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 does nothing to change the intermediate term (multi-week/month) bearish analysis that prices could move meaningfully toward and below the lows set on 8/13 with a good probability that the 2003 lows will be tested in time.
You will recall that Monday's note suggested that a multi-day corrective bounce to Fibonacci resistance was possible and that such a bounce could produce a downturn. Given yesterday's bounce off the AM intraday low, we believe that that expected bounce to Fibonacci resistance is underway and could resolve (read: end) anytime from today to Friday at the following levels: SPX 1117-1123, INDU 10100-10200, and NDX 1397-1417. Movement to those areas that takes an overlapping form and shows short term momentum divergences and Demark trend exhaustion indicators along with the overlapped action in the NDX and the INDU from the peaks set in late August would strongly suggest that new lows (at a minimum) beneath the August 13th lows could be seen in the markets shortly.
Specifically, we suggested in Monday's note that: "For the NDX specifically, an overlap of the peaks from 8/27 (at 1393) would go a long way toward helping to confirm this larger bearish trend and conclusion. Coming under SPX 1094 would be a similarly bearish confirmation for the SPX." Indeed, the NDX did just that on Monday, coming under 1393 and thus adding another important technical clue that the move up off the August lows was entirely corrective (counter-trend) and could shortly be retraced.
Short term (last three sessions), there are several acceptable ways to "count" the action in each index but the most important point is this: whatever bounce materializes (or has already materialized) will be (has been) highly overlapped and corrective. We can hope however that higher prices are seen into the Fibonacci resistance zones we cited above over the next 1-3 sessions that will allow traders to position for the expected move to new annual lows at a minimum.
We will be sure to publish a note as soon as we feel confident that the bear trend from 9/21 has reasserted itself meaningfully.
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