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.
In our Wednesday note we highlighted a part of our Monday piece and we're highlighting it again here: "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." Given the impulsive move above the 8/27 peaks, which surpassed our cited levels, clearly this "low probability" outcome has come to pass.
Though the SPX and INDU have moved above a "good" resistance zone (1113 +/- and 10250 +/-) yesterday, we remain confident that the larger intermediate term trend is in fact bearish and that the bounce from the 8/13 lows, given the overlapped pattern and the multitude of "3" wave patterns throughout, looks very much like a corrective, against-the-dominant-trend bounce. Its corrective characteristics imply that this bounce from 8/13 lows could eventually be given back in its entirety once the larger bearish trend returns. To that end, we think it is wise to give the market some leeway here and be patient.
It is possible that last night's Intel (INTC:NASD) news will provide the necessary catalyst for the emergence of the bear trend again, but we do not want to anticipate price action. We'd rather let it present us compelling evidence one way or another. So we'll allow for a few more days of higher prices (with the attendant divergences and hourly Demark indicators that we look for) before looking for a possible downtrend off of this strength. If, however, prices come under the lows from 8/31 at anytime (SPX1095, INDU 10074, and NDX 1354), that would be strong evidence that this corrective bounce from 8/13 has ended and that a top has been registered.
For now, patience is recommended as the market extends its bearish bounce from 8/13 a bit higher. If prices come under those 8/31 intraday lows, however, we will look for a possible decided move lower. On Wednesday we said: "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." The market has chosen the latter scenario; now we'll just have to be patient and await our usual indicators to present a good risk/reward setup.
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