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Advanced Technical Analysis



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


No real conclusions to add to yesterday's note; the last two sessions' technical action does not clear up the short or intermediate term picture enough identify a solid risk/reward picture. Prices on Wednesday spent much of the day, despite their upward bias, within a narrow range and exhibited overlapping price action on lower volume, worse advance/decline, lower up vs. down volume, and lower ticks than Tuesday's volatile session. Prices are clearly struggling to go higher; this overlapping action is usually considered corrective and against trend, so adding to longs at these levels does not compensate traders on a risk-adjusted basis. Until the market exhibits a clearer trending pattern we remain on hold . Both of the intermediate term trends (bullish or bearish) are possible, depending on how prices move out of their recent trading ranges. Those two scenarios are: a bullish 4th wave triangle which bottomed in C on 4/30 and is now in a D leg upward and eventually to new annual highs and a bearish wave (III) that calls for prices to fail near/above the recent highs and fall below the 3/24 lows. Once we can identify the very short term trend, we will have a better handle on limning which of the intermediate term trends above are operative. For now, a move above SPX 1127, INDU 10386, and NDX 1438 that holds above those levels potentially points to SPX 1130-1140, INDU 10400-10460, and NDX 1450-1470 in the 4th wave triangle scenario. However, a break below SPX 1112, INDU 10280 and NDX 1416 point to a test of the recent lows at SPX 1107, INDU 10225 and NDX 1401 and probably even lower if the wave (III) down is underway. We await confirmation of one or the other of these trends in the next few sessions.


S&P 500 (SPX)

As the summary above stated, the SPX is not clear in the near term until a breakdown below SPX 1112 (which points to 1100-1105 at least if not a more rapid wave (III) decline toward the 3/24 lows) or a sustained breakout above SPX 1127 (which points to 1135-1145). The near term Demarks, momentum gauges (MACD, ROC), and Elliott wave interpretation all remain unclear as yesterday's prices did little to change the short term uncertainty in trend. What we can say is that the price action over the last two sessions, despite having an upward bias, is very overlapping, which suggests it is a correction of some degree and prone to being entirely retraced in a downward move. But the usual technical indicators we use are not necessarily confirming that right now, so it remains a low confidence call. Beyond that, we simply cannot state with any degree of confidence how yesterday's price action fits into either the intermediate term or short term.

The Nasdaq 100 (NDX)

Same as the SPX. An NDX breakdown below 1416 is bearish at least to the recent lows of 1400 and possibly even lower toward the 3/24 lows if the bearish intermediate term trend is operative. A sustained break out above 1438 points to NDX 1450-1470 in a bullish ongoing 4th wave triangle from the January highs. Like the SPX, the last two NDX sessions have left lots of overlap on the price charts, suggesting the entire "up" move has been a correction of last week's selling and will be retraced with a down move. Few of the technical indicators we use are confirming this so we cannot state that this will happen with any confidence until the support and resistance levels we cited are broken. Stay tuned.

Dow Jones Industrials (INDU)

Same comments here as the SPX and NDX. A breakdown below 10280 points to 10180-10220 at least if not the 3/24 lows if the bearish wave (III) intermediate term trend interpretation is operative. A sustained breakout above 10360 points to 10400-10460 in a wave C of an evolving bullish 4th wave triangle from the March highs. Prices here too are full of overlapped action over the last two sessions, arguing for the more bearish interpretation that calls for a new low beneath the 10220 area. But few technical indicators are suggesting as much so we'll await a better read on the short term trend via the breakout or breakdown cited above.

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