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.
Citigroup has been called the most important stock in the stock market thanks to a simple logic train: (1) The Fed's liquidity injection in the banking system (and thus the economy) has been the primary driving force behind the economic recovery of the last 18 months; (2) banking/finance stocks are the largest component of the S&P making up 21% of the SPX's capitalization and; (3) Citigroup is the single largest component of that sector. Thus, keeping an eye on Citigroup may provide important evidence as to whether the stock market and the economy are in a self-sustaining growth pattern or if they have merely been the beneficiaries of a record impulse of excess credit and liquidity and thus poised for the "bust" phase of the boom-bust cycle. The cleanest observation we can make is that an impulse wave down from the 4/2 highs of $52.88 has taken shape at the recent $44.83 lows, suggesting that some important degree of trend change occurred at the high.
This observation is supported by the fact that the impulse wave is bifurcated by Phi. [i.e. the bottom of wave iii at 47.85 on 4/29 bifurcates the entire impulse wave down by phi or 0.618. Clean impulse waves often have their wave nadirs bifurcate the entire impulse sequence in a phi relationship.] Further, the 4/2 highs were not confirmed by momentum (thus it was a high of some import) and Daily Demark trend exhaustion indicators had registered near the 4/2 highs as well. What these observations may be suggesting is that another leg down that takes prices perhaps 15% lower from whatever ABC bounce high is registered (in this move off the recent lows) could be a good possibility (not advice). Just how far below is difficult to say at this juncture until we see a completed ABC bounce from the May lows. Important lower supports however are in the $42.50 and $38.25 areas. "Normal" expectations for a corrective bounce of the 5 waves down from 4/2 would take prices to the .382 resistance area ($48.19) and/or near the previous internal 4th wave high ($49.18) at a minimum. The recent high of $46.97 is not quite near these important resistances. Only a very bearish interpretation would suggest that the $46.97 high last week was the high for the corrective bounce. Any move under $44.83 would suggest that this very bearish interpretation is operative and that prices could be headed toward the $38.25 area. Otherwise, we're remaining patient and awaiting a more complex upward correction (possibly a double zigzag) toward the $48-49 area before caution is warranted. For now a further bounce may occur that could have trouble in the $48-49 area before a move toward lower support in the $38-42 area in our view.
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