Sundays update from Ted:-
Right now it looks like the market is at a crossroads....and it's getting a little hairy.
From what it appears, the DOW is retracing it's move from around 9700 to 10300, and it needs to hold it's .618 fib retrace of 9926/9940. The move down from 10300 to around 9980 fits a zigzag pattern. Wave A down was 180 points down, 10298 to 10118, Wave B retraced about .618 to .78 of Wave A to about 10270, and Wave C has been exactly 1.618 X Wave A, 180 X 1.618 = 292 points to around 9980...but the problem is, the DOW closed at the bottom of the Wave C, which made me decide to go flat. Things are getting a bit shady. The question is, is the move down from 10300 to 9980 an A-B-C or a 1, 2, 3, 4, 5? If it turns into a 1, 2, 3, 4, 5, there might be more downside from here. Tomorrow the move down from 10270 to 9980 is going to retrace, which is, if it's a 1, 2, 3, 4, 5. .382 to 10091, or .500 to 10125. Tomorrow is VERY important, and if the DOW rallies, there MUST be a reversal candlestick formation, like a harami, hammer or engulfing line...any sell off tomorrow needs to be held in check, and in the next couple days, a close over 10177.86, from there the rally would resume. If the DOW rallies to those levels, but sells off and breaks 9926/9940 (.618 retrace), gets smacked by another wave of S & P Future contracts, and closes bad on large volume, this could be the start of a larger correction. I know the the PPT (Plunge Protection Team) uses S & P Futures contracts to manipulate the market up and down...was the PPT selling them to force a correction? Or were they selling them just to close them out. What's getting a little more shady is the fact that certain Fed governers were talking down the market last week, and if the PPT is reversing course on us, look out below. The Fed's been pumping up the market for months, but Greenspan himself implied another rate cut on Friday....if the main big cheese wants to continue pumping, than that pretty much negates the lower Fed governers' comments.
I'm getting a little cynical because of the action on Thursday....when the market drops on rumors of a large sell off of S & P Futures contracts, you have to be on edge.
Another reason why the DOW may be in the start of a larger correction, is the fact that wave 1's usually retrace about .618 of the move down. The move down on the DOW was from 11908 to 7926, and a .618 retrace is about 10386, and on Thursday, it retraced to around 10300. If this is the start of a larger correction, the retrace could take the DOW back to around 9113/8835 (.500/.618).
In order to negate this correction, the DJI needs to hold 9926/9940, and reverse on good volume over 10177, with a solidly bullish candlestick formation. Last Friday had a bearish engulfing candle on low volume, and there needs to be a solid hammer at support.
The NASDAQ chart is a bit different from the DOW....there's more bullish action on this index. The NASDAQ has been over the 200 day moving average for over a month, it's began to slope upward, and on Friday, for the first time since May 2000, the 50 day moving average crossed over the 200 day moving average. All confirmed bull markets
are above the 200 day MA, have an up sloping 200 day moving average, and a 50 day moving average that's above the 200 day MA. Back in October, the Wave 1 and Wave 2 from 1387 lasted 8 days, and so far the move from 1936 to 2099 and back down has been 8 days...if this was the wave 1 and wave 2 of wave 3 of 3, than the 9th day, Monday, should be the start of a sharp rally...1.618 X wave 1 to around 2251-2264.
The NASDAQ is retracing the move from 1918 to 2099, and tomorrow, like the DOW, is very important. It looks like the NASDAQ is going to retrace to around 1987 (.618 retrace of 1918 to 2099), or 2000 (.618 retrace of 1936 to 2088), and the wave count down is approximating those levels. I would need to see a strong bullish candlestick formation on the NASDAQ to get back in....like a piercing line, harami, hammer or engulfing line. The NASDAQ needs to hold 1987/2000 and in the next few days, 1955, or the NASDAQ may fall prey to the Wave 2 correction that the DOW may be about to experience. Basically, I'm not going to be doing anything until the end of the day on Monday. I'm gonna be watching the internals, volume, candlestick, and the 1987/2000 level.
If Monday turns into a bullish reversal day, than I'm entering the following positions.
I got NVDA at 62 in December, and last Thursday, sold it at 70.66, and got QLGC in Dec for around 45.23 (it's now 56.20+)
NVDA is in it's wave 4, retracing the move from 47.80 to 72.66. The wave 2 of wave 3 on NVDA was 6 days long, and on the 7th day it reversed. The Wave 4 had it's 6th day on Friday, and retraced to around .382 of the wave 3 move from 47.80 to 72.66 (.382 is 63.15, and the low on Friday was 62.81). If 62.81 was the bottom of Wave 4 on NVDA, than Wave 5 should be .618 X Wave 1 + Wave 3 = 19.97 to around 82-85. If I were to re-enter NVDA on Monday, it would have to be a bullish day overall, with a good candlestick. I'd enter around 62-63, and place a stop a 60. Usually Wave 4's don't retrace more than .500 of Wave 3, and .500 of Wave 3 is 60.53. With a stop at 59/60, and entry of around 62/63, upside potential is 20+ points, and downside protection, is 2-3 points.
