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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:


The last two sessions have produced both the 4th wave corrective peaks (8/10) and the expected 5th wave to new lows we were looking for on Wednesday. At the time we said 2-3 days and 2-3% lower from the 4th wave peaks. So far those parameters remain in place. The NDX has made a new low beneath its wave iii low from 8/6 while the SPX and INDU are knocking on the door. You'll recall our specific targets were SPX 1050-1053, INDU 9700-9750, and NDX 1295-1305. None of those have changed: those areas could basically hold this current decline and possibly provide a nice, 3-8 day bounce back to the peaks of 8/10 and perhaps a bit beyond.

If the larger trend is as bearish as we believe it to be, that 3-8 day bounce should be weak and overlapped and register topping indicators on the short term charts (hourly and less) once we approach the important resistance levels of SPX 1077-1087, INDU 9900-10000, and NDX 1340-1370. [Parenthetically, we would note that there is an open gap in the NDX at 1352.27 from 8/6 that has a high probability of being closed in this bounce]. If indeed that bounce is weak, overlapped, and corrective looking, it will confirm the larger bearish trend and set up a likelihood for a downturn. If those conditions present themselves, the resulting decline will be a third of a third of a third wave, typically the most violent, rapid and aggressive move within an impulse wave.

If for some reason the bounce we are expecting produces a much more impulsive move up that is not halted materially by the above resistance levels, then we will be forced to delay further analysis until we determine just what type of bounce is developing and how that bounce "fits" into the larger Elliott Wave pattern. For now, our confidence is high: that high confidence relates to the bounce we expect in the next 1-3 sessions. We have "medium" confidence however on whether or not that bounce will stop at the above cited resistance levels. Only the character, form, and internals of that bounce will allow us to go to "high" confidence for a possible decline at those higher levels. So we'll simply have to watch to see how the bounce develops; stay tuned, the next 8 sessions should be quite informative.

In the short term, the educational analysis suggests the next 1-2 sessions could produce the bottom we are looking for and provide a bounce back to resistance, doing so in the bottoming areas we cite above unless levels drop through SPX 1046, INDU 9650, and NDX 1285 (again, note the NDX 1352.27 open gap from 8/6). We'll obviously highlight that as/if those targets get closer.

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No positions in stocks mentioned.

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