Page 1 Market Overview The University of Michigan Consumer Sentiment final figures for April indicated an overall decrease to 97.0. And, not only was this lower than the preliminary reading, but it was also less than some analysts had been expecting. In the week ahead, traders may want to remember that ADP Employment Change figures for April are due on the 3rd. QQQ Daily Kicking off this week's analysis with the QQQ daily chart above, we can see that this market made a gap to higher highs on Monday's open. And, it managed to finish slightly higher on the day. When trading resumed on Tuesday, the market continued the bullish momentum seen the prior day. As a result, the market close in the upper portion of the day's range. On Wednesday, the market seemed to change its overall tone of it. While the market continued higher during the session, it backed away from these highs to finish in the bottom portion of the day's range. Thursday's trading began with a slightly higher open. And, the market once again traded to new highs. As a result, the market finished near the highs of the day.
Page 2 On the final day of trading for the week, the market made a gap to higher highs on the open. And, even though the market filled the gap during regular trading, it backed away from the session low to finish around the middle of the day's range. QQQ 240 Minute Moving down to the 240 minute time interval for the QQQ, we can see that IntrepidTrader has identified the current wave as wave five on this timeframe. Also, we can see that the fifth wave trades to the green Fibonacci target box for this wave. When a market is in a sustained trend, some traders may begin to ask themselves when the inevitable correction will unfold. And, it helps to have a few rules of thumb to follow to answer these types of questions. Usually, for a market to enter a correction, the momentum which exists in the current trend needs to decrease. Of course, there are exceptions to this such as unanticipated news or events which have a strong impact on the markets. However, after a market has lost a degree of momentum, some traders may begin to observe divergence in different indicators. This helps quantify the fact that the market is losing momentum and helps them anticipate the possibility that a correction may unfold. As a correction begins to develop, it is possible that the trendlines which were created during a sustained move will help confirm the decrease in momentum and the higher degree of likelihood
Page 3 that the market is, in fact, making a correction. And, these trendlines can be easily created by connecting the areas of support and resistance at the market highlighted during the creation of the current trend. In the week ahead, traders may want to watch the 240 minute time interval for the QQQ. If this market continues to advance and trades beyond the top of the green Fibonacci target box for the major fifth wave shown in the chart above, the next objective for the current wave would be the yellow Fibonacci target box for wave five. However, should this market decide to sustain a correction greater than the major fourth wave (shown in red) within this bullish five wave sequence, this could be an early indication that the wave count shown in the chart above could be over. SPY Daily Moving onto the SPY daily chart above, we can see that this market made a gap to higher highs to begin the trading week. And, while the market filled this gap during the session, it recovered from the lows and finished only slightly lower on the day. On Tuesday, the market once again made a gap to higher highs on the opening. And, the bullish momentum seemed to continue during the trading session. As a result, the market finished higher on the day. When trading resumed on Wednesday, the market continued to higher ground during the trading session. However, the market seemed to lack the conviction to sustain the move to higher highs.
Page 4 As a result, the market backed away from these highs to finish in the bottom portion of the day's range. Thursday's trading session began with a slightly higher open. And, even though the market traded lower during the session, it was able to recover somewhat to close only slightly lower on the day. On Friday, the market began the trading day higher. However, it seemed to lack the overall enthusiasm to continue to new highs. As a result, the market returned to the 238.00 price level and closed in the bottom portion of the day's trading range. SPY 30 Minute Moving down to the 30 minute time interval for the SPY, we can see that IntrepidTrader has identified the current wave as wave four on this timeframe. Also, we can see that the fourth wave traded to the green Fibonacci target box for this wave. Fibonacci targets can be quite useful for helping a trader understand how far the market can move and remain symmetrical to other waves within an Elliott wave count. And, to further validate the price levels highlighted by the Fibonacci ratios, some traders may look to other means to further validate these price levels. As written in previous newsletters, support and resistance levels can help a trader identify key psychological price points which are significant in different markets. And, for this reason, it's not
Page 5 uncommon for traders to incorporate these price levels into their overall trading methodology as entry points or opportunities to adjust one's stop loss placement. Occasionally, Fibonacci price targets may also highlight previous areas of support and resistance. And, when this occurs, seasoned Elliott wave traders may tend to place a higher degree of significance on these price areas. The reasoning behind this rationale is simply that two different types of technical analysis can be seen as validating each other. And, since the analysis that one uses to derive support and resistance levels is quite different than that used to calculate Fibonacci targets, one can easily see why a higher degree of significance may be derived when these two methods agree on a common price area. In the week ahead, traders may want to watch the 30 minute time interval for the SPY. If this market continues to advance and trades beyond the peak of wave three, this will be our confirmation that we are in the fifth wave on this timeframe. However, should this market decide to sustain a move below the bottom of the green Fibonacci target box for the major fourth wave shown in the chart above, the next objective for the current wave would be the yellow Fibonacci target box for wave four. Good Trading! Sam Perdue