Editor's Note: The following is a brief summary of the analysis offered this morning via Scott Reamer's technical service. We share this vibe with educational intentions only. For more information regarding Scott's unique approach, please click here.
We suggested in last week's Complexity Analysis update that "this [short term] action presents two potential paths from current prices according to our models: either the peaks in the last several sessions were peaks from which a solid 2-3% decline may be created or this sideways consolidation is in fact the 'correction' that we were looking for...in fact we can make a good case that SPX 1247 is a short term potential target if we get a spike upward in the next few sessions."
The spike to SPX 1245 last Thursday and the retest again on Friday (when several other indices made new peaks) counts well in our models as the possible culmination of the entire post-London bombings bounce, which we believe was the culmination of an even larger trend.
Again, to reiterate what we were looking for on the divergences front: "one more spike higher could well result and [this spike] would create those short term contextual divergences we look for to an even greater degree of divergence."
From short term trading perspective, the decline from last week's lows is too immature to confidently asses it as THE decline we have been waiting for. Slight new peaks in some of the indices are possible while others may not register such (the DOW in particular). While not intended as advice, note that none of this changes our long term bearish posture.
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