Tuesday, August 21, 2012

SPX, Nasdaq, and NYA Updates: NYA Faces Intermediate Test

There's really not much to add to the outlook since yesterday, so this update is going to be on the short side (no pun intended).  Unfortunately, I just can't invest 20 hours into writing and charting every single day -- if for no other reason than the fact that, after a mega-weekend-update like yesterday's, I simply run out of new and interesting stuff to talk about.  This update builds upon that, so for more perspective on the intermediate term, please refer to yesterday's article.

One chart I'd like to revisit briefly is NYSE Composite (NYA) daily chart.  This is a very broad-based index which is almost never mentioned by the mainstream media -- NYA covers all the common stock in the NYSE, and I like to track it because it's a much better representation of the total market than, say, the Dow Jones Industrial Average (INDU) which consists of only 30 large-cap stocks.  NYA consists of thousands -- and it has yet to best the highs of 2011. 

I called attention to this chart on August 13, and suggested at that time that higher prices would fit the pattern over the short term -- and that's what's happened. 

This pattern has a very triangular appearance, which sometimes suggests the first breakout will be a fake-out move that reverses.  In any case, that's a bit ahead of the game -- currently NYA is approaching the blue intermediate down-sloping trendline, and thus is now facing a test of intermediate resistance.

Nasdaq has reached the targets I mentioned at the beginning of August, but still looks like it has some more upside left.  The final sentence ("the next target is from here to 3100") was added today.

A very short-term chart of the S&P 500 (SPX) also suggests the index will probably take a stab at least somewhat higher, and I have drawn-in a speculative short-term ending diagonal pattern (it's speculative because there's yet not enough price info since the 1412 swing low to make a more definite call). 

My second preferred option, only barely shown on this chart (in black), is the potential that this is a bullish nest of 1's and 2's, which would lead the rally into the 1425-1430 zone.  Unfortunately, there's really no way to tell the two patterns apart until the market starts moving again, so I've outlined some levels to watch.  Both potentials suggest higher prices immediately over the short-term, but the larger wave count suggests this should be the final upthrust.  It goes without saying that bulls do need to clear the 1418.71 level first.

In conclusion, the market has reached all the targets discussed earlier this month, but the short-term direction still appears to be "up."  The intermediate interpretation I'm currently favoring has the patterns quite close to reaching culmination, but please remain cognizant that I'm going out on an analytical limb here and trying to nail down an intermediate turn before even the slightest sign of a turn actually hits the tape.  This is pretty much the toughest job in market analysis, so I could well be wrong (or at least off by a few points).  Obviously, if the bulls instead stampede right over all the sell signals which have triggered recently, then all we can do is try to adjust accordingly.  Trade safe.
Reprinted by permission; copyright 2012 Minyanville Media, Inc.

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