Applied Complexity 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.
Monday and Tuesday provided a touch more data to help clear up the short term. The Blue chips remain on a path toward SPX 1234 or so, a target that should be approached in a choppy and halting fashion. The NDX, in moving above the 1542 stop level we cited now looks like it will complete an important counter-trend peak slightly above 1561 (1564/67 is a target area). On the daily and weekly charts little has changed: important divergences are set, bullishness is near previous peaks, our DeMark trend exhaustion indicators have registered, and the pattern off both the March 2003 lows and the August 2004 lows is almost complete, preparing the way for the first serious bear trend in the markets in more than 2 years.
What we are waiting for is the short-term pattern to align bearishly with these longer term indicators. On that score, though volatility remains nicely diverged for the blue chips, we are awaiting momentum, breadth and tick indicators to diverge on a new swing peak for the SPX and DOW.
For the NDX, its position remains clear to us: the entire move off the lows from January 24th is overlapped and clearly not impulsive. Nasdaq ticks peaked on Feb 25th, Nasdaq breadth peaked on January 28th, Nasdaq volatility found a low on February 3rd, and Nasdaq momentum peaked February 15th. It remains very likely that a move to the 1564-1567 area over the next handful of sessions will produce even more divergences in these 4 contextual indicators.
That is what we await for all three indices: for the short-term indicators to suggest a top is near and thus signal a larger degree peak is at hand as well, owing to the completed moves off August 2004 and March 2003.
For now, the near term interpretation suggests patience while prices are below key short term projection targets and while they are above key breakdown levels of SPX 1200 and NDX 1500. Any break below either of these levels would suggest the large degree peak we are looking for is in. Otherwise, we will await SPX 1234 and NDX 1564/67 over the next week or so (not advice).
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