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.
Net/net: no change to the larger analysis that we're finishing up a large degree corrective bounce that should soon give way. The short term details have changed slightly in terms of targets. Wednesday we said SPX 1189, DOW 10483 were targets and next Tuesday to next Thursday were good time targets into which a peak could form. The short term subdivisions of the fractal pattern suggest SPX 1198 +/- and DOW 10553 +/- could be hit after a few more small down-up sequences. That action frankly would be ideal from a setup standpoint as it would likely allow for the contextual indicators we look at (breadth, momentum, ticks, volatility, and up vs down volume) to register nice divergences on a new peak next week into those price areas.
It is possible of course that today's / yesterday's peaks are THE peaks (since they were so close to our price targets) but we cannot state with high confidence that the current peaks will cap prices and send the market into the bearish trend that started on March 7th this year. No need to be very aggressive on either side of the ledger: not at least until we see prices get into the SPX 1198, DOW 10553 areas early next week with the divergences we look for OR we see a hard impulsive decline today that goes below SPX 1170. The NDX, as is its wont at important counter-trend peaks, has carried further than we anticipated (short covering has played a meaningful role here) so we'll watch the Blue Chips and the Small cap indices (SML and RTY) for indications that the bear is back.
Please note that, since the March 7th peak, the up vs. down volume ratio for the NYSE has peaked 4 times: 3/30, 4/21, 5/4, and Wednesday May 18th. Please note the action subsequent to each of those dates. Interestingly, the most frantic buying (ticks, up vs. down volume, short term momentum, etc.) has come near the end of corrective, counter-trend bounces. This, in bear markets, is actually typical behavior. So the fact that investors are most anxious to own stocks near peaks speaks to the larger degree bearish trend in place since March 7th. Stay tuned, next week should be very interesting.
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