This is an update to the July 8 Premium Member Weekly Digest.
4th waves tend to typically retrace 23.6 to 38.2% of the prior 3rd wave. In this case intermediate-iv of intermediate-iii on the NDX, and these retrace levels correspond to $5600-$5414. It is impossible to know before hand which retrace level it will be eventually for all of the 4th wave, so we’ll have to take it day by day. But, what we do know is that price stalled at the 23.6% after a typical corrective a,b,c pattern where wave-c equaled the length of wave-a, measured from the b-wave high. Classic. Then positive divergence started to build on the RSI5 indicator (green arrow); and the A.I. buy/sell indicator gave an almost ideal buy signal (the last was early-November last year the day after the US election results when this Trump-Bull kicked in for real). Thus Friday’s signal was very good, and our premium members are profiting handsomely from it. In addition, both the A.I. and MACD are turning back up from oversold levels (dotted blue horizontal lines) from which important lows have been formed previously during this Bull.
Question now is thus if intermediate-iv is complete and we can expect new ATHs to ideally the 2.000x Fib extension at around $6104, or if this 4th wave will become more complex and only a b-wave is underway to ideally around $5900, before a vicious c-wave will take price down to the 38.2% retrace. It’s too early to tell, but the close back above the 20d SMA is a good start for the bulls. As all TIs are pointing back up and the A.I. remains on full-buy, looking up -even to $5900- is the most prudent market view until proven otherwise.
Please note that a move to new ATHs due to the possible 5th wave now underway will most likely also push the tech heavy S&P500 to new ATHs. The bounce and then drop lower scenario, will have the S&P500 follow suit similarly. The two prevailing counts on the S&P500 are shown below: major-3 top in, vs minor-5 of intermediate-v of major 3 underway. For now we give the benefit of the doubt to the Bull-count until proven otherwise: break below SPX2404. Especially since the SPX2454 top fell short of the ideal SPX2485-2500 target zone for this larger wave-up. This target zone is based on multiple 3rd and 5th waves of different degrees that all coincide at around that level and for the market to be off by 30p is rather unheard off. But, if it is the top so be it: forecast, observe, adjust.