Technical Laboratory Update For The Week Of September 11, 2016

The narrowest sustained range in 100 years of DJIA history came to a dramatic end this week with a gut wrenching two plus percent decline thus trading the entire range in a single day.  As dramatic as the decline was, it is still well within the scope of reason for what we've been looking to transpire since the first of August once prime trading season got underway.

Range

DJIA Range

 

It was no surprise that VIX took off on Friday from its historically subdued levels and was one of the clues that was pointed out last month was a huge area of concern for any substantially bullish scenarios.  Historically, any trade below a 12 handle is typically met with a spike up to 17 at a minimum which was touched upon in the August 21 weekly update.

VIX

VIX

While the VIX chart got us in the ballpark of what to expect in the months ahead, the DJIA seasonality charts narrowed the time frame down substantial.  Simply by noting the presidential election year cycle and historical YoY weakness that coincides in the early stages of the month of September and runs typically into the first of October set the stage for what took place on Friday.

Seasonality Comparison

Seasonality Comparison

Lastly was the technical backdrop to lay this all upon with the preferred Elliott Wave path in magenta after we had tagged the 2191 symmetry target that was achieved back on the 15th of August.  There is no change in preferred path since we began outlining at the inception of the Technical Lab updates.  There are some caveats that need to be put into place especially considering how early we are in the seasonally weak period and how dramatic the initial drop was.   The 2110 to 2100 area will provide a great deal of clues as to whether we are going to continue the waterfall like decline down to the lower 'Expanded Flat Wave 2' range, or if we will find a bottom at the lower rising wedge/ending diagonal trend line.  Good luck this week and trade safe.

SPX

SPX

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