Summary Based on the prior week s price action, I found in last week s digest uncertainty has increased once again on where the market exactly is from and EWT-count perspective. The standard impulse (preferred), Ending Diagonal Triangle (1 st alternate), and Zig-Zag (4 th alternate) all remain valid. We can add a possible Leading Diagonal Triangle for intermediate-i as well (2 nd alternate). With this week s price action, I was starting to be able to eliminate these counts 1-by-1 through logical deduction. The standard impulse was eliminated first, then the triangle, followed by the diagonals. With Friday s price action we are now left with the Zig-Zag on the S&P, DJIA, and an irregular flat on the NAS/NDX. Indeed, the Zig-Zag was my least favorite option because there are now two different types of corrections ongoing, which is very odd, but what I prefer is not necessarily what the market gives. This is also why trying to trade based on wave counts only does NOT work. EWT should only be used to gauge where the markets are and what to possible expect next. What you need to trade with, instead, is a system that reduces all these possibilities into only two signals: and entry and exit signal. This is also why stops were suggested on trade/close below the indices 50d and 20d SMAs already two weeks ago, and none of you should therefore have been caught on the wrong side the last few days because if you d adhered to the stops you would have been stopped out last Monday already. Downside targets for the S&P range from SPX2565 to SPX2450. It can even drop to SPX2340-SPX2215, but I find that for now highly unlikely. The sweet spot for this c-wave down is SPX2510-2450. Downside targets for the NAS range $6825 to $6390. It can even drop to $6205, but I find that for now highly unlikely. The sweet spot for this c-wave down is $6755-6390. Downside targets for the DJIA range from $23350 to $22500. The sweet spot for this c-wave down is $22875-22500. How to trade this? Already two weeks ago, and restated last week keep stops at a close below the 50d SMA and 20d SMAs for the S&P and NAS/NDX. Hence, everybody should have been stopped out on Monday. Wait to go long until market gives signal, as aforementioned price target ranges are still too big to allow for a low risk entry. No need to front run. There s still PLENTY of upside left (see road map below) SPX3000-3200 Major-5 SPX2872 Major-3 SPX2802 Intermediate-b? Minor-5 SPX2544 You are here Intermediate-a? SPX2533 Major-4? SPX2510-2450? 1 P a g e
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Elliot Wave Updates Last week I had the i, ii, 1, 2, i, ii, impulse as preferred until proven otherwise: a trade below SPX2702. This week the market invalidated this count quickly and we are now down to only one EWT-count: Zig-Zag on the S&P, DJIA; irregular flat on the NAS/NDX. Regarding the latter I can t say if it will be a expanded or running flat (c<a, or c>a; respectively). Last week I also showed the color-coded hourly S&P chart and stated as long as price remains above the upper support line (green area) the general [big picture] trend is up. If price moves below it (orange area) the trend becomes side-ways. If price drops below the lower support line (red area) the big picture trend is down.. This week, price closed in the orange zone: the Bulls are on watch. Support is at the lower dotted parallel uptrend line, then at the symmetry arrow, followed by the 2 nd uptrend line: SPX2565, SPX2540, SPX2460. The 1 st target is also where the green and grey arrows equal 1.618x the shorter arrows (see Fig. 1A), the 2 nd is close to a retest of the SPX2533 low, whereas the 3 rd target is where intermediate-c = a [2802 (2872-2533) = 2463]. See also the stars in Fig. 1B. Figure 1. S&P 1-min chart. A) c-wave underway. Next target SPX2565?! B) Price in warning zone. Support at SPX2565, SPX2540, SPX2460 (see stars) 3 P a g e
This week price only managed to close just above its 200d SMA (SPX2585). However, the A.I. is still on a sell since early last week, and the MACD as well. Here the simple c=a Zig-Zag correction is shown with SPX2450ish as the ideal target. Since all TIs are pointing down, we should expect lower price, but the RSI5 is now almost as oversold as at the end of the intermediate-ii correction in November 2016. Albeit oversold can always become more oversold, it appears the end of this wave down is closer than its beginning. The A.I. buy/sell indicator is now in <20 territory from where thus an ideal buy signal can occur. The prior 3 ideal buy signals all lead to huge gains, so we ll monitor it closely. Figure 2: S&P daily TI chart: price closed just above its 200d SMA, A.I. and MACD on a sell, but RSI5 very oversold 4 P a g e
The DJIA s daily chart remains on track for the inverted triangle symmetry target at ~$23350, with a possible extension lower to $22750-22500. Note the RSI5 is not yet as oversold as last February, and March/April last year, suggestion more downside is still available. In addition, the 200d SMA is still a bit below current levels ($23357), and price can thus still fall a bit lower. Price is at the lower Bollinger Band, and the bands are expanding: weakness. A trade (open and close) entirely outside the lower band (preferably on Monday) is the sign for a strong reversal the next day (turn around Tuesday?!). Note the difference between the (Red) intermediate-b highs between the DJIA and S&P. The former index has it late-february, whereas the latter has it mid-march (Fig 2.: SPX2802 high). This discrepancy between indices can be followed up on with the NAS (see next page). Figure 3: DJIA daily TI chart: price closed just above its 200d SMA, A.I. and MACD on a sell, but RSI5 very oversold 5 P a g e
