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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.


Prices rose nicely in all three indices on Tuesday and eclipsed short term resistance after finding some degree of bottom on Monday. Tuesday's advance was confirmed by short term momentum, breadth, ticks, up vs. down volume and was attended by a nice increase in total volume. My Monday note highlighted the conundrum that my indicators were clearly oversold and due for a bounce but that the wave count was not providing for a clear end to the impulsive move down from the June highs and therefore a good bottom from which to relieve this oversold condition.

Tuesday's bounce did not help matters at all insofar as the low on Monday was unorthodox in the extreme (relative to a clearly completed impulse wave down from June). So I am left with the following two observations: (1) the fact that the move down from June has taken out so many important supports and created so much technical damage beneath the quote price of the indices forces me to adopt as my primary trend the bearish interpretation of prices from the January high that I have been citing these last few months. Specifically, that bearish interpretation is that the bear market that started in 2000 and was interrupted from 2002 to 2004 is now beginning anew; it will eventually take prices below the 2002 lows. (2) The oversold nature of the market on a daily and hourly basis still has not been "worked off" to any real degree but despite this the wave patterns continue to point to lower prices once this bounce completes in the next several sessions.

Specifically, what happens at SPX 1105 holds the key to at least two of the short term interpretations: above 1105 points to a retest at least of the 1116 peak and perhaps a few points above. If 1105 acts as resistance however, the wave pattern calls for a sharp decline to well below 1080 immediately (in a 3rd of a 3rd wave). Similarly, for the NDX, the 1414 level holds the key to two short term interpretations: above 1414 and prices will be magnetized toward the last peak at 1433 and a bit beyond. If 1414 acts as resistance, it could start a 3rd of a 3rd wave decline that will take prices rapidly below 1359. Given the unorthodox wave patterns of late, a clear setup has not presented itself.

Waiting to see what happens at SPX 1105, INDU 10125, and NDX 1414 is key: above those levels points to SPX 1117-1120, INDU 10250-300, and NDX 1435-1445. If they act as resistance, a sharp decline below the recent lows could occur. Given the flux in prices lately, I will stand aside and wait to see what happens at those cited levels slightly higher than yesterday's close before formulating further analysis.

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