Editor's note: The following analysis was offered this morning via Scott Reamer's technical service. We share this vibe on the 'Ville with educational intentions only. It's not intended as advice. For more information regarding Scott's unique approach, please click here.
There are a few different probable paths for prices in the short term as they 'resolve' the significant divergences we have been cataloguing over the last two weeks.
As per last week's intra-week notes, we still think even the short term is bearish as these divergences resolve so we'll maintain a short bias at least for a few more sessions and 1-3% lower. Recall our analysis suggests weakness in the blue chips here with a move above DOW 10660 and SPX 1211 forcing us to the sidelines on this near term bearish call. We'll continue to follow the action and define a course as our analysis unfolds and as the divergences we have been writing about resolve lower. How, and how far prices decline (assuming they continue to from last week's peaks) will tell us much about the intermediate term, which we think remains weighted toward bearishness given worldwide indices (note our DAX comments in the attached piece) as well as, of course, what our models are saying both macroeconomically as well as technically.
For now, the probabilities favor a bearish long term resolution; the question becomes what happens over the next few days and weeks to prices. We will watch our short term models closely to see if/how they 'align' with our longer term (bearish) models. Remember, complex systems are scale invariant; so the short term action is an important part of the confirmation process relating to our long term model conclusions. Stay tuned; the U.S. and worldwide markets are at a very interesting juncture here.
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