Friday, July 19, 2013

MTU Weekly Ed. - A look at NDX (7/19/13)

Short term update on SP500
SP500 squeezed out a new all-time high this past week to 1693.12 which is 5 index points above the May high of 1687.18. Recent price actions continue to support a wave five advance since the June low (see prior weekend commentaries). Our short term wave count places the current high at wave [iii] (Chart 1, green), with wave [v] (Chart 1, red) as an alternative. In addition, the advance in SP500 over the past week is likely an expanding ending diagonal which suggests a swift and likely deep retrace for wave [iv].

A look at NDX
The following analysis assumes that the bear market dating back to the Y2K peak in NDX is still in progress.  The analysis is motivated by the observation that wave structures of the proposed counter-trend rebound are largely complete on the monthly, weekly and daily scale.

the larger structure (monthly and week charts)
The monthly chart of NDX (Chart 2) shows the larger degree wave structure since the Y2K high. Following a crash into the 2002 low, a three wave (zigzag- or flat-like structure) counter-trend rebound has been developing.  [Note that the bullish alternative count labels the 2008 low as the prior bear market low.]

Wave (5) of [Y]b started at the 2010 low.  As the weekly chart (Chart 3) shows, NDX is likely in wave 5 of (5).

final touches (daily chart)

Chart 4 counts the proposed wave 5 of (5) on the daily scale, in two ways.

The red count is a regular five-wave structure, with the top potentially already in.  If so, the two recent gaps in July, one upward and the other downward,  would be an obvious reversal pattern in hindsight.

The blue count is an ending diagonal triangle.  This scenario could accommodate one more overthrow, probably following a retrace first.