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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.


For the last handful of sessions in the SPX and INDU we have been trying to determine if a completed 5 wave impulse move off the mid May lows has been completed, as it clearly has in the NDX from the 5/17 lows to the 6/8 highs. Unfortunately, Wednesday's and Thursday's action in the SPX and INDU did not give us confident data that such a top has yet been seen nor has the market's action suggested that prices are in the process of tracing out a final 5th wave up toward new swing highs above SPX 1142 and INDU 10432.

The charts show that multiple interpretation of the last few session's technical indicators are possible, leaving us without a good risk/reward setup on either the long or short view. If a final 5th wave up is underway toward SPX 1150ish and INDU 10450-500, the upside is limited and will likely be very choppy, making a long trade here unattractive. However, given that we have yet to see a clear impulsive (5 wave) sequence unfold to the downside (thus signaling that a larger corrective decline toward at least lower Fibonacci support), the short side remains unattractive as well. For now we must simply wait for more price action to trigger out technical indicators and provide a clear picture. If a new high is achieved in the next few sessions, it will undoubtedly be registered with serious momentum divergences making it highly vulnerable to a sharp retracement. That will most likely be the next best set-up: as caution would be warranted from a new swing high in the SPX 1150 and INDU 10450/500 area for a move to lower support: SPX 1105-1122 and INDU 10100-10250. If a clean 5 wave move down occurs before those 5th wave upper targets are reached, we'll highlight it as the analysis would suggest a larger correction may be underway. The NDX remains much clearer in its hourly chart: a clean 5 waves ended on 6/8 and the subsequent action has produced a correction that seems incomplete. We are still targeting 1420-1450 area for important support.

The last two sessions have indeed maintained the view that a correction is underway, but the precise pattern remains complex. That is to say that another bounce to the 1490-1500 area could well be in the cards for this index before a final impulse wave down toward our 1420-1450 target is reached. As a result of the multiple interpretations of the very short term pattern, a good defined risk/reward for a potential move lower has not yet presented itself. When it does, we will highlight it in an intraday or AM note. For now, the "ideal" scenario based on the analysis has the NDX tracing out a bounce to 1488-1496 in the next few sessions before another larger decline toward lower support unfolds. However, if prices put in a new low today beneath 1458, that will signal that the next leg down toward those lower 1420-1450 supports is already underway. Stay tuned.

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