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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.


As readers have been aware for the last few weeks, we have been looking for an end to the bounce from the 8/13 lows in all three indices. We have been counseling patience for the last two weeks as that corrective peak approached. Indeed, last Friday, 8/27, we thought just such a peak had developed. Alas, the corrective bounce "extended" toward higher Fibonacci resistances.

Given Friday's impulsive looking, support-breaking decline in the NDX (and the decline below the August lows in the SOX) it strongly signals that the corrective bounce from the 8/13 lows for the NDX has completed and that the expected emergence of the bear market trend from Q1 is now underway for that index. The Friday declines in the SPX and INDU however, do not look impulsive yet nor have they taken out important supports; as a result, we cannot say with equal confidence that the SPX and INDU have ended their corrective bounces from the 8/13 lows. In fact, an ideal situation would have the SPX and INDU put in one more slight new peak today or tomorrow above the peaks these two indices registered on Thursday 9/2 (SPX 1121 and INDU 10321) while the NDX is bouncing in a corrective minor wave 2 bounce to Fibonacci resistance. This would provide not only a "clean" completed move up for the SPX and INDU but also provide a common intra-market divergence: the SPX and INDU making new highs while the tech indices do not confirm.

All of the hourly divergences (and Demark trend exhaustion indicators) that we identified on 8/27 are present at the same or greater magnitude as of Friday's prices. So the conditions for an important peak remain just as ripe. So too then does the analysis for an important peak to be registered soon in the SPX and INDU. Probability strongly suggests the NDX has already peaked. With those conditions then, the analysis suggests a downtrend in the NDX on any corrective-looking bounce to 1378 -87 unless levels cross through NDX 1403. A downturn in the SPX on any new peak to 1121-25 unless levels cross up through 1132, and a downturn at any new peak in the INDU to the 10322 -385 area unless levels cross through 10440.

If however the SPX and INDU actually peaked on Friday with the NDX, we will await confirmation with a "5" wave impulsive move down that takes out important support levels (like the NDX did on Friday) before then looking for a possible downtrend analysis.

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No positions in stocks mentioned.

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