The charts below reflect my current technical view of the U.S. stock market. A much more expanded analysis will be published in the coming few days.
Chart 1. Philly Semiconductor Index - On the heels of the summer 2015 crash, and again in February 2016, this forward-looking indicator bounced off the intersection of the triangle's b-d line and support/resistance zone #1 (i.e., the top of the triangle denoted by the a-c-e line).
Chart 2. S&P 500 - On both occasions, a double-bottom pattern set the stage for a tradable recovery. The rally ensuing the August/September 2015 double bottom gave way to a distribution phase that unfolded as a "3 Falling Peaks" pattern. As for the current rally that sprung out of the January/February double bottom, exhaustion signs leading to a distribution phase have yet to be registered, even though "selling pressure" is being exerted at a critical line denoted in chart #3 below.
Chart 3. S&P 500 - The January high ran into the intersection of the purple line and the underside of our long-term pitchfork. This pitchfork is rooted at the 2010 "Flash Crash" low and anchored at the 2011 high and low, respectively. Likewise, last week's rally fizzled out at point c, making the pitchfork all the more relevant insofar our ongoing technical analysis. The most likely interpretation of the a-b-c pattern is an Elliot expanded flat, i.e., a sideways pattern confining the index to a particular price range. Should price manage to move back inside the channel, chart #4 below suggests the next resistance milestone.
Chart 4. S&P 500 - 'Wave a' retraced exactly 50% of the down leg that began on 12/29/2015. If 'wave c' is to exhaust soon, the 61.8% retracement would be the closest resistance milestone.
Chart 5. Russell 2000 - Monday's late-day sell-off came on the heels of this index reaching a down-sloping 50-dma, as well as a TD Sell Setup registered two sessions earlier.
Chart 6. Russell 2000 - There are two interpretations for this index's wave structure off the high. The first one is depicted in this chart, suggesting a double zigzag (W-X-Y) came to a completion at January's low. Should this interpretation prove valid (in hindsight), the subsequent pattern, including the marginal new low registered in February, is a countertrend wave formation (sideways, relief phase) referred to as an Expanded Flat. Thus, a second (and FINAL) 'wave X' will soon give way to a third and final zigzag, namely, 'wave Z'. The other interpretation is depicted in the chart #7 below.
Chart 7. Russell 2000 - This interpretation is similar to the first one, except for the second zigzag ('wave Y'), which is assumed to have completed its 'wave a' at February's low and currently tracing out a relief rally in the form of 'wave b'. Once this relief phase exhausts, the next leg down should be commensurate with the last one, i.e., the one that began in earlier December 2015 and came to an end in February. Note that both interpretations, the one depicted here and the other in chart #6, foreshadow another down leg in the coming.
Chart 8. Dow Jones Transports - This index registered its top several months ahead of the summer 2015 crash, and upon simultaneously reaching the cup-and-handle's measured objective and the top of the channel established by the Andrews Pitchfork. By decisively taking out the 2008/2011 double top in early 2013, a Dow Theory bullish confirmation signal was triggered, ushering in the 'BTFD' period. In contrast, the advances achieved in 2015 across the various major indices were unconfirmed by the Transports, setting the stage for the summer 2015 crash. The tell-tale head-and shoulders depicted in blue top suggests a backtest of the cup rim is in store (i.e., the line drawn across the 2008/2011 highs). However, after closing the month of January below the blue neckline (and 50-month MA), the index managed to regroup and stage a recovery. Currently trading back in north territory, only a move back below the neckline would definitively signal a resumption of the downtrend.
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