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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.


SPX and INDU prices continued upward yesterday past the SPX 1133 and 10330 area targets but doing so, still, in a diverged manner, suggesting that the call for some degree of correction in these two indices remains.

Momentum, ticks, and volume all diverged on the new highs in the SPX and INDU while another set of hourly DeMark trend exhaustion signals were registered or will register in the first two hours of trade today.

SPX 1140 and INDU 10390 were triggered right into the close but that does nothing to alter the view for a larger degree correction at some point soon. Given the persistence of the price advance despite the divergences that have accumulated over the last several sessions, the view of waiting for a confirmed "5" wave impulsive move down from whatever high is registered near these levels might make sense. Once a confirmed trend change "5" wave move down can be seen, a cautious stance in the SPX and INDU will present itself on a subsequent bounce to Fibonacci resistance, the levels of which we will attempt to identify intraday.

The NDX pattern is much more clear off the 5/17 lows: a clean "5" wave impulse move can be seen from 5/17 with nice internal Fibonacci relationships between the waves, suggesting that this move off the 5/17 lows may be nearing an end.

Furthermore, within the first hour or two of trade today, a valid "8" or "9" hourly DeMark trend exhaustion signal will be registered which would add to the "13" trend exhaustion signal registered on 5/28 in the NDX. This would make a "9-13-9" series of DeMark trend exhaustion signals, which are relatively rare and important to mark potential turning points in indices and stocks. That signal, along with a completed "5" wave impulse move off 5/17 seems to strongly suggest that the NDX is due for a multi-day correction that should find support in the 1413-1435 area.

However, the most important technical observation one can make of the NDX is that a clean 5 wave move off the 5/17 lows has been registered, which means that, even if a bearish interpretation of prices can be gleaned, we should expect another impulse move up of similar magnitude (+9% +/-) once lower Fibonacci support can be found.

It is a strong possibility that those lower supports will the produce a much more aggressive move up than the one we just saw from the 5/17 lows (that is, larger than 9%, with an increasingly likely chance that a 14-15% move is seen off lower supports). The analysis suggests that at that point, a move higher in the NDX from lower supports may present itself. A move down toward NDX 1413-1435 (300-500 bps) may be expected with 1509 an area to re-evaluate a cautious view based on the analysis. If that plays out, we would then begin to get positive if those lower price levels hold.

No positions in stocks mentioned.

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