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Advanced Technical Analysis

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Summary:

Yesterday's prices strongly suggest that an impulsive wave C of a wave 2 bounce toward the 1125 region is underway in the SPX which should complete in the next few sessions. Once we can identify a completed 5 wave advance in the SPX from the 1087 low that nears the 1125 area and has the requisite Demark trend exhaustion indicators and momentum non-confirmations, we will be able to more confidently state that the next big leg down in the SPX is underway toward initially 1020 but more probably 1020/30 area. The NDX too is in an ABC bounce toward our resistance area of 1420-1430 area. There too, the next trade setup will be to identify and short a completed ABC bounce from the 1368 low that has trend exhaustion characteristics we look for. It is reasonable to expect this ABC bounce to take several days but the price area is more important: the 1434 area is a more precise target for this ABC bounce. We'll have to assess prices and pattern to hone in on a more refined target in the next few sessions. Ultimately we expect NDX prices at least to the 1360 area if not the 1320 area. The DOW too is in its bounce toward the 10280-10350 area where this ABC bounce is expected to fail and then move substantially lower (at least to the 9600 level). The next few sessions' prices should allow us to more accurately determine the trend exhaustion point for this index and where traders should go short. Only the SOX index appears close to the end of its ABC bounce into cited Fibonacci and trend channel resistance levels (485-490).



Highlights:


S&P 500 (SPX)

Yesterday's strong across-the-board action signaled that the SPX is most likely in the C leg of an ABC wave 2 bounce toward the 1125 area. The low that was put in on Wednesday at 1087 unfortunately was not a clear low based on the indicators we follow, so we weren't able to confidently state until now that prices were or were not going to bounce from that area. At this stage, the Elliott count suggests that the 1125 area is the target for this wave C bounce, with a small possibility that prices make their way to 1140.

As a result, we will be watchful over the next several sessions: a clear 5 wave C leg advance into the 1125 area that sports both momentum non-conformations and some important Demark trend exhaustion indicators. Once we can identify that point, we would become cautious as the indicators still suggest the most probable scenario is for prices to fail there and move rapidly back down to first 1060 and possibly 1020/30 before another bounce of this magnitude can be expected. As of this point, there is no good risk/reward on either side so our view is to remain on alert until our indicators line up more attractively.



Nasdaq 100 (NDX)


The NDX is now clearly in a wave iv bounce to correct the wave iii down that started on March 5th. Yesterday the NDX had a very large move up, though volume was limited given the advance, adding weight to the idea that this is merely a corrective bounce before prices fall once again. We have been targeting 1420-1430 for the target of this wave iv bounce and yesterday's close at 1425 is right in the middle of that target. A more precise target based on the Fibonacci projection is 1430/1435.

Despite the fact that prices are within our target area, we are not yet seeing a "complete" ABC sequence into the target area and further our Demark indicators do not yet suggest that this trend has exhausted itself. As a result, there is little to do but wait for these indicators to line up before looking for prices to fall. We have found that corrections like these need to correct both in terms of time and prices. So far, this bounce is only 2 days old, so another few sessions might be needed before the ABC bounce exhausts itself before prices fall into the 1360-1320 area for a 5th wave bottom.


Dow Jones Industrials (INDU)


Same setup with the DOW as the NDX: the wave 2 bounce is clearly underway that will "correct" in an overlapping, ABC fashion, the entire move down from the 10753 high. That move down took 746 DOW points and 24 days to complete. The bounce we are expecting should take prices back to the 10280-10350 level minimally and possibly into the 10450 level (the 61.8% retrace). At this stage it remains difficult to know which area will act as the stronger magnet for prices. Like the NDX and SPX, we caution traders on taking new positions at this point. If we see a fully complete ABC Elliott wave rebound into the areas we described above we would look for prices to then fall based on the analysis. It should take several sessions at least for this correction to fully play out so patience will be key.

No positions in stocks mentioned.

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