Wednesday, June 14, 2006

Secondary indicators

Worrying negative divergences are taking shape in some of the tech supporting indicators. Leading the decline are new lows in the indicator measuring the number of NASDAQ stocks over the 50-day MA - but no new reaction lows in the parent NASDAQ index.

There is a Custer's last stand for the Bullish Percent Index and the index measuring the Number of Stocks over the 200-day MA; if support fails in these indicators it could lead to rapid declines and a potential retest of 1,100 lows.

As for guesstimating what might happen in the future; if the NASDAQ repeats along the lines of the Nikkei index it could mean another 4 years of sideways action with support kicking in around 1,898, before a significant rally drives the market to 4,280 resistance. This would also mean no test of 1,100, with reaction lows in 2004 or 2005 acting as key support.

Roman numerals in the figure below do not represent Elliot Wave counts.

Time will tell.