ALOHA. Arnout aka Soul, Ph.D. 5 P a g e

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1 I continue to use the wave-i, ii count as my preferred count until proven otherwise. Why? 1) Price bottomed last week right in the preferred target zone for wave-ii. No need to overthink that. 2) The entire decline counts best as corrective (3 waves down), especially since the first part (SPX2789->2738) was overlapping on the S&P and especially the NAS and DJIA. See my tweet here. Fitting that into a leading diagonal triangle pattern -which allows 1 st and 4 th waves to overlap- but without any triangular shape to the actual price action is IMHO incorrect (Blue box, Fig. 1A). Neither does the pattern adhere to the following rules: a) wave-5 must be >80% of wave-4; but since 5=23.50p, 4=17.21p, wave-5 is 73% of wave-4;. B) wave-3 must be > wave Since 3=35.31p, 1=32.14p, and 5=23.50p, wave 3 is smaller than the sum of wave 1+5: < Today price gapped down at the open, but reversed within the next 1 hour, stalling at the 23.6% retrace of the SPX2533->2789 price move (Fig. 1A) and stalling in the possible b-wave target zone as outlined in the weekend update (Fig 1B). As such, a break over the green 76.4% retrace at SPX2756 remains key for suggesting wave ii/c of either an impulse or larger LDT is underway. Remember in the case of an impulse, major-5 should ideally target SPX Hence, there s plenty of upside potential left. Figure 1. S&P 1-min charts: A) Preferred count has impulse wave-i completed at SPX2789, wave-ii possible completed at SPX2647. B) Possible alternative is a 3-wave high. A Not an impulse. Not an EDT B 1 P a g e

2 Today the S&P continued to rally despite a 10p lower open. That s a sign of strength (see also page 4). Price is back above the 20d SMA, but not yet the 50d SMA (@2736, red arrow). Thus, the short-term trend is back to up. Support at the SPX held on a closing basis last week, and as long as it continues to do so, the pressure remains up. The Technical Indicators are starting to turn back up, with the MACD back to buy. The A.I. is almost on a non-ideal buy. A higher close tomorrow will also give a none-ideal A.I. buy signal. Thus over the past two days, price has improved enough to make the daily chart constructively better. Figure 2. SPX daily TI chart. Price back above the 20d SMA. TIs starting to point back up. 2 P a g e

3 In the weekly digest I already showed the NAS charts were in much better shape than the S&P s, and today didn t change much other than that thanks to today s price action the NAS daily TI chart looks even more bullish. The reasons why are given in Figure 3 below. Price will need to drop below the 50d, than 20d and then the lower green trendline to tell us the move up off Friday s low is over. Figure 3. NAS daily TI chart. Price firmly in an uptrend. Technical Indicator setup suggest more upside ahead. 3 P a g e

4 The S&P500 s McClellan Oscillator (MO) ended today at +2, UP 40p: the number of stocks advancing is slightly outpacing those declining: Neutral to Bullish. The SPX-SI ([Cumulative] Summation Index of the MO) remains on a sell, but starting to bottom and turn back up: Neutral. All the other MOs increased as well, with only the DJIA-SI ending negative. The NAS-SI is back on a buy, while the NDX-SI and NYSI are almost on a buy. (See Table). These are all positive developments. Last week I showed how the NYA cumulative A/D had put in place a secondary top aligning with a downtrend line and stated which needs to be overcome to signal the correction is over. Fig 4A show the NYAD for common stock only, but it has the same pattern. This break over the red DT line remains the case, and today the A/D moved further back up and is close to breaking out. Once it does, we can continue to expect higher prices. This fits with the fact that the NDX A/D and DJIA A/D already made new ATHs last week. Thus breadth has improved enough over the last two days alone to give 1 new buy signal, and two close to buy signals. Figure 4. A) SPX-SI remains on a sell as breadth remains negative. B) NYAD needs to cross over downtrend line to signal correction over. A 4 P a g e

5 In conclusion: The i, ii-wave count remains preferred and as said last week Ideally wave-ii should drop to SPX We got SPX2647 on Friday and since then the largest rally since the decline from the SPX2789 high started. The alternate count remains a b-wave high at SPX2789, but the improving daily charts and improving breadth readings (all sectors ended in the green today) and renewed buy signal for the NAS-SI, while the NDX and NYA are close suggests this EWT count is indeed the appropriate underdog. The DJIA and S&P bounce off their 100d SMA, while the NAS held its 50d SMA as support. Meanwhile the VIX closed below $20. Hence, many positives today. Price on the S&P now needs to clear the 50d SMA to allow for more upside. The NAS is already well-above the 20d and 50d, and the expanding daily Bollinger Bands hint at a strong price surge. How to trade this: In the weekend update I suggested to go long today, but the 10p gap down made me sent out an advising to wait it out until things would clear up. Although buying the first hour would have given already nice profits (I did post in the FORUM that my EMA-based mechanical system for SPXL went long after the 1 st hour, and is still long. Ps: I will continue to post updates there on this system), I don t regret the update as it s always easier after the fact. As said in this morning s , I rather give up p to allow my members a low risk trade than to risk you 100p. After today we are, IMHO and however, at a more comfortable stage. With the NAS/NDX charts where they are after today, and NASI buy-signal one can go long this index with any of its ETFs (QQQ, QLD, TQQQ). Stops can be placed just below today s low, which is the 50d SMA. For the S&P one can do the same, or simple wait one more day -as it s still a take it day by day market - to see if we can get an A.I. buy signal and break over its 50d SMA. (ETFs; SPY, SSO, SPXL). Or one can even wait for the SXP-SI to give a buy signal and the NYA A/D to break out. All depends on your comfort level. Because please don t forget that if we re in wave-iii the ideally target is SPX , hence, there s still 100s of points of upside potential left, and the money is made being on the rights side of the trend. It is not made in nailing tops and bottoms (If you sell at the bottom, but buy at the top you nailed it ) ALOHA Arnout aka Soul, Ph.D. 2018, Intelligent Investing, LLC. This copyrighted daily periodical is published on most stock market trading days by Intelligent Investing, LLC, and is intended solely for use by designated recipients. No reproduction, retransmission, or other use of the information or images is authorized. Legitimate news media may quote representative passages, in context and with full attribution, for the purpose of reporting on our opinions. Analysis is derived from data believed to be accurate, but such accuracy or completeness cannot be guaranteed. It should not be assumed that such analysis, past or future, will be profitable or will equal past performance or guarantee future performance or trends. All trading and investment decisions are the sole responsibility of the reader. Inclusion of our information for trading and investing are the sole responsibility of the reader and cannot be construed as any type of recommendation, nor solicitation. 5 P a g e