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.
All three indices remain in the impulsive move lower that started on Tuesday morning: the corrective, overlapping action yesterday counts as an internal 4th wave correction that, if it hasn't already ended at yesterday, could do so with a slight new high above SPX 1125.72, NDX 1452.92, and INDU 10332.74. The final 5th wave lower should resume soon and potentially find support in the area of SPX 1108-1111, NDX 1410-1425, and INDU 10220-10240. The AM lows in all three indices were confirmed by momentum and "counted" as the third wave low of the impulse that started at Tuesday's highs: both of these observations suggest that at least one more low is needed before we can contemplate covering shorts and potentially going long for a trade-able bounce. If in fact the AM lows were a completed "5" wave impulse move down from Tuesday's high, then an upward correction could take prices somewhat higher than yesterday's highs.
The intermediate term analysis has not changed: if prices move below the 3/24 lows then the intermediate term trend will be bearish. If prices stay above the 3/24 lows and move impulsively higher from the above cited support levels, the intermediate term trend will be considered bullish. Currently the analysis for each index is suggesting a good risk/reward for a move to a new low toward cited supports.
S&P 500 (SPX)
Yesterday the SPX traced out an overlapping corrective 4th wave (of the impulsive wave forming from Tuesday's highs) off the AM lows. Prices were highly overlapped and struggled to make upward progress, indicative of 4th wave. It is possible that a complete "5" waves down from Tuesday's highs ended at yesterday's AM lows but that isn't the most confident view given the breadth and Demark indicators at present. One more new impulse wave down would be much "cleaner" from a technical standpoint. Breadth was negative on the day, and volume was even heavier than on Tuesday's large move lower, despite the marginally positive prices. Indeed, what is interesting from a market "internals" standpoint is that only 5 of the last 15 sessions have ended with positive breadth, and prices are basically where they were 15 sessions ago. What this suggests is that the market is getting weaker beneath the surface of "prices" and ostensibly that it is also getting more narrow; both conditions are not very conducive for a marked advance in intermediate term prices.
So far, the near term pattern remains the same as we stated yesterday: a move to lower support in the 1108-1110 area should be underway and the bounce that could develop from that point could tell us much about the intermediate term trend. If prices move decidedly below the 3/24 lows in the next week or so, the intermediate term can be considered bearish. If the SPX stays above the 3/24 lows and then puts in an impulsive-looking 5 wave advance from whatever low it gets to, the probabilities will call for eventual new highs in the SPX. [For a full explanation of this, please see yesterday's note].
Yesterday's price action counts well as an internal 4th wave that will resolve lower toward our support area (1108-1110 area) in another impulsive wave lower. The SPX either finished this 4th wave rebound at yesterday's high or will do so with another slight new high above 1125.72.
The Nasdaq 100 (NDX)
The NDX traced out an internal 4th wave (of the developing impulsive wave off the Tuesday highs) just like the SPX and the INDU. This 4th wave rebound has either completed or will complete with a slight new high above 1452.92 today. This 4th wave action was highly overlapping and struggled for the entire afternoon to make any real progress above 1445, again, classic 4th wave action. The 3rd wave low that formed on Tuesday afternoon was confirmed by momentum so we remain of the view that the NDX has not yet seen a trade-able bottom. Another impulsive leg lower could provide one in our cited support area of 1410-1425 over the next few sessions.
Like the SPX and INDU, what happens at the 3/24 lows will be important to determine the intermediate term trend: if prices stay decidedly above the 3/24 lows and show an impulsive move up from whatever low does form, we must consider the bullish case for an eventual new high to be operative. If prices do not find support in the 3/24 lows, then we must then consider the more bearish intermediate term scenario, which is quite bearish. [Please see yesterday's note for a full explanation of this interpretation].
Dow Jones Industrials (INDU)
The INDU and the SPX are in the same pattern: a 4th wave bounce has neared completion or has in fact completed at yesterday's 10332 high. A 5th wave impulsive move lower is expected to complete lower, possibly in the 10220-10240 area with the 10400 an area to re-evaluate that view. And as with the SPX, we will simply have to see how prices "act" if we approach this lower support to determine the intermediate term trend bias.
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