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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.


Monday's and Tuesday's action in the SPX and INDU look like an internal 4th wave correction has completed, as a 3-wave move from the 6/8 highs likely completed Monday at SPX 1122 and INDU 10307. Thus, the view that a 5 wave move off the mid May lows is near completion remains with a new high in the SPX 1145-1150 area and INDU 10500 area (+/- 25 points).

The same hourly divergences that were present on the 6/8 highs are likely to be even more pronounced on any subsequent high in the SPX and INDU. Traders should keep an eye on the SPX 1122 and INDU 10307 levels, as a break below would cause re-evaluation of the view that we are seeing a 5th wave up in underway from the mid May lows.

Caution may be warranted near term at slight new swing highs against diverging momentum if that were to occurr in the next several sessions. Should prices decline below the 6/14 lows, something more bearish may be afoot and we will have to reassess the technical indicators.

The NDX remains in a different pattern than the INDU or SPX insofar as it has cleanly completed a 5 wave move off the 5/17 lows to the 6/8 highs. The action subsequent to the 6/8 highs has, so far, been corrective looking and suggests that potentially a 3 wave flat or expanded flat correction are underway that will, ultimately, find support in the 1420-1450 area.

The long side may remain risky in the NDX at the current time as the correction of the 5/17 impulse wave does not appear complete. A flat NDX correction would take prices back to the 6/8 highs before failing away to the 1450 level again, while an expanded flat correction would take the NDX to the 1510 area before moving lower toward 1440.

The analysis suggests that we could see a short term move toward support in the 1420-1450 area for the NDX with the analysis suggesting a potential bounce from there. Caution may be warranted as prices approach previous highs with the 1455 level an area to re-evaluate, which would be past the limits of an expanded flat and would suggest that the NDX has already bottomed on the 1451 level on 6/14.

No positions in stocks mentioned.

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