Nasdaq and NDX made higher highs in July when SPX, Dow and R2K all made lower highs. Now, Nasdaq has exceeded its late August high unlike the other 3 markets. Since DRSI has yet to confirm that the downtrend from the July highs in any of those markets (1356 in SPX) is complete, we are still left to consider the ABC, 1-2-3 and 1-2-3-4-5 counts. Regardless, with Nasdaq breaking the equivalent of SPX 1231, it gives us the opportunity to bring the tech and non-tech counts back into congruence. It actually makes perfect sense to me in hindsight. And, shame on me, I've seen this congruence happen before when Nasdaq/SPX highs/lows get out of sync. But, I've never studied historical tech price divergences in detail, so I think I'll study that over the weekend and hope that it gives us a little more clarity on the counts/patterns. To be continued...
ISEE and CPCE have lost their equity bullishness today which is a signal to Mr. Market that the "dumb" money is finished adding to their long leverage like they did at 1170-1210. It may seem counter-intuitive to call those traders "dumb" since they are likely up 20-30+ points on average, and I mean no disrespect since I'm feeling pretty dumb right now, but SPX is at the top end of its 6-week 1120-1220 range virtually tagging OPEX max pain today after a non-stop 5-day rally. Mr. Market is likely to test the 1180s and probably the 1170s where bulls piled on and bears got squeezed to find out where he can extract the most money from traders. The stats I presented the last 2 days about ISEE favor such a scenario probably because Mr. Market consistently seeks max pain. Sure, an exogenous event can always throw things out of whack temporarily, but the odds strongly favor an imminent 3-5% pullback from 1220ish.
The US Dollar never quite overlapped 76 and is trying to rally, so a series of wave 5s higher is still possible OR it could even extend into a larger wave 3. That will likely determine the SPX fate over the next few weeks.
I am still favoring the SPX wave 4 triangle count on my public daily chart although it has certainly been pushed to its limits and will be eliminated above 1231. If 1220ish proves to be a triangle C-wave top, a typical 50-80% retracement of 1136 would target 1150-1180. The 20dSMA and 89hEMA/SMA reside at 1179-1186. The bull pile-on really started around the 1170s. So, there are strong reasons to believe SPX will test the lower 1180s or 1170s. I expect a 1-2% bounce from there followed by a lower low in an ABC and then a 2-4% rally. That could either complete an ABCDE triangle or wave 2/B of the 1231+ rally scenario. All that could finish prior to the FOMC announcement on Wednesday or just after it, and the USD situation at that time should offer clues. Good luck and good weekend!
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