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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.


Wednesday's correction in the INDU and the ongoing correction in the SPX and NDX took prices back to some important support levels in the INDU 10468, SPX 1138 and NDX 1476 area where they bounced impulsively on Bin Laden capture rumors but then subsequently gave back most of those gains into the close. As a result of that late afternoon spike, the wave pattern remains very much unclear and a call for an end to this correction cannot be made at this time, despite the fact that the above support levels "held" on the AM low. At this point, our confidence is low on both the very short term (next few days) and the intermediate term (next few weeks) as a result of this erratic trading. Until we get more clarity from the indicators we use, it makes sense to stand aside from a trading perspective and wait for this ongoing correction to either complete lower or confirm that it is over with a clean impulsive wave higher through important resistance. Once we get some more clarity on this current correction, we will be able to discern a more confident view of the intermediate term where the various indices continue to be unclear in their direction.


S&P 500 (SPX)

Yesterday's decline in the SPX was taking an orderly Elliott wave form but became quite complex and difficult to read because of the end of the day spike related to Bin Laden capture rumors. As a result, the internal wave count of the earlier decline, which was trending nicely and showing both momentum and Demark confirmation of that downtrend, became quite impossible to read. Because of this, the Elliott wave count has no confident view in the very near term (next session or two). Demark and momentum indicators as well are not providing any evidence to support a confident view of the near term price action.

Given that we had been waiting for this correction to form to allow us to better "see" the intermediate term picture in the SPX, that time frame too remains unclear. As a result, no confident view of possible trade over the next several sessions is presenting itself. In our experience with these indicators, once they become highly "jumbled" like this, it is best to simply take a step back and wait for them to reorganize, which they tend to do in a few sessions.

The Nasdaq 100 (NDX)

Same analysis on the NDX: the decline this AM was both orderly and took a discernable Elliott wave form that could have found a nice bottom at 1472ish with all the requisite Demark and momentum signals lining up for a possible low there. Unfortunately the spike up and then back down in the PM scuttled that view and makes the technical picture extremely unclear. And as with the SPX, we were hoping that this correction would yield some more evidence to make a better intermediate term (multi-week) call on this index for either new highs or a breakdown to new lows. As long as the very near term correction remains unclear, so too will the intermediate term. And we'll simply have to see how prices respond tomorrow to get a better call on the next few sessions.

Dow Jones Industrials (INDU)

Same analysis for the INDU: the decline was orderly and looked like it needed one new low under 10465 to register some sort of bottom but the PM spike up and down made that call moot. At this stage, this index is still susceptible to downside pressure as this was only the first day of a correction, so it's reasonable to expect prices to be pressured on the downside for a few more sessions. That said, the when's and where's of any sort of bottom in the INDU is impossible to determine based on our indicators right now. We'll need a few more sessions to become more confident of such a call.
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