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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:


Monday's action produced the new swing low I was looking for in all three indices, and a shallow bounce took place Monday afternoon and into Tuesday morning. Has an important bottom been seen then? Perhaps, but it is not yet clear that all three markets have found a good bottom. Specifically, the NDX's bounce from the Monday low has produced an overlapping, 3-wave bounce and as of Tuesday night, NDX futures have put in a new low for the entire move down from the June highs.

This NDX action suggests that one more new swing low toward the 1413 area in the NDX cash could find a bottom that I have been looking for. The SPX and the INDU are less clear: it is possible (though unattractive) that they have found a good bottom from which to bounce at Monday's lows. However, the price action from Monday's low has not been classically impulsive (suggesting that an uptrend has started of some degree). The last several sessions have been a bit unclear in the SPX and INDU as to the pattern playing out (that is, corrective or impulsive). As a result, calling a bottom in those two indices has been more difficult. I would suggest keying off the NDX, as the pattern in this index is more clear.

The analysis suggests that the NDX could bottom with one more new swing low in the 1413 area (+/- 2 pts) and then start a multi-day bounce that could take the NDX up to 1460-1475 at least, even if the bearish intermediate term trend is underway. As my last several index technical notes have suggested, the size, manner and scope of the bounce from whatever low is struck in the next session or two will determine whether the market has entered into an important bear phase (and thus the May lows will be eclipsed and then some on the downside) or if the market remains in the bull phase that has dominated since October 2002. In sum, this is a big, big moment for the markets. I cannot overstate the importance of the juncture that the markets are now in: not since October 2002 has the dividing line between the bull and bear markets been this clear.

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No positions in stocks mentioned.

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