On 05/16/23 the Nasdaq Composite(IXIC) momentum was bearish, and it appeared that an important top may have been made. Today the U.S. stock bulls blasted all three main stock indices higher. On the surface it looks like this could be the start of a sustained advance. An examination of the IXIC – Elliott wave pattern and its momentum suggests something different.
The IXIC continues to be the only one of he three main U.S. stock indices to make a new post October 2022 rally high. The daily IXIC chart courtesy of Trading View illustrates the “strongest” of the three main U.S stock indices.
The prior blog noted that the IXIC from the 04/25/23 bottom appeared to be forming an Elliott wave – Ending Diagonal Triangle (EDT). Also noted that this structure frequently has a throw over of the trendline connecting the termination points of the first and third waves of the EDT. Today 05/17/23 the throw over occurred. In standard Technical Analysis a throw over of the upper line of a wedge pattern is bullish. In Elliott wave analysis a throw over is the climax of an EDT. If an EDT has formed, the spike up on 05/17/23 could be quickly retraced on 05/18/23.
The 05/16/23 blog illustrated that the 15 – minute IXIC chart had bearish divergence on RSI and MACD. Those bearish divergence continued into 05/17/23. There are also bearish divergences on the daily time scale.
The next chart courtesy of Barchart.com illustrate the 52 – week Nasdaq highs ($MAHQ).
There’s a huge bearish divergence vs. the IXIC 02/02/23 peak. Additionally, there’s a second bearish divergence vs. the IXIC recent high on 05/10/23.
This is not the type of action you would expect if there was a sustained bull move underway.
Traders entered a 50% position on SPX – non leveraged inverse funds at the SPX 05/17/23 open. Hold the position.