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Advanced Technical Analysis

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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.
Fundamentals



Summary:


Monday and Tuesday's price action in the SPX and INDU helped add more evidence to the view that a 4th wave corrective triangle is forming that will end shortly and then result in a 5th wave thrust toward SPX 1145/50 and INDU 10500ish before failing and starting a large multi-day correction that takes 2-4% off these indices and perhaps much more if the bearish intermediate term count is operative. No matter what the intermediate count, an important technical juncture for the SPX and INDU is approaching with the analysis suggesting weakness once a 5th wave swing high is completed in the above resistance ranges. Only a move below SPX 1122 and INDU 10300 would indicate that our 4th wave triangle count is invalid and that a larger correction has already begun. Otherwise, we remain of the view that a new swing high that ultimately fails may soon present itself.

For the NDX, the overall view for a corrective decline "to the 1420-1450 area" remains on track as long as 1481 is not penetrated to the upside. If it is, a case could be made that the NDX's correction is already complete at yesterday's low of 1448.82. It is not an ideal correction to be sure so we do not believe that the larger correction is over, but prices above NDX 1481 would cause us to stand aside and await more evidence that the correction has not completed. With the SPX and INDU so close to an important top, it would be hard to imagine the NDX entering into potentially its strongest up wave (if the bullish intermediate NDX trend is operative). This is one of the reasons we believe the NDX decline is not yet complete. The NDX moved up impulsively from 5/17 to 6/8, 22 calendar days. So far, the correction has lasted 14 days, nearly exactly 0.618 of the span of time the impulse wave took to complete. So time-wise, the correction is getting potentially near an end.

What traders should do now is keep stops tight and try to identify a clean ABC decline from the 6/8 highs that ends in cited support zone (1420-1450) with hourly momentum divergence and with the SPX and INDU nearing their own important supports. Though NDX prices did touch the upper end of that cited support yesterday, an ABC correction does not yet appear complete and the SPX and INDU have not even started their correction process yet.. So we will favor caution re the NDX while 1481 remains important resistance and while the SPX and INDU push up to complete their final 5th wave highs. It is possible that the NDX retests the 1487 area as the SPX and INDU make new highs, but we'll simply have to watch how prices behave in the next session or two as the SPX and INDU move to 5th wave highs.

No positions in stocks mentioned.

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