Technically Swindelicious ~ The Risk Averse Alert

Wednesday, July 17, 2013

Technically Swindelicious

Let's return to an Elliott wave view applied to the NYSE Composite Index some weeks ago whose technical substantiation, most of all, made it compelling...

Five waves up from June 2012 bottom labeled above saw noteworthy technical strength coinciding with formation of wave iii of 3 last September (displaying typical 3rd wave "dynamism"), as well as typical technical deterioration, 4th wave versus 2nd, and 5th wave versus 3rd.  Following the wave v of 5 "channel throw-over" leading to May peak, the channel's upper parallel has come back in play and now $NYA is stalling as its bounce reaches right back up to it.

Certainly a decline sinking $NYA to within range of the 4th wave forming in the October-November 2012 period seems technically well-justified at this point. This represents more or less a minimal objective given a weakening technical setup--one likewise very well substantiating the above wave count off June 2012 bottom. Yet even this minimal objective presents something of a problem...

$NYA's uptrend line off March 2009 bottom would be broken should the index fall within range of its 4th wave of 5 waves up from June 2012 bottom. Not that this uptrend line break, in and of itself, should be regarded a big deal. However, the index's declining momentum registered at key peaks over the interim since March '09 might add negative weight to any upcoming, prospective break of the uptrend line. Thus, the added decline indicated above, suggesting a virtual retest of March '09 bottom over upcoming months.

The most critical line of support to be regarded in this prospective outlook connects 2010 and 2011 bottoms. Taking this line back to the 2008 period we might regard it something of a "do or die" marker. Another trip into the zone raising such imperative once again--exercising liquid swindle--very well could be in the making between now and early next year.

This "do or die" line finds commonality across all indexes. Its same, curious pertinence per the S&P 500 finds a precedent, too...

Now, here, a challenge of March '09 bottom might seem a stretch. Yet a decided break of the S&P 500's support at its 2010 and 2011 bottoms still might find similarity to its January 2008 break below a more positively inclined recovery line of support that formed off the S&P 500's March 2003 bottom.

A sub-1000 S&P 500 still appears a reasonable possibility. Subsequently, 3-5 years spent challenging upside resistance (that is today's support at 2010-2011 bottoms) might develop, while, ultimately, a trip lower to levels last seen in the 1987-1994 period still remains on the radar. This target could be reached sooner rather than later, no doubt. For now, let's assume later. Well enough a significant break over coming months is a technically well-substantiated possibility.

Again, weekly momentum (see MACD, bottom panel) has only begun to turn over,so underlying power (if that's what we might call it) to momentarily keep the market levitated here comes as no surprise, really. All the same, prospective attack on the euro-zone proceeds apace...

Word on the Street
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