Thank You DJIA

Editor’s Note: We just finished a glossary that will be included in our new website. It does not pretend to be all inclusive. However, we invite readers to offer technical analysis terms that they would like to see included. Total volume was about 7% below Wednesday’s level.

On Thursday, the S&P 500 suffered its largest decline since early July – and its six in seven sessions – with a loss of 2.6%. Breadth and volume ratios were so negatively lopsided that it was a 9:1 day.

In yesterday’s post we resolved a conflict between the hourly charts of the DJIA and S&P by effectively resolving the conflict in favor of the DJIA, suggesting that the S&P may still need to undercut the 9/25 low with a “C” wave to bring it in line with the DJIA. Thursday’s sell-off did allow the S&P to “catch up” by carrying the index below the 9/25 low and locking in the rally from the 9/2 low as a complete pattern.

The hourly chart suggests that the decline from the 9/23 high is corrective, but we will wait for the daily chart to confirm. That said, the post-July uptrend line has been violated and deteriorating near term momentum is still on the overbought side of neutral (even though the daily Coppock Curve has a bearish bias for 23 of the 24 industry groups have). So, still lower lows are likely. The index is probing the 1036-1015 support range, but it will still take a decline through 992-991 to lock in the July-September rally as a complete Elliott Wave pattern. The July low (869) continues to be tactical support. First resistance has been lowered slightly to 1070-1080. Second resistance is 1121-1156.

For the record, we do not consider this decline to be the beginning of a major decline. We continiue to believe that near to medium term decline are corrections within, but not reversals of, the post-March bear market rally.

10-Year Yields


While the S&P was under pressure, so were 10-year yields. We have long focused on 3.30%-3.29% as an important support point and suggested that the decline from the August highs should at least challenge 3.17% (a 38.2% retracement of the December-August rally). On Thursday, 3.29% was violated and – almost in an instant – accelerated to 3.19%. The 3.17%-3.11% range is now support. Prior support at 3.30%-3.29% is now important resistance. We continue to respect the possibility that the December low is an historic benchmark.