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Advanced Technical Analysis



Note: the following analysis is formulated as an assimilation of Fibonacci, DeMark, Elliott Wave and other technical indicators. It is offered as education and not intended as advice in any way.


Prices yesterday bounced in an internal 4th wave from the open then impulsively moved to new swing lows beneath Wednesday's lows to complete a clean "5" wave move off the Wednesday highs. This action confirms to a high degree of confidence that the next impulse wave down from the 4th wave top that was struck on Wednesday has begun. As we've stated, the lower support targets are derived from multiple Fibonacci relationships and they are: SPX 1066-1072, INDU 0770-9824, and NDX 1355-1368. If prices find support at those levels, we will then need to see what type and size of bounce is registered to relieve the oversold nature of the daily technical indicators (put/call, sentiment, momentum, ROC, etc.). The intermediate term bullish wave 4 double zigzag correction from the Q1 highs would need to see prices move decidedly higher from those support levels and do so impulsively to allow us to tentatively conclude that much higher prices may be in store. If prices bounce only slightly from the lower support levels or indeed do not find support at all at those levels, then the much more bearish wave (III) scenario will become operative. For now, the near term suggests caution after another new swing high (wave ii of the impulse that started on Wednesday) that is registered today in the SPX 1093-1098 area, the INDU 9974-10020 area, and the NDX 1405 -1414 area. Specific targets to keep an eye on are SPX 1095, INDU 10000, and NDX 1412. Ideally we'll see short term momentum non-confirmations of any new high at/near those above targets. Watch the following levels: SPX 1102, INDU 10050, and NDX 1420.


S&P 500 (SPX)

Yesterday at noon, SPX prices completed a clean "5" wave impulse move down from Wednesday's high, confirming the 4th wave high we suspected of being put in on Wednesday. As we noted in yesterday's piece, the SPX target remains lower in the 1066-1072 area for a potentially meaningful bounce that could start to work off the oversold nature of the daily technical indicators as well as the hourly non-confirmations of price lows that are likely to be registered on a trip to that lower Fibonacci support area.

The wave ii bounce that started from 1085.43 at 12:30 ET looks like it has completed the first (A) leg and will this AM or has as of yesterday's close completed the B leg. So the remaining C wave (which should trace out a small 5 wave advance) is most likely forthcoming in today's session. Fibonacci retracements targets of the entire impulse wave i down from the Wednesday highs to yesterday's noon-time lows are in the 1093-1098 area (38.2%-61.8%). Further, if the C leg of the ABC corrective bounce that started at noon equals the A leg, then 1095 is a natural target as well. That 1095 internal C wave target aligns nicely with the Fibonacci retrace target area of 1093-1098; indeed 1095.68 is the 50% retrace Fibonacci target of wave i as well.

Keep an eye on the 1102 level and keep in mind that what happens at 1066-1072 in the SPX will be an important indicator of whether or not the intermediate term trend is potentially bullish or decidedly bearish: beneath 1066, there is not another important Fibonacci support area for another 40 SPX points. Also keep in mind the daily oversold readings and the likely momentum non-confirmations that could manifest at the 1066-1072 level suggest that a large falloff in prices beneath 1066-1072 is improbable.

The Nasdaq 100 (NDX)

Like the SPX, yesterday the NDX traced out a clean "5" waves down from the Wednesday peak, confirming that a 4th wave peak was registered on Wednesday's high and signaling that a larger degree impulse wave down toward 1355/1368 is potentially underway. Prices bounced from 1390.40 yesterday in what appears to be an ABC zigzag wave ii correction. The Fibonacci resistance targets for this wave ii are 1404-1414. Further, if the C leg of that ABC zigzag is equal to the A leg, the NDX has a further target of 1412 for the end of this wave ii. Allow for prices to move all the way to perhaps 1420 in this upward correction; ideally the 1412 level will largely cap this corrective wave ii rebound. 1420 would be an area to re-evaluate.

Dow Jones Industrials (INDU)

The INDU traced out a clean 5 wave impulse move down from Wednesday's highs to yesterday's 9900 lows as well, bouncing from the 9900 level in what appears to be a wave ii rebound. Resistance targets for this wave ii are 9974-10020. If wave ii's C leg is equal to the A leg that traced out from 12:30 to 2:15 ET, then another INDU resistance target would be 9990/10000. We'll have to see if we get a move to lower supports in the 9770-9824 area. What happens at those lower supports will help us determine the likelihood of the intermediate term bearish or bullish trend.
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