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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.


Yesterday's technology-led decline continues the correction that started off the late June highs for all three indices. I have been citing SPX 1103-1112, INDU 10100-10200, and NDX 1430-1460 as areas of possible support: the NDX is already within that zone while the SPX and INDU remain slightly above it.

Hourly momentum, breadth, and internals are all confirming the new lows which suggests that an important, trade-able bottom has not yet been found (and that whatever 1-2 session bounce takes place soon will be shortable). Further, and most importantly, I will want to be able to identify a clean "5" wave impulse move down from the June highs in order to get comfortable with the fact that a potential bounce is near.

At this stage the NDX has only three waves down and seemingly needs another new low beneath 1441 (potential targets include 1410-1420 area). The SPX and INDU too have not completed a full "5" waves down from the June highs: another slight new low (at least) is needed below SPX 1113 and INDU 10191 before a completed "5" wave impulse move can be counted. Once that initial impulse wave down from the June highs has been completed, I can expect a multi-day bounce to resolve the very short term oversold nature of prices that could ensue. However, regardless of the intermediate term trend, a multi-day bounce will likely fail to reverse the downtrend.

At this stage I still cannot confidently state which of the intermediate term trends is operative: bullish to new annual highs after this multi-week correction is complete (with a large ABC correction downward) or bearish to new lows beneath the May lows and possibly much lower. I will keep my time frames short and attempt to play the "5"s and "3"s (the impulse and corrective moves respectively).

Only if prices start to exhibit bottoming action - with the requisite momentum non-confirmations of new price lows as well as important hourly Demark exhaustion indicators - will I be able to suggest a definitive call on the intermediate term trend. Needless to say right now, I am not yet close to identifying such a bottom as none of those "bottoming action" indicators are present.

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