Advanced Technical Analysis
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.
Monday's and Tuesday's price action provided the pullback we had been looking for last Thursday and Friday. So far, the pattern off the Friday peak is impulsive looking, suggesting that the most probable outcome is for prices to at least move down in another impulse wave of equal size to the Monday/Tuesday decline once the correction from yesterday's AM low completes near where prices closed on Tuesday. In our Monday AM note we suggested that "though we feel strongly about an imminent decline, we cannot say with equal confidence that Friday's/today's peak will be the final peak from the 8/13 lows. It remains possible (though low probability) that a several day decline and then another attempt at a new high (like late June) could take place."
That remains an open possibility at this stage. Even if this comes to pass (another stab at new highs in the next 1-2 weeks) we expect the very short term selling pressure could keep prices pointed toward lower levels for the next few sessions. Specifically, momentum is confirming this move down, arguing for another few sessions of weakness even if the market is getting ready to take a run at new highs. A break below SPX 1079, NDX 1336, and INDU 9950 would argue strongly against an attempt at new swing highs for the market and instead point prices down hard into late October.
For now then, the analysis suggests a possible move down to at least lower support if a run at new highs is afoot, or for much lower prices if the larger bearish 3rd wave down has commenced from Friday's peak. If levels cross above SPX 1110, INDU 10215, NDX 1394 (Friday's peaks), we would need to re-analyze. We will simply have to watch price action closely this week to determine if the more immediately bearish scenario is unfolding (new lows on increasing downside momentum) or if a final, exhaustive move up to new swing highs could take place before a larger and more bearish failure.
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