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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:

There is very little to add to our Friday AM note: Friday we said: "You'll recall the analysis suggested targets of 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."

The only thing that Friday's session contributed to the technical conclusions is that a bounce is indeed expected, given the momentum (hourly and less) non-confirmations that Friday's new lows produced. The only question is if the final 5th wave we have been looking for has yet completed from the peaks on 8/10. On that score, we cannot be highly confident that it has nor can we be confident that it has not. Our internal count of the move down from the 8/10 peaks "looks" like it needs one more thrust lower: the price pattern you see from that 8/10 peak looks like a diagonal triangle, which is an ending pattern (again lending credence to the call for a bounce soon). If this ending diagonal triangle pattern is correct, one more thrust lower could just about complete the 5th wave low and lead to that expected bounce; interestingly, triangle patterns, once completed, often see reversals back to their origin: in this case, that origin is the 8/10 peaks for all three indices. [We continue to note the open gap in the NDX at 1353.44.]

We said on Friday that "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 decline through SPX 1046, INDU 9650, and NDX 1285..." The SPX and the INDU did not yet register prices in those bottoming areas which is why we think one more thrust lower is possible to complete the pattern. However, should prices move above SPX 1071.21, INDU 9855, and NDX 1316.30, that would be a strong signal that the expected bounce was under way. We'll obviously highlight that as/if those targets get closer.

No positions in stocks mentioned.

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