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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.


Summary:



SPX and INDU prices edged up Friday in an overlapping, ending diagonal pattern, suggesting that prices are on the verge of the anticipated correction we have been writing about.

For the SPX and INDU, this terminal pattern looks like it is taking the form of an ending diagonal, with another 3 wave move to slight new highs needed to complete this ending diagonal that started on 6/1. If SPX and INDU prices come under the 6/3 lows, the diagonal will have likely already ended and a correction to SPX 1105/12 and 10100/150 is a minimum expectation.

Any overlap with the 5/19 highs in these two indices would suggest a larger correction could be playing out, with a test of the mid-May lows the next likely target.

For the NDX, the Elliott and Demark interpretation is different and presents two possibilities. (1) A full impulse wave off the 5/17 lows is forming and is currently in an internal 4th wave correction that could find support in the 1432/43 area before making a run at one more new high to 1484/90. Afterwards a correction to 1420-1440 could be the expectation. (2) the D wave of a large triangle pattern off the January highs has just ended with the 3-wave move up from 5/17. If so, 1410/1415 would be the target for the final E leg of the NDX's corrective pattern off the January high.

Only a move below the March 17th lows would argue for a much more bearish wave (III) pattern. At this point that interpretation remains low probability. The analysis suggests caution in the SPX and INDU with another 3-wave small move up to SPX 1133, INDU 10330 areas before a potentially larger correction gets underway (not advice). The form and extent of that correction will tell us much about the import of the May lows. If it becomes impulsive and overlaps with the 5/19 highs in these two indices, then something potentially more bearish (intermediate term) is afoot. A move thru SPX 1140 and INDU 10390 would provide reason to re-evaluate this view.

No positions in stocks mentioned.

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