Indeed, contrary to the S&P and DJIA, the NAS (and NDX) made new ATHs mid-march, whereas the S&P made a higher high and the DJIA made a lower high. What a mess between indices. Such inconsistencies are then often resolved at the terminal lows of corrections, when the markets get back in sync. This means -based upon the available price datathe NAS/NDX are most likely in an irregular flat major-4 correction: either expanded (common) or running (rare). See inserts figure 4. We can even have an expanding triangle (a,b,c,d,e) upon our hands, with wave-c now underway, but that s speculative for now; just keep it in mind. Of note: major-3 lasted 47 days, while the current correction has now lasted 39 days. All corrections in between were 19 days. Thus, based upon time symmetry major-4 it is. Does it mean it will take exactly 47 days? Possible yes. Price targets for the NAS are the c=a extension at ~$6755, the 200d SMA now at $6725, and the 38.2% / 1.382x extension at around $6400 (-/-10). Figure 5. NAS daily charts. Likely expanded flat underway. TIs all on sell, RIS5 not yet at extreme lows. B B A Expanded flat C A C Running flat 6 P a g e
The weekly S&P chart is still inside the uptrend channel, but given that all TIs are now pointing down, I expect price to break below the lower red uptrend line. The blue arrows show symmetry (similar length in upside breakout out of the channel for a breakdown out of the channel) targets SPX2465ish. This coincides with the c=a target (shortest black dotted arrow, the 38.2% retrace of the entire uptrend off the SPX1810 low made February 2016, and the orange uptrend line off that same low. Note the weekly SMAs are still bullishly aligned ( 20w>50w>100w >150w> 200w), and all are pointing up, but price close below the 20w SMA. Hence, the uptrend is deteriorating. The weekly A.I. gave a sell buy, and the MACD remains on a sell: expect more downside. Hence, the weekly chart strongly suggest to expect more downside going forward. Figure 6. S&P weekly TI chart: still long term bullish, but Technical Indicators now signal further downside first. 7 P a g e
Market breadth, Simple Moving Averages Charts and Volatility/Sentiment The SPXSI (McClellan Oscillator [MO] derived Summation Index for the S&P500) turned to a sell last week, and the SPXMO ended the week at -107. Down 109p compared to last Friday s close! Except for the NASI, all daily MIs are now back to sell. The extremely low weekly-close for several MOs has only occurred nine times prior since the March 2009 low for the SPX and 3 times for the NDX (see my tweet here) in its 20 years of existence; and very often mean we can expect a lower price low after some sideways/up price action first, followed by a multi-month rally. Figure 7. A) The SPXSI on a sell. B) Extremely low MO readings often lead to bounce, lower low, than rally. A B 8 P a g e
Another way of looking at breadth is assessing the daily and weekly cumulative A/D lines. The weekly A/D line is still above its moving averages and has not the same set up as in 2015. Rather the opposite: back then price made higher highs and the weekly A/D made lower lows: negative divergence. Now the A/D line made a similar high, but price made a lower high. This suggests we should not expect a repeat of 2015/2016. The VIX traded entirely above its upper Bollinger Band line, and we can start to look for the sell the VIX, buy the SPX signal. In addition, the Fear/Greed Index is now as low as it can get (7 on a scale from 0 to 100) and has been extremely low over the past month, while the CPCE registered a 0.76 reading on Friday. The latter is not extreme yet, but overall one can conclude that fear is becoming too high, which is a contrarian signal. Figure 8. A) Weekly A/D line. B) VIX traded entirely outside its upper Bollinger Band. 9 P a g e
The Simple Moving Averages (SMAs) trend-following charts show the short-term chart is still mostly bearish as it is now at around 20% Bullish. The long-term chart is still 100% Bullish, but the SMAs have mostly turned flat. Thus, the long-term trend remains up, and but is now starting to slow down, but there s no signs of a Bear market yet at all (see my tweet here). Figure 9. Short term Simple Moving Averages: 20% Bullish. Long Term Simple Moving Averages: 100% Bullish. Copyright Intelligent Investing, LLC. May not be copied and/or distributed without permission. www.investingintelligent.com Copyright Intelligent Investing, LLC. May not be copied and/or distributed without permission. www.investingintelligent.com 10 P a g e
Fib-based Turn Dates & Bradley Turn Dates My Fib-based Turn Date of March 21 nailed it, which aligned exactly with the FED announcement rate-hike (I originally thought it was March 22, my apologies). The next Bradley turn date is on Tuesday March 27, and my larger-cycle Fibbased turn date is the day before: March 26 (not shown). Since markets don t bottom on Friday s we should expect a turnaround Tuesday IMHO. Figure 10. Fib-based turn dates. 2018, Intelligent Investing, LLC. This copyrighted weekly periodical is published on non-stock market trading weekend 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 my 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 information about managed accounts, program positions and other information is not intended as any type of recommendation, nor solicitation. For more information, contact intelligent investing at intelligent_investing@yahoo.com. I reserve the right to refuse service to anyone for any reason. 11 P a g e