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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.


In Friday's intraday note, we highlighted ideal 5th wave targets as "above SPX 1146 and INDU 10487" with a more granular target as: "SPX 1149.65 and INDU 10512". The SPX and INDU did not produce a new swing high on Friday but came within less than ½ of 1 point in both indices of doing so. And these "almost" new highs came with even more of the important technical divergences we have been highlighting for the past handful of sessions.

We have been looking for a top of the uptrend that began in mid May for the last week of trading: does Friday's action suggest an important top has been struck and a meaningful multi-week correction is underway? There is evidence to suggest as much: a clean "5" wave impulsive move down from the Friday highs took the INDU and SPX to their lows of the session right into the close.

Friday's cleanly impulsive move down suggests one of two scenarios: (1) that the top we have been looking for occurred on Friday and that the multi-week correction (if not more) toward at least lower Fibonacci support is underway now, or (2) the top is not yet in and a complex 5th wave up will continue to unfold for the next several days toward at least our "ideal" targets of "SPX 1149.65 and INDU 10512".

What will be the tell that the top is in or the top is still forthcoming? If the SPX and INDU fall below SPX 1124 and INDU 10309 (the June 22nd lows), we can confidently assume that an important correction - either a minor 2-4% correction or a major bear market correction below the May lows - has started. If the SPX and INDU do not fall below their 6/22 lows in the next several sessions, we can then presume that a complex 5th wave is still tracing out that will find a top near our cited upper resistance levels.

The analysis suggests weakness may be at hand (ideally off a bounce today that fails at SPX 1142 and INDU 10455 resistance) with a move thru SPX 1146 and INDU 10487 serving as an impetus to reconsider that view. I remain of the view that the NDX is in a larger complex correction of the 5/17-6/8 bounce: that lower support in the 1424-1449 range could provide support if the bullish intermediate term trend is operative. However, we cannot yet be confident that the next leg lower in the NDX has started. 1514 is an ideal target for the NDX but it could fail at anytime before reaching that price.

We are waiting for a "5" wave move down (as we saw on Friday in the SPX and INDU) to confirm the next impulsive move lower in the NDX is underway toward 1449 at least and more probably 1424-1446. Here too, if the more bearish intermediate term trend is operative, much lower NDX targets will prevail. For now however, I will take trading one day at a time: if the markets do not hold materially above their mid May lows, then something much more bearish is afoot that calls for a rapid decline to new yearly lows.

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