Complexity Model update
With the SPX and DOW exceeding their May 9th peaks, the corrective bounce from the mid April lows continues, tracing out a more complex pattern and digging deeper into the price and time resistances set up by the decline from March 7th. Specifically, our models now have the next price and time targets (potential bifurcation points) for this mean-reverting action as the SPX 1189 and DOW 10483 areas early next week (5/23 to 5/26).
Like the Jan-March 2005 period, the Blue Chips are likely to form a rounded peak here and be frustrating to anxious shorts. We want to stress however that the action in the indices still looks corrective and against the dominant trend (down from March 7th). The RTY index should be a proxy to watch as well; it has a target of 611 and Monday March 23rd for a potentially important peak in price and time.
The action of the internals (patterns, DeMarks, voaltility, up vs down volume dynamics, etc.) off the lows from May 13th is analogous to the post-November election rally we saw in the SPX (where the current peaks are a miniaturized version of the January 3rd 2005 peaks). A move down to correct this latest 2 session spurt and then one more new peak on diverged momentum, breadth, ticks, volatility, and volume could end the entire corrective bounce off the mid April lows. Short should be patient and longs would be wise to be wary.
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