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Advanced Technical Analysis

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

Summary:


Yesterday's impulsive move down only seemed to add to the complexity of the technical picture of late. The intraday low completed a clean impulse move off the Wednesday highs but how that "clean 5" fits into the last 4 sessions' technical picture remains uncertain. What we do know is that there is plenty of overlap as prices have moved both up and down in the SPX and NDX over the last 4 sessions. That overlap makes a confident interpretation of the intermediate term trend difficult at this stage. The bullish 4th wave triangle count we have been following is still viable but is getting less clear: the INDU's and SPX's new swing low (below 4/30 lows) yesterday suggests that the C leg of that triangle did not end at the 4/30 lows. It's possible that today's intraday lows did complete the C leg but there is simply no corroborating evidence for this view. The bearish wave (III) interpretation too has its flaws: the strong afternoon bounce in all the indices overlapped with the lows (SPX and NDX only so far) from the post-Fed meeting decline on 5/4; such overlap makes it difficult to see a clean impulse wave down from the 5/4 highs. If wave (III) was underway, this type of overlap would not be expected as price action should be moving decidedly lower. To add to the confusion, the INDU pushed cleanly below its 4/30 lows while the SPX just barely and briefly penetrated those lows and the NDX stayed above them. Indeed, the SOX, for its part, never even came close to its swing lows and was in fact up on the day. So there are both intra-market divergences as well as multiple (unattractive) valid interpretations of the technical picture here. Given the unattractiveness of both the bullish 4th wave triangle interpretation and the bearish wave (III) interpretation, we remain neutral until we can come to a better conclusion.


Highlights:



S&P 500 (SPX)



As the summary above stated, the SPX remains unclear, as the range of the last 4 days remains intact and the overlapping action of those 4 sessions makes a trend determination - even a short term one - decidedly unclear. Yesterday saw a breakdown below 1112 but it held at the previous swing low and bounced hard into the close. Perhaps short covering ahead of this AM's employment numbers. The reason is meaningless from a technical standpoint; there is simply no good conclusion we can confidently draw from this sort of volatile, overlapping, back and forth range trading. As the chart shows below, there are a number of "3's" and "5's" over the last 4 trading sessions within this larger range. The number of interpretations one could draw from the Elliott wave form, the Demark and momentum indicators we use are too many to have confidence in any of them. It is safe to say then that both the bullish 4th wave triangle interpretation that calls for eventual new highs or the bearish wave (III) down interpretation that calls for prices to move decidedly below the 3/24 lows, are valid. We will need to see prices break down decidedly below yesterday's AM low in order to bolster the bearish case. Conversely, prices need to continue impulsively advancing today for the bullish call to be operative. If and when the picture clears itself up, we'll be sure to post a note.


The Nasdaq 100 (NDX)


Same as the SPX. The NDX held its range and moved higher off the 1403 swing low yesterday. It is impossible to say at this juncture if this move up will continue and make the bullish 4th wave triangle call the operative one or if it will fail by moving decidedly below the 1403 level to bolster the bearish wave (III) call. The internals, the Demarks, the momentum indicators and the Elliott wave pattern are all open to many (valid) interpretations. One confusing aspect is the clear overlap in prices from the 5/4 highs to the close yesterday. If the bearish case was operative we would not expect to see this overlap at the 1420 level. It is possible that a series of wave 1's and 2's (1-2-i-ii) are starting; only a severe breakdown below 1403 would make that a high confidence call. For now it is mere speculation to suggest that is what the pattern is.

We're waiting to see if prices continue their advance from the 1403 level (bolstering the 4th wave triangle call) or if they fail soon and break below it (bolstering the wave (III) down call). Note that the SOX was actually green yesterday and came nowhere close to breaching its 53 swing lows. To the degree that this index is a harbinger for risk appetites, this adds to the bullish 4th wave triangle call. It's too early to conclude that now, but the SOX is worth keeping an eye on.


Dow Jones Industrials (INDU)


Mostly the same comments for the INDU as the SPX and NDX. The difference however being that the INDU broke decidedly below its 4/30 lows, completing a bottom of some degree. That bottom was either the C wave of the bullish 4th wave triangle or possibly the 5th and final wave of the impulse wave down that started back on 4/27 (which could be construed as both potentially bearish or bullish - only subsequent price action will allow us to make a prediction of some degree of confidence. We cannot say with certainty at this stage as the Demark indicators and momentum measures we use are giving conflicting signals. Note though that the INDU is the weakest of the three indices.

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