Technicals | Jul 25 2018
Bottom Line 24/07/18
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 7420 / 7320 / 6806 / 6630
Resistance Levels: 7868 (new highs)
Technical Discussion
'….. we continue to see price action evolving within a higher degree Wave-(4) …. yet what we don't know is whether this wave has now completed, or whether more depth is still going to be required. From a timing and price perspective, overall we still look short on both, so we are certainly open to lower levels being attained short to medium term.' We will talk more about this in our technical section below. Right at this juncture though price is continuing to hover around all time highs with last night's session dropping 0.6% at one stage before closing 0.3% higher with semiconductor and software stocks among the top performers. Interesting to note the low volume on the recent rise which always keeps us cautious, especially when combined with weaker breadth, with overall losers and winners on the Index pretty much even in last night's session. Lets take a closer look at the technicals.
Reasons to remain bullish longer term (caution short to medium term):
→ technology sector continues to be a secular growth story
→ inflationary pressures remain under watch with a Trump Administration
→ early 2018 dip was strong on high volume yet price remaining robust overall
→ Elliott Wave count remains bullish moving forward
'The typical 23.6% pullback at 6377 and the 38.2% target aligned to 5606 continue to be watched closely as part of a potential medium term higher degree unwinding.' Well we certainly haven't been granted the depth we would normally like see for the higher degree Wave-(4). And from a timing perspective the red annotation on our chart would be ideal for an intermediate Wave-4 yet not a higher degree Wave-(4). So for mine it leaves two options. Either the higher degree Wave-(4) is still playing out via an A-B-C flat or expanded flat, or the early April low point is actually only an intermediate Wave-4 low rather than higher degree. This latter line of thinking simply states that the move higher we are witnessing now is a Wave-5 of (3) which means once completed, a deeper multi month correction will be likely. Our preference though would be for the former to take shape as most of the work and pain would have already been done, with just one last dip needed to the downside to complete the move. It would then set the scene for another strong bullish move to commence later on in the year. Wave-(4)'s are often complex patterns so it is really no surprise that price action is creating some hesitation in our analysis at the moment.
Trading Strategy
Basis our preferred stance that is looking for one last dip to the downside, we have decided to stand aside here. The S&P 500 chart was a little more compelling from a pattern perspective, and thus far our first attempt to trade it long ended in a break even trade with our second attempt still active and presently sitting in some profits. Price action is hesitant though on the S&P 500 so we do continue to have a cautious approach to our trading right at this juncture.
Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).
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