QLGC in the past week has broken a new recovery high, and has shown really strong relative strength to the market. And on Friday, completed a very bullish morning star formation. If the market on Monday is a strong reversal day, than I'm entering QLGC with a stop at 53. The upside potential on QLGC this month is to around 65-67, which is pretty conservative believe it or not. I don't want to get everyone crazy greedy on QLGC, but in the past month, QLGC retraced .382 of it's move from 17.22 to 56.99 to 43, which means wave 1 could have been 17.22 to 56.99, Wave 2 was the .382 retrace to 43. Wave 2 lasted exactly .382 the amount of days Wave 1 lasted....plus the 200 day moving average on QLGC is sloping up, and has been for about 2-3 weeks, the MACD is spiking up, and money flow is sloping up. If Wave 1 was 17.22 to 56.99, about 40 points, than Wave 3 should be 1.618 X wave 1 = 40 X 1.618 = 64.72.
64.72 + 43 = 107/108. That sounds nuts to me, because there's a ton of overhead supply in the 65/67 range. Too sound more conservative, the level of 65/67 sounds more sane....but a clear break of 67/68, and there's a huge gap that's gotta fill to around 82-85, and another to 108-130.
BRCM, for what completely astonishes me, is in a bullish wave. Last week, BRCM mentioned that they were returning to profibility far far ahead of what analysts forecast, and even said they would be returning to their historic growth rates. This is what I heard, but the PE on this thing is infinite! Anyway, the momentum is strong, as BRCM broke a new recovery high, but at the 53 range, there was an ugly inverted hammer, and an evening star....could be a 5 of 5 at 53, but the action has looked pretty good...on a good Monday NASDAQ reversal day, I'd buy BRCM with a stop at 45/46. I don't like the fundamentals with the stock at all, but when the NASDAQ rallies, it rallies.
Other technicals:
Right now, we have bullish signals on the put/call ratio:
10 day moving average is around .68 and 21 day moving average is around .70.
Readings around .65/.70 are considered very bullish from a contrarion point of view.
The bears are using their only "hope" indicator, which is the VIX. The VIX , they say is complacent in the 23/25 range....well, sorry to pop their bubble, but in bull markets, the VIX can get lower and lower and lower. In 1995-1997, the VIX was trading between 5 and 17 and the DOW and NASDAQ exploded.
Investor sentiment readings are from the latest Barron's:
52% Bulls, 23% Bears.
I know the bears are harping on the 23% bears reading, but markets top at a reading of 65% or higher. In Jan 2001, it hit that level, and from that point, the market tanked.
The bears forgot to mention, that the other percentage calls for a correction. Shorts sure love to put a spin on everything to spew out, don't they.
But, for the first time in a long time, the boneheads at the Clown Free E-Wave Workspace are calling for a major rally this week, and have turned bullish. That kinda scares me a bit, but at the same time, makes me wonder...
Overall, this week is very very crucial....if the January plays out like October, than by late Jan/early Feb, the NASDAQ could at my intial bull market target of 2337. Wave would be 1936 to 2099, Wave 2, 2099 to 1987/2000, and Wave 3 1987/2000 to 2251/2264, Wave 4, 2150/2180, Wave 5, 2300/2337. That's IF all these scenarios play out.
But in the past, government manipulation, ala the PPT, and the Fed have screwed up wave counts. I hope this isn't happening.... If I was reading the Fed correctly, they might have been talking down the market, and that barrage of S & P Futures contracts on Thursday, has put me on the edge. The Fed needs to continue pumping juice in this market....what harm is there when there's NO INFLATION??
I'll be watching the Fed's action on Monday....are they going to inject a mega dose of repos on Monday? They refrained on Friday...
They might pump the futures up in the morning, if the liquidity pump continues...
Subject 51336
gem-x's incredibly accurate Elliott Wave forecasts
Mondays update ....
Another day, another bad candle on the COMP DOW and SPX...
Today, the 3 major indexes broke their .618 fibonacci retracement from their Dec lows to January highs, but the volume on the move down wasn't excessive...but the internals were a bit negative. Down volume swallowed up volume on all three indexes, and the a/d lines were pretty bad. All this carnage, and the VIX barely popped up to 25.03. Merrill was throwing everything into the dumpster...wonderful.
The next major and important level of support is the .78 fibonacci retracement. This level of retracement has in the past 3 months been the maximum amount before the market turned up in the past.
