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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:


Last Friday's lows turned out to be the lows we had been looking for from which a bounce to the 8/10 peaks and beyond could start. The last two days of trading have taken prices impulsively above the 8/10 peaks for the SPX and INDU while the NDX remains below those peaks. The very short term is a touch unclear: we cannot state confidently whether or not prices have completed their initial impulse wave up from the lows last Friday.

A "normal" zigzag correction upward (which we suspect is what is unfolding from last Friday's highs) would take an ABC form, with the first impulse wave being A up, a corrective B wave down to take back some of A's progress, and then a final C wave impulse that is both labored and divergent. So far we clearly have an A wave up from last Friday's lows but a B wave corrective move down has not yet materialized. Ideally, we will see a B wave correction of this last two day's up move soon that could take prices back to Fibonacci support in the SPX 1070-1076, INDU 9875-9930, and NDX 1318-1328 areas. From those B wave lows exists the possibility of an impulsive wave up toward the important resistance areas of SPX 1090+, INDU 10100, and NDX 1353+.

We will attempt to get more specific on the C wave analysis for important resistance once we can identify a B wave low. That whole sequence then, the ABC corrective move up from last Friday's lows, would constitute a completed corrective bounce and could then result in a move downward to new annual lows.

We would note that it is possible to "count" last Friday's lows as the end of a 5 wave move down from the June peaks (we have noted this count with a ? in our charts below). Our ongoing most probable count is different: it suggests that a wave i low ended on 7/26 and that a major and aggressive wave iii down started on 8/2 and that the move down from 8/2 is the internal waves of an aggressive move down in wave iii. Only a move above SPX 1100, INDU 10175, and NDX 1388 would suggest this alternate count is correct. For now, the bias remains up in a corrective bounce no matter which of those interpretations holds. The best interpretation suggests a modest bounce to cap prices while the alternate suggests prices to bounce even higher before failing. The key to which of these scenarios is unfolding will be what happens at the first layer of Fibonacci resistance. Stay tuned.

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No positions in stocks mentioned.

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