Technicals

NASDAQ At Trendline Support, But Downside Risks Remain

As is often the case in Elliott, the picture is becoming much clearer as the rally has matured and nears its end.  The advance from the March low is a complex W-X-Y (a-b-c-x-a-b-c) rally.  The Dow has actually satisfied minimum expectations for the rally by exceeding 9918 (wave iii of c) so a reversal could occur at any time.  Wave c of y would equal 61.8% of wave a of y at 9947.  Momentum is as one would expect at an important top with RSI failing to confirm the new price high.

The Dow resumed its march toward a test of trendline support near 9,630, where a hold may lead to a re-test of 10,000. A break below exposes 9,430-10/2 low.

The S&P is in the exact same position as the Dow. The analysis presented there applies here.

The S&P 500 is threatening to make a clean break below trendline support which would expose 978-8/17 low.
The possibility remains that the support level will hold which could lead the broader index to look to test 1,120-50.0% Fibo of 1,576-666.

The NASDAQ pattern is the same as the Dow and S&P patterns with one exception – this index has yet to exceed its September high.  It’s interesting that the NASDAQ is the weaker of the 3 indexes at this point since it is the one that has led the advance since March, retracing a larger percentage of its 2007-2009 decline.  It is possible that the divergence (new highs in Dow and S&P, not in NASDAQ) sets up a non-confirmation that results in a turn lower.  In Elliott terms, failure to exceed iii of c would constitute a truncation.

The NASDAQ could see short term trendline support today but the level appears weak and further losses could lead to a test of 1,929-8/17 low.