On the NASDAQ, the move from 1918 to to around 2002 in middle of December to late December was retraced to exactly .78 (1936.56)of that move, and rallied from that level to 2098+.
The levels to watch tomorrow and this week are 1955/1956 on the NASDAQ, 9820/9830 on the DOW and 1128/1130 on the SPX. There MUST be a bullish reversal candle at those levels, or we're going to test the December lows...
The big problem, is if we break the Dec lows on all three indexes...the rallies on all three to the January highs had divergences on the RSI, meaning all three indexes made new highs, but the RSI didn't confirm it with a new high of it's own.
All three indexes need to break out to new highs this month, with the RSI following it, or the the correction we've seen so far, is just the start of it.
The DOW retraced .618 of it's entire drop from 11908 to 7926, the NASDAQ .236 of it's move from 4252 to 1387, and the SPX .618 of it's drop from it's May 2001 high.
What gets to me is the move on the NASDAQ...I would hate to see the NASDAQ break down miserably....if it does, than the move from 1387 to 2099 would qualify as just a Wave 4 from the move down from 5133 in March 2000 to 1387 in Sept 2001. That 2100 level, for some reason has been extremely tough resistence in the past 6-8 months. For the NASDAQ to be in Wave 1 of a bull market, it would have had to retrace .618 from Wave B to Wave C, which is 3157 (4252 - 1387 X .618). If 1387 to 2100 was just Wave 4, there would be one more wave down....
I like the fact that the DOW's move from 7926 to 10345 can qualify as a Wave 1 move, because it retraced .618 of the entire drop from it's all time high of 11908 to 7926, so that's a good sign.
But because the DOW SPX and NASDAQ could be entering into a Wave 2 this early in a move, during a seasonably strong month, could forecast a bad 2002. I hate to sound bearish like this, but the last times I remember the markets dropping like this as a result of index futures, like the QQQ Jan 40's and S & P Futures contracts, being dumped were back in March 2000 at the top at 5133 and late May 2001 when the NASDAQ was at 2328....Also, what's pretty bizarre too, as that the top of 5133 and 2328 both coincided with bonehead anti-business attacks by democrats (I'm not dissing any political party..it's just known fact that market tops have come at times when democrats have attacked "big business" and won. Hochberg himself, in an interview, has mentioned this fact himself. I believe he mentioned RCA, but I wasn't around to witness any of this..). At NASDAQ exactly 5133, the market crashed when the government attacked Microsoft, I'm sure many of you remember this. That Monday the NASDAQ crashed 500+ points before reversing. At exactly, NASDAQ 2328, the balance of power in the Senate shifted, when a former independant became democrat. Oh yeah, and I almost forgot, NASDAQ 3000 last year during Al Gore and "the will of the people." And in December, NASDAQ 2066, the much anticipated economic stimulus plan was slaughtered, thanks to Mr. Daschle. In the 1930's during the Great Depression, a democrat led government helped extend a deep economic depression, by taking all the money from the rich and giving to the poor. That's fine and dandy if you're a happy happy joy joy kind of guy, but this shift turned the recession in the 30's into the Great Depression...read all about it...I'm not kidding. I have a feeling that our Santa Claus rally had no bite thanks to Daschle.
So, this week, be very cautious, especially with this week being expiration.
Again, I'll be watching fibonacci levels, (.78 retrace of all three indexes), and the candlesticks. There needs to be a harami, piercing line or hammer on the .78 support level for me to be aggressive on the long side.
Also, the next extremely important levels are the Dec lows, with around 9700 on the DOW, 1918 on the NASDAQ and 1117 on the SPX. If the indexes drop to those levels and rally hard than, the retracement would be a healthy one...those three levels are the bottoms of their previous wave 4's which is usually the maximum retracement levels on a bullish upwave.
A total breakdown on the indexes, and I'll be giving a few short calls soon...
But here's one...NVDA broke it's .500 Fibonacci retracement level of 60.23 today, and the MACD is crashing through the floor. From what I heard, the 20 million shares that NVDA wanted to sell back in November are being unloaded...the move down has been very VERY unnatural, and broke the natural flow of it's bullish wave. It's next level of support is it's 50 day MA, than it's .618 retrace of 52.69. I hate to say it, but NVDA has turned into a short literally overnight. E-mail NVDA management and thank them for screwing a lot of people.
And a couple more:
Also, if you look at the charts of ERTS and THQI...
THQI, if you look at the 3 year chart hit it's 5 of 5 in December, very textbook move, and is dropping very hard. From $8.00 in April 2000, to $65.00 in December, which means it's got a long way down. .382 retracement of the entire wave is 43-44 (just about broke it), .500, 36-37, and 29-30 is the .618 retracement. "5 of 5's" are a short's dream, and that's what THQI has had. It's gotta hