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Advanced Technical Analysis



Note: the following analysis is formulated as an assimilation of technical indicators. It is offered as education and not intended as advice in any way.


Friday's price action suggests 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 several sessions. Once we can identify a completed 5 wave advance in the SPX from the 1087 low that nears the 1125/30 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 1060 but more probably 1020/30 area. The NDX too is in an ABC bounce toward our resistance area of 1430-1440. There too, a completed ABC bounce from the 1368 low that has trend exhaustion characteristics would suggest caution. It is reasonable to expect this ABC bounce to take several days but the price area is more important. As of Friday's price action, it looks like the NDX is starting the B leg down of the ABC wave 21 bounce. Ultimately we expect NDX prices at least to the 1360 area if not the 1320 area once we can confidently identify the top in the 1430/1440 area (possibly 1450). The DOW too is in its bounce toward at least the 10280-10350 area where this ABC bounce could be 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


S&P 500 (SPX)

Friday saw prices advance for most of the session and then give back all of the gains in the last 45 minutes of trading. This action suggests that we are seeing the first minor correction in the C-leg wave 2 bounce toward the 1125-1130 level. Prices should find support in the 1098-1104 area on Monday or Tuesday before resuming their advance toward the 1120/1130 area.

We remain on the lookout for the next good trade setup over the next several sessions: a clear 5 wave C leg advance into the 1125/30 area that sports both momentum non-conformations and some important Demark trend exhaustion indicators. Once we can identify that point, we foresee weakness from those prices 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. Should prices find strength above 1130, only a move above 1140 would cause us to reassess our Elliott wave and Demark indicators for a possible move back down toward new lows for the year.

Nasdaq 100 (NDX)

The NDX is clearly in a wave iv bounce, with the A leg of the ABC wave iv bounce ending probably on Friday. The B leg lower should find support in the 1392-1407 area before resuming its final C leg up to, preliminarily, 1430/1450 to correct the wave iii down that started on March 5th.

We still caution traders not to get too aggressive at this point. 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 for a clearer picture. We have found that corrections like these need to correct both in terms of time and prices. As with the SPX, this week may see the end of this ABC bounce into our target resistance area, we'll simply have to be patient and await the setup we are looking for. Sometimes in trading it is best to simply sit on one's hands and be patient. This is decidedly one of those times.

Dow Jones Industrials (INDU)

The call on the DOW is the same as the NDX and SPX: a wave 2 ABC-type bounce is underway but not yet complete. If Friday's high marks the top of the A leg of the ABC wave ii bounce, then the B leg lower should find support in the 10110-10170 area before resuming the move toward the 10320-10350 target level minimally and possibly into the 10450 level (the 61.8% retrace). It is possible too that prices see one more new high on Monday above 10271 before falling in the B wave correction to the support levels cited above. Either way, the B leg needs to complete before we can then try to identify the final C leg of this ABC bounce toward resistance. Once we can see such a setup, we will more closely target a potential resistance point and become cautious for a potential move to new lows for the year. As with the NDX, patience here too is key: late this week may see the end of the ABC bounce but we'll simply have to be patient and let the setup take place.

No charts today; please see Friday's piece as there have been no labeling changes.

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