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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.


Yesterday's overlapping action, despite the slight new swing high, did little to change our ongoing conclusion: that from 5/19's Wave 4 top (of the impulse wave down from 4/27), the 5th wave of a larger impulse wave down from the 4/27 top is likely underway toward (possibly initial) lower Fibonacci targets in the SPX 1066/1072 area, the INDU 9770/9824 area, and the NDX 1355/68 area. Yesterday's session saw all three indices put in new swing highs just above the highs they registered on Friday morning. While this did change the top of minor wave ii (of the 5th wave down that started on 5/19), it does (so far) little to change the near term view: that prices are within a 5th wave impulse that could take prices to cited lower Fibonacci support levels before a bounce of some larger degree can be expected. If and how prices bounce from these lower targets will help us determine just what kind of correction has taken place from the annual highs struck in Q1.

From that information and those technical indicators we will be in a better position to determine the intermediate term trend. Daily prices are still in a good position to work off the daily oversold readings that have accumulated in the last several weeks; we believe those lower Fibonacci price targets are the next best place to look for this bounce to begin. Our cited levels on the SPX and INDU were not reached yesterday, but the NDX stop, which we set at 1420, was technically elected with the spike to 1425 that was turned immediately back. As we have stated in the past, stops are as much an art form as a science; if our near term interpretation is correct, SPX 1102, INDU 10050 and NDX 1420 should not be seen again in the very near term. However, since we should allow for some slight upward moves in case this ongoing corrective action decides to continue, we would use SPX 1106, INDU 10090, and NDX 1428 as firm areas to re-evaluate the cautious view. If prices move above those levels we would need to reassess the current technical indicators.


S&P 500 (SPX)

No major changes to our ongoing assessment: a 5th wave down continues to be underway that should approach our lower target range of at least 1066-1072. Monday's session put in a new swing high above Friday's AM high, thus moving the minor wave ii top of the final 5th wave down from 4/27 to Monday's intraday high rather than Friday's intraday high of SPX 1101.71 from 1099.70. Other than that, all the pieces are still in place for a move toward our lower Fibonacci support levels. What happens, if anything, at those lower levels should tell us much about whether those Fibonacci supports are strong enough to produce a meaningful bounce in prices that would allow the technically oversold conditions to work themselves off. We should loosen up our levels a touch to allow for a bit more overlapped correction: 1106 is the new level for such re-evaluation.

The Nasdaq 100 (NDX)

Here too, little to add to our Friday AM note except that the minor wave ii high we had pegged at Friday's NDX 1414.11, gets moved to Monday's 1425.49 intraday high. Otherwise, the assessment that a 5th wave down from the 4/26 highs appears to be underway that should take the NDX to lower levels in the 1355-1368 area remains intact.

Unlike the SPX or the INDU, the NDX "took out" our cited 1420 level with an intraday spike to 1425.49 before prices were rejected in what appears to be an impulsive fashion from that level. As we have written before, the levels that we identify are not hard and fast (unless we specifically state that they are): it matters as much if prices stay above our levels as it does that they go above them at all. So levels that are broken on a spike are to be given some "wiggle room" in our book. Of course, every trader has his own style. The most important technical observation about the last several sessions prices is that prices have impulsively moved down but only correctively (overlapping fashion) moved up. This evidence continues to suggest the proper conclusion is that our lower cited supports are more likely to be seen in this 5th wave than an impulsive move higher from here. Prices should not move above 1427.51 or our near term conclusions about the technicals are incorrect. We will then stand aside with a flat position. For now then, we are keying off the 1427.51 (hard and fast level here) to allow for the potential that prices may continue in this choppy, overlapping upward wave ii mode for another session or two. Otherwise, what happens at lower supports will help us determine what the intermediate term trend is.

Dow Jones Industrials (INDU)

Same with the INDU: Monday's new swing high puts the minor wave ii bounce (of the final 5th wave down from the 4/27 highs) at yesterday's intraday high of 10045 instead of Friday's intraday high of 10037. Other than that, our conclusion remains that a 5th wave down started on 5/19 and is underway toward a lower cited target of at least 9770-9824. We are keying off 10090 as a hard and fast level to re-evaluate. What happens at those lower Fibonacci (potential) support prices will help us determine whether the intermediate term trend is bullish or bearish.

No positions in stocks mentioned.

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