Volatility Reports August 29 2022

August 28, 2022

Volatility Reports August 29 2022

Contrary Thinker’s headline two weeks back said something like “the bulls were getting ready for an island vacation.” Well, they got what they may not have expected (See Nasdaq chart.)

Either way I look at the market, from the ground up or from the top down, Dow & Co. does not look well. From an Elliott Wave point of view – the theory everyone loves to hate – the intraday bar on all the majors is a clear bearish pattern. A nominal five wave count, calling the larger trend lower.

I will let the coming issue of MarketMap discuss the time window to expect a change, the long 1,000-point decline on the down produced the most radical downside momentum. A situation is more typical of the middle of a move, not the end of one.

On the right-hand side are textbook examples of an Elliott wave count, pointing out that only one of the three motive waves can be extended, while the other two are similar in length. If we take EWT in isolation the suggestion is a 3rd wave extension is unfolding now and there should be immediate carry-over near the open in New York, or as soon as the overnight globex.

Volatility Model (the Technical Event Model TEM)

The four major cash indices shown here have near identical backgrounds working off an expected period of range expansion calls Technical Event #4. As a rule, it means “trade the break.” From left to right the Dow had a breakdown below intermediate Support, the S&P broke down below our smooth Bollinger Band, The Nasdaq Composite broke below its Short term (S-T) support zone and the Rusell’s moving averages touched off to hight light its reversal. In effect, the four indicators are inter-changeable last Friday and all gave the same message, sell on an S-T and Intermediate-term (I-T) basis.

TEM on the close is not near a new extreme suggesting a change of trend. P.S the blue highlight on the Nasdaq chart depicts a bearish island reversal.

Compounding the worries

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