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.
About Complexity Analysis
Probability- and fractal-based price analysis that attempts to predict potential bifurcation points in price patterns where trends reach points of exhaustion. Underlying the work are a host of traditional, non-traditional, and proprietary technical analysis tools including pattern analysis, DeMark indicators, and momentum measures among others.
The major indices we've been following, including the NDX, the Nasdaq Composite, the Russell 2000, the Value Line, and the S&P Small caps all declined impulsively from last week's peaks and so far have bounced in what looks like a very corrective, mean-reverting fashion. Thus, we have a somewhat common situation where the broader indices have formed an important peak last week and the SPX, DOW and OEX are forming theirs now.
Recall that our last few weeks' potential target for the SPX was 1247 +/-: it is quite possible then that the move that started up from Monday's low will end near that price point while the DOW "projects" to 10755 +/- for its terminal peak. It need not get there (and the decline from today's peak as I write is suggesting it won't) but the contextual situation: sentiment, put/calls, momentum, up vs. down volume, volatility is ripe for a meaningful reversal.
We noted last week that: "What's most remarkable to us... is the fact that the bullish consensus is so adamant about higher stock prices when the DOW has made no net progress since January 21st 2004: 558 days of no price gain." Interestingly, current consensus bullishness is once again making a good record.
Again, this speaks directly to the underlying reality of negotiated financial markets: they are driven largely by irrational impulses and NOT by linear, utilitarian economic decision-making.
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