices). These models are flawed in their design and thus cannot and do not correctly model those markets they aim to predict. So we are long term bearish and are simply trying to identify the short term setup that will allow us to identify, with confidence, the important peak in equity prices our models suggest. On that score we remain of two minds: either the peaks on the 16th (for the INDU and SPX) were THE peaks from which a serious bear trend will emerge or a few more weeks of choppy action toward higher targets will ensue that will THEN succumb to the exhaustion we are seeing develop (not advice).

For now, existing the analysis suggests lowering stops to SPX 1203, NDX 1524, and INDU 10800 (not advice). If the recent peak was truly an important peak, these stops won't be triggered. And if we are in store for a few more choppy weeks, we'll stand aside and attempt to identify the next good risk / reward setup.

No positions in stocks mentioned.

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