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Technical Flash

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Summary:


This AM's action is tracing out the final 5th wave move to new highs we highlighted in the AM note: a move above SPX 1146 and INDU 10487. Fibonacci targets for this final 5th wave move are: SPX 1149.65 and INDU 10512, with a bit of wiggle room around those targets. All of the important divergences we noted in the AM note are still present today so the setup for a failure at slightly higher prices remains in place for the SPX and INDU. This final move is expected to result in the first substantial correction since the mid May lows and take 2-4% off these indices if the intermediate term bullish trend is in place OR much more than that if a more bearish intermediate term trend is operative. Any move today below SPX 1139 and INDU 10430 would be initial evidence that the substantial correction we're looking for has already started. A move below SPX 1130 and INDU 10360 would be very strong evidence of such. The NDX has triggered thru the 1502 level we cited in the AM note. A Fibonacci target for the NDX remains 1514, though the NDX, with all the same important divergences as the SPX and INDU, could potentially turn down before reaching that target.

The technical indicators then imply a correction could start from the SPX 1149/50 and INDU 10510/520 areas. Any move above SPX 1160 and INDU 10560 would "re-set" the indicators and cause us to stand aside and wait for them to set up again. For the NDX, a move to 1514 could be met with the same weakness, though the NDX technical indicators imply that the next leg of its correction could indeed start below that 1514 level. Confirmation of a correction could come from a small degree "5" wave impulse move down from whatever high is registered coupled with a downside penetration of the following levels: SPX1139, INDU 10430, and NDX 1485.

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