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US Markets Technical Outlook

Index Strat Risk Target
DJIA Short 11,867 8,700
NASDAQ Short 1,313 980
S&P500 Short 2,473 1,650



Despite the rally late last week, we stand by the longer term bearish forecast. “The Dow has entered the most bearish part of the pattern to date. Recent commentary mentioned that “the drop from 13136.69 is viewed as wave i of 3 within the drop from the top. In other words, a break of the July low will signal that a 3rd wave, at multiple degrees of trend, is underway.” We got that break today as price closed below the July low. Wave iii of 3 is underway and price should reach Fibonacci extensions at 9,656 and 8,680 within the next several weeks (if not sooner).”



The Dow found resistance near the 50.0% Fib level of 11,790- 10,459, and could look to head lower continuing the longer term downward trend. A re-test of the Sep 18 low of 10,459 could be in store and may be the next level of significant support.



There is no change to the longer term bearish bias in the S&P 500. “The index has entered the most bearish part of the pattern since the decline began in October 2007. Wave iii of 3 is underway. 978-999 is a Fibonacci extension confluence that should be reached in the next several weeks (if not sooner).”



The S&P 500 could look to turn lower after finding resistance at the 50.0% Fibo extension of the 1,287-1,133 decline. A break below the 38.2% Fibo level could lead to a retest of the September 18th low of 1,133.



The NASDAQ decline has accelerated and there is no support until a Fibonacci measurement at 1,899. That level should only be temporary support as a larger degree target is at 1,613.



The Nasdaq continued to find support at the July 15 low of 2,167. A break of this level could see the index look to test the September 18 low of 2,084.


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