Technicals

Dow Looking To Test Fibo Resistance, Is Retrace Ahead?

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.  Notice the broadening formation since August.  Broadening patterns almost always signal tops (called ending diagonals in Elliott terminology).  Levels to watch for resistance are 10365 and 10495 (100% extension).

The Dow continues to trade along trendline resistance which is steering the blue chip index toward a test of 10,581-61.8% Fibo of 13,136-6,469. We could see the technical level stall the current rally and lead to a retrace back toward support at 10,000.

The S&P is in a similar situation to the Dow.  The count from the March low is the same but the recent surge that propelled the Dow to a new high has yet to do the same for the S&P.  A broadening formation from the August low is evident here as well, which again does warn of a top.  A new high exposes 1110.30 (top of gap from October 2008 in December contract), then 1134 and 1159 (100% extension) in the index.

The S&P 500 continues to consolidate below resistance at 1,120- 50.0% Fibo of 1,576- 666 opening the door for a test of trendline support near 1,060. A break above the Fibo level exposes 1,150.

The NASDAQ pattern is the same as the S&P pattern in that the index has yet to make a new high.  The more volatile index also broke a support line and dropped below its October low (red line) – something that the other indexes failed to do.  Clearly, the technical situation for bulls is deteriorating.  A new high would expose 2341 (100% extension).

The NASDAQ has regained its footing and is looking to take another run at resistance found at former trendline support.  A test of short-term trendline support near 2,090 still remains a strong possibility but could come after a test of Fibo resistance at 2,251. We are also seeing a shorter term downward trending channel which could provide resistance today.