NYA recently reached an important turning point.  More than any other index, it suggests that a significant downturn has arrived.  The only hitch?  Its Harmonic Patterns have typically been overruled by SPX.

In April 2010, NYA was still 3.4% away from its 61.8% Fib level when SPX, 0.7% away from its 61.8% retracement, reversed sharply.  The Gartley Pattern that SPX missed by only 0.7% in May 2011?  NYA was still a good 3.7% away (though both completed a well-formed Crab Pattern set up by the 2010 drop.)

On May 22, NYA reached several important Harmonic Pattern targets, completing a Bat Pattern and three Crab Patterns.

• the .886 retracement of the 2007-2009 crash
• the 1.618 of the Jul – Oct 2011 correction
• the 2.618 of the Sep – Nov 2012 correction
• the 2.24 of the Apr – June 2012 correction

Recall that when SPX hit its .886 retracement of the 2007-09 crash last September, it dropped almost 9% from 1474 to 1343.  The next lower major Fib level had been the .786 at 1381.  What can we expect from NYA, especially when the investing world expects that the Bernanke put will prevent a correction of more than a few percent?

continued for members…

In this case, the .786 Fib is at 9059.21, which would be a 6.4% drop.  Note that 9059 would require the rising purple channel to break down (the bottom is at 9137ish.)

If the .786 Fib doesn’t hold, the next serious support is the white channel .25 line and a TL off the recent lows currently around 8600 — a more serious 11% decline.  The red channel midline is closer to 8500.

I suspect that either the yellow TL off the recent lows or the midline of the large red channel will ultimately decide things.  They’re currently at 8600 and 8500 respectively.

While that seems a bit extreme, the daily RSI suggests it’s not as outlandish as it sounds.

GLTA.