One Thing is Missing

This may be the most boring stock chart you may see. It is the ratio of NYSE Declining Stocks to NYSE Advancing Stocks. In following this ratio for years, a 4:1 to 9:1 ratio is typical of a downward impulse wave. (Similarly, the reverse is true for upward impulse waves: typically, 4:1 Adv/Dec to 9:1 Adv/Dec).

NYSE Dec/Adv - Daily - Tame

Meanwhile the area of 9:1 to 12:1 (or greater) is reserved for "kick-off" waves that start a down move or "climatic" waves that near the end of the move. What do we see? With the exception of the move to the June 22 low, there simply has not been either a "kick-off" or "climatic" wave registered in all the market's grinding in both directions. Yet when we look at the "cumulative" NYSE advance/decline line below, we see clear and continuing deterioration in market breadth.

NYSE Adv/Dec Cumulative - Daily - Lower Lows

In fact, the March 2023 low has recently been undercut and the 50-day SMA has a bear cross under the 200-day SMA. This is another factor tending to rule out the immediate upward resumption of a bull move as many are hoping for. Rather, it begs the question of whether the NYSE advance-decline line will put in a "kick-off" or at least a "climax" move lower, with the signature of the 9:1 to 12:1 ratio of declining stocks over advancing stocks.

Again, for how much the A/D line has fallen already, such a move seems eerily absent. Thus, if this Monday or Tuesday should be an overnight gap lower, one would want to watch to see the level of the declines / advances and see if it is maintained throughout the day.

For those looking for a bottom in this area, here are some items in favor of that, and some items against that. Refer to the chart, below.

Factors For:

1. Price has closed outside the lower band for two days in a row. This lowers the odds to somewhat around the 3 - 5% that the next close will be below the band. Definitely not impossible - just lower odds.
2. There is a way to count "five-waves-down" from the 12 Oct high. So, a rebound wave could occur. But - as we have warned previously - extensions of a fifth wave are possible.

Factors Against:

1. The daily slow stochastic (regular calculation) has just embedded. According to Ira's work, it is one of the most powerful signals in all of technical analysis.
2. There is no reversal candle yet at the bottom of the move. There is not a shooting star or a bullish engulfing - anything that would signal reversal.
3. Price remains below the 18-day SMA, so the daily bias remains lower.

The message of this post is that we could soon be entering the center of a third wave with a gap down move. Such a move might 'also' be the third wave of a fifth wave of a diagonal - but is not yet required to be. One at least has to be aware of this real possibility. I hope to say more on the Elliott Wave count tomorrow.

Have an excellent rest of the weekend.

TraderJoe