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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.

The last two days' price action has done little to clear up the short term picture for the indices. In Monday's note we suggested that the SPX and INDU were probably headed to new annual peaks (SPX 1227/34 area) while the NDX remains ensconced in a counter-trend corrective bounce with targets either 'above 1560' or possibly only to 1536 +/- before failing and succumbing to the larger downtrend (not advice).

Because major degree peaks (like the one we believe is currently forming) are processes and not discreet events, their labeling from a fractal pattern perspective is often difficult to discern in the small time scale (hourly and below) we are looking at. Not intuitively, the fact that the short term patterns are difficult to 'see' (neither expressly bearish nor expressly bullish) gives us more confidence that a large degree peak is forming near the current price levels.

In assessing the patterns of the SPX, INDU, and OEX, we can make a case that this move off the lows from Jan 24th is nearly complete with only the slightest new peaks. We can also 'see' however a move to the SPX 1234 region and even beyond to the 1250/60 area. But, and this is important, the larger degree interpretation for a bearish resolution to this pattern off both the March 2003 lows and the August 2004 lows remains very much intact. On that assessment our confidence remains 'high'. It's simply the short term that has become difficult to assess.

For now then, our view remains the same as in Monday's note. Nothing to do on the short side until we get either a clear "5" wave move down from whatever peaks are registered soon or the short term patterns clear up enough to determine with confidence if SPX 1234 and above are likely terminal targets. The long side remains risky here even for the aggressive interpretation because we have low confidence about how precisely to interpret the bounce from Feb 22nd. If we setup for a quick lift to higher prices (SPX and DOW) we'll highlight it here. For now, the analysis provides that a move through the following levels would force us to stand aside on this short term bullish view: SPX 1188, DOW 10700, and NDX 1500; otherwise, we'll await the next good risk/reward setup to present itself.

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No positions in stocks mentioned.

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