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Advanced Technical Analysis - XBD



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.


The AMEX Broker/Dealer Index (XBD), an equal-dollar weighted index of the top broker dealers in the market, has nearly completed a large degree impulsive move down from its all-time peak in February at 149.24. That peak in February was registered against both weekly and daily momentum divergences, as well as both weekly and daily Demark trend exhaustion indicators, suggesting that indeed an important peak was put in. Most importantly, this index's move off its 2002 low to the 2004 peak can be counted as a complete impulse wave, suggesting that in the least, a correction of that 135% up move is now unfolding, if not a more bearish alternative interpretation of the technicals that suggests for the 2002 lows to be taken out in the next few years.

For now however, I will continue to focus on the shorter term horizon where my confidence level is higher. Specifically, a clean and well proportioned impulse wave down from the 2004 peaks can be seen that will ideally complete with one more new low beneath the 112.97 low registered on 7/19. A new low could come with both daily momentum divergences as well as potential Demark trend exhaustion indicators, both suggestive of an ending impulse wave that needs to alleviate a daily oversold condition.

Though the very short term hourly chart of the last week or two of action is open to a few interpretations, for now, it appears that a 4th wave triangle is forming within the final 5th wave down that started on June 8th. This triangle could trace out a down-up sequence that reaches important Fibonacci resistance in the 119-120 area before quickly thrusting out of this triangle down toward 111-112 in a final 5th of a 5th wave. That is where an upward trend could begin, in my opinion, in the constituents of the XBD: between 111-112 unless levels continue a decline through 108. The analysis suggests that at that point there's a possibility of a strongly impulsive move up that could, at minimum, carry prices over the ensuing 2-3 months to the 125-130 resistance area if not to the 135 level, a potential 15-20% move up. Only a move impulsively below the 108 level would negate the short term analysis for a low to be formed there, while a move above 121 from here would suggest that an important bottom was already struck and that a move to my higher targets was underway. I'll update, as usual, when conditions warrant.

No positions in stocks mentioned.

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