Squawk Morning Briefing: Watching Grid Levels

We have another day where the short-term picture has failed to clarify. Keeping track of FibGrid levels can help us track where we are until we can identify a likely wave count. FibGrid levels have their origin in Elliott waves and by choosing to stay firmly above or below a particular support/resistance level price can help show its intent.

To make this concrete with examples, we can look at the YM snow line at 12,511. If the Dow futures build support above this level then it suggests that any correction may be a larger degree move and might not be finished. If the level continues to serve as resistance then it sets the stage for a move down. There isn’t a clear support level that would cleanly tell us that we’re done correcting, but an impulsive-looking decline from nearby snow line resistance would be strongly suggestive.

The S&P 500 has a snow line above and two sky lines below that help benchmark progress either up or down and these may be the best guides to interpret short-term moves. The DJIA also has a nearby levels: a sky line that acted as resistance yesterday and a snow line below that supported the market against declines the past two days.

The DJIA levels highlight the value of this strategy since it highlighted the important levels to watch and they have defined the range this week. Unfortunately, at the moment all it tells us is that if we break out of this week’s range in either direction to look for likely continuation. But by adding the S&P into the mix we see that the grid establishes roughly the same range but then also gives us another sky line to potentially serve as an early warning on a decline.

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Elliott Squawk delivers thorough market preparation every morning in time to take action during the trading day. By combining up-to-the-minute futures activity with traditional end-of-day analysis from cash indices, you receive analysis based on the latest conditions as the trading day sets to open. Each issue of Elliott Squawk goes beyond traditional Elliott Wave analysis because we recognize that trading Elliott Waves is much more than just looking at the most likely current count. Squawk will prepare traders to assess the market action as it unfolds by answering questions that any Elliott Wave trader should consider:

• What price levels and wave motions would confirm an expected move?
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• What intermarket movements merit special attention to understand likely price trends?

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