JT, Tonite's Growler..
The [Dow Jones Industrial Average] traced out five waves down from yesterday's 10698 intraday high. Our chart shows this clear pattern. This impulsive sell-off is likely subwave one of the next leg down in wave 3 (which started at the 11035 high of Feb. 6). This afternoon's late rally carried to a perfect 38% retracement of the preceding impulse wave. A break of today's 10424 intraday low should announce that the next leg down is underway, toward support of 9950-10180. Beneath that it's on to the 9655 low of October 18, and likely below. If the index decides to undergo a more complex upward correction tomorrow before breaking down, higher resistance is 10561-10593. Key resistance is yesterday's 10698 high. As long as it remains intact, the immediate trend is down and we would view any near-term strength as an opportunity to position for further selling to come. If prices push above this high (10698), then the impulsive decline to today's low was wave 'c' of a flat correction (the top alternate count) and prices are pushing toward 10750-10875 before topping. So it's pretty clear cut. The pattern indicates the Dow is in an immediate bear trend, with key resistance at yesterday's 10698 high.
A break of today's low would not necessarily mean that the 10-week cycle had disappeared. Instead, February 23 could represent the nominal cycle low, with the price low coming later this week or in our next Fibonacci turn window of March 7-12. The other possibility is that the 3.25-year cycle is indeed active and is coming into its trough. In this case, the stock market should experience a very steep decline, commensurate with a 3.25 year bottom. The previous cycle trough was in October 1997, when the Dow fell 1094 intraday points (13.5%) in 5 trading days. Thus, one could reasonably conclude that IF the 3.25-year cycle is active and about to bottom, the next down leg in the Dow should draw prices well below 9655, the October 18 low (at least intraday).
In the [March S&P 500], here too the index traced out a small-degree five wave decline from yesterday's high of 1277 (1272.76 in cash). As in the Dow, this decline is subwave one of the next leg down toward our downside support targets, or it is wave 'c' of an expanded flat correction. The key resistance level is yesterday's highs. As long as they remain intact, this impulse pattern tells us we should be bearish. A break of yesterday's highs indicates that another five-wave advance is unfolding, likely into our next turn window of March 7-12. As we mentioned in our section on the Dow, a break of the February 23 low would place the S&P in sync with the NASDAQ. It would open the door wide for a sell-off toward our first support of 1168-1175, basis the weekly continuation contract (1163-1185 in the cash index). So the near-term parameters are also crystal clear in the S&P. The bears control the market against yesterday's highs, which are key resistance. The next leg down should carry into our turn window in March. Any break of yesterday's highs means that instead the S&P was rallying into the turn window and then reversing thereafter.
Today the [NASDAQ] indexes broke below their February 23 lows, a bearish sign. I now count seven waves down from the January 24 highs, which means that the OTC indexes need to do at least one more up-down sequence to a new low to get an impulse wave. The other possibility is that today's new low could be a small-degree 'b' wave of an expanded flat correction. But as long as Monday's highs remain intact, we will stick with the immediate downtrend and look for further selling pressure ahead. Monday's highs are 2310 in the Composite, 2104 in the 100 cash, 2115 in the futures and 52.60 in the Q's. With today's fall to a new low, it is possible we will see the long-awaited capitulation stage in the NASDAQ's decline. This is where everyone, including the public that has been holding on, throws up their hands and says, "get me out!" The next support in the Composite is 2078, then 1965 and beneath that, the October 1998 low of 1357. The next support in the March contract is 1606-1696. In the Q's it is 37.40-41.67. So unless the NASDAQ is able to recover and push back above Monday's highs, it could get nasty in the coming week or so.
The [XAU] pulled back today in a fourth wave, in line with our near-term outlook. Once this decline is complete, another up leg should carry the index above yesterday's 54.30 high to complete a five-wave rally from 45.64 (Feb. 15). This next leg higher holds the potential to finish the entire a-b-c corrective rally from the October 25 low of 41.61, so protective stops should be judiciously trailed beneath bullish positions. Prices have no business being below 49.33 Fibonacci support. A close below this support would suggest that a top may already be in place. Wavers, we turned bullish the XAU at 49.75 (Feb. 23). Tonight we are adjusting our protective sell stop to 49.00. On any rally back above 54.30, we will raise our stop to 52.75.
>><< |
