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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 683.17

+0.2%

Jan 2 4:00 PM EST

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To: pater tenebrarum who wrote (46348)	4/14/2000 9:47:00 PM
From: Square_Dealings	Read Replies (1) of 99985

Looking in the Abyss - using fibonacci/wave theories <<one other thing worth noting is that the Nasdaq chart continues to remind me of the Nikkei's chart before and during its collapse. in wave theory terms it looks fatally like we are in wave 3 of 1 down. >> heinz It does look like we are in wave 3 (or maybe completed today) to me as well. Using the theories from this book i use, "Fibonacci Applications and Strategies for Traders, Robert Fischer" it combines elliot wave theory and fibonacci ratios. I highly recommend it for anyone thats interested in mathematical study as applied to the markets. Anyway its difficult to see the waves until they are fully developed but here's my take on things. 1. Assuming that wave one was from the second failed top on the naz at 5078 to last Tuesdays low of 3652. Then the target for the completion of this cycle is 1344. This isn't a misprint!! Which also happens to be close to the low of the Naz in 1998 (1357). So if this is a bear market developing the bigger picture could one day look like a double bottom on the Naz around 1350 or so. Kind of scary to say the least. 2. Now we are trying to guess where the wave 4 mini rally will be starting from so everyone can jump in for the last big hurrah. This is a guess but I think that we could have seen the bottom of wave 3 today at 3265, which looks like the 20 period moving average on the monthly chart. It kind of makes sense to me because after having broke all the previous support levels, this is the only thing that the Naz could find to hang on to for the time being. Notice that on the weekly chart it looks close enough to the 50 period moving average. siliconinvestor.com Also it makes sense to me from a contrarian point of view enough people are expecting a Black Monday scenario that it wont happen. So maybe we could get would be a retest of today's low on Monday and from there begin the wave 4 retracement. 3. I wouldnt expect that the retracement would be more than 38% of the recent decline because this market is unbelievably weak, and we know from this weeks action and failed supports that its going lower ultimately. But a 38% retracement from today's low would give and upside target of 3953. 3953 would also be a logical place to run out of gas on the next rally because it looks like the top of the downward trend channel that is now set up by the last two failed rallies ( the second top and last weeks failed rally). 4. The only thing that doesn't fit so far from the scenario is that wave 3 magitude should be greater than wave 1 magnitude according to elliot. So possibly we could go a bit lower to complete wave 3, around 2900. If that is the case we could do a 38% retrace from there and still run out of gas around 3727, probably still inside that falling trend channel by the time that happens. In either case I want to be out of the way, or short if any rallies run out of steam at 3727 - 3953. Its all a guess but thats all we can do based on this weeks significant developments. Mike

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