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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:


Though the price action after Wednesday's Fed meeting was a complex upward correction (where the NDX posted a new high but the SPX and INDU did not, an intra-market divergence), the SPX and INDU failed to break through SPX 1146 and INDU 10487, levels that would've suggested a change in trend.

Prices yesterday rolled over aggressively, impulsively, and were confirmed by market internals in terms of momentum, breadth, and ticks, suggesting that the long awaited correction we have been writing about for the last 7 sessions has begun.

All three indices registered a complete "5" wave impulsive move off of Wednesday's highs and could easily bounce in today's session (especially given the anticipation and volatility surrounding today's employment numbers). If prices do bounce, resistance at SPX 1132-1136, INDU 10350-10400, and NDX1496-1506 should contain the bounce before the resumption of the downtrend toward our cited lower supports.

The impulsive move up from the May lows that recently completed took about six weeks to unfold; the ensuing correction, if the bullish intermediate term trend is operative should last several weeks at least (2-3 weeks). Note that we have altered the "count" for the NDX off the 5/17 lows for that index. We have now labeled the top on 6/30 the wave 5 top from the 5/17 lows (before we had labeled the 6/8 highs the 5th wave top). This does little to change the overall view however: lower prices for the next several weeks are in order. What happens at those lower Fibonacci support levels holds the key to the bearish vs. bullish intermediate term trend. If those Fibonacci support hold and the technicals suggest a good bottom is forming, a move to new annual highs could occur in all three indices.

If those supports do not hold, potentially much lower Fibonacci targets come into play and the likelihood of a resumption of the major bear market off the 2000 peak increases substantially. At this juncture we are inclined to believe the bullish call for new annual highs, but one should never pre-judge the market. We'll simply have to see what happens at those Fibonacci supports. A strong market will find them very solid supports. A weak market will not hold there. Any bounce that develops today could very well cause the indices to continue downward unless levels break through SPX 1140, INDU 10430, and NDX 1513. If the top that recently registered in all three indices was an important pivot, those prices should not be meaningfully exceeded.

No positions in stocks mentioned.

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