NASDAQ and DJIA update: What the lower low in November and Bollinger Bands are telling us.

This is an excerpt of this week’s premium member weekly market digest.

Many Elliot Wave services seem to be grappling with the fact the S&P500 and DJIA didn’t make lower lows in November compared to October, and therefore treat last week’s low as a smaller degree (in my case minor) b-wave in a larger ongoing (intermediate) b-wave. However, TECH (NAS, NDX) made lower lows in November and clearly satisfies the three-waves-down pattern for major-a. See Figure 1 below

Figure 1. NAS daily chart. Made lower low in November telling us major-a is complete and current price action is most likely not part of on ongoing intermediate-b wave. Red dotted arrows show projected path going forward.

COMPQ daily TI

Since the S&P500 is a hybrid index, stuck between the DJIA and NAS, we can learn from both and apply that knowledge to the S&P. Remember that in early April the opposite happened: DJIA made a (marginally) lower low below its February lows, while the NAS didn’t. See Figure 2 below. After, all indices re-aligned. I apply this knowledge to today’s charts as well; just in reverse. This tells us the recent November low was most likely the major-a low and not still part of major-a.

Figure 2. DJIA daily chart. Made a lower low in April compared to February telling us correction complete. Grey arrow shows projected move based on prior similar “lower Bollinger Band to Upper Bollinger Band moves (Blue arrows)”

INDU daily TI

From the DJIA’s daily chart we can also learn price found support twice at around the lower Bollinger Band (BB) in November and October, and every time this “lower BB support” happens price then often moves to the upper BB (Blue arrows). We can call this Bollinger Band Ping-Pong 😉 For the DJIA a move and close above the 50 day Simple Moving Average opens indeed the door to the upper BB at around $26,300.

Thus,  based on a IMHO more correct analogy between indices, and the BB study, I foresee therefore there’s still room for more upside.

Arnout, Ph.D.

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Founder and President Intelligent Investing, LLC

Vice President NorthPost Partners, LP

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