Editor's Note: The following analysis was offered this morning via Scott Reamer's technical service. We share the vibe on the 'Ville with educational intents and is not intended as advice. For more information regarding Scott's unique approach, please click here.
Friday's decline in the blue chips went a long way toward confirming a larger intermediate degree bearish trend. The NYSE index declined to a new annual low while the DOW, SPX, RTY, and OEX all declined below very important support levels which, if the bullish alternate interpretation was indeed operative, should well have held. The blue chip decline was confirmed by momentum, breadth, ticks, volume, and volatility (which broke out of its recent range). As a result, we can likely anticipate an ongoing decline toward our longstanding October/August lows (not advice). As Friday's note suggested we were a seller of that session's bounce (not advice) with a move thru SPX 1184, DOW 10450 forcing us to the sidelines; we would shift those levels to the May 5th (DOW 10405) and May 9th (SPX 1179) peaks now.
The most interesting aspect of Friday's action was the significant intra-market divergence we witnessed with the NDX going to new swing highs while the other markets declined meaningfully. The generally accepted view of this action is that it is a quite bullish interpretation. If the same 'NDX as leading indicator' arguments were being made in December 2004 and January 2005 when the NDX and Nasdaq Comp peaked we would be perhaps more open to the concept. That said, we abhor contextual analyses, preferring instead to see what our models are saying now with respect to the NDX, irrespective of what the NDX did in the past. And on that score they remain bearish on the intermediate term; the bounce from the mid April lows seems corrective and destined to be retraced in its entirety (not advice).
It would be ideal for the bearish scenario for the NDX to make a slight new peak between 1480 and 1490 today or tomorrow and then decline hard. If a new peak is registered and prices then come under 1455, we could see aggressive selling in the NDX. We will highlight the appropriate parameters intraday as necessary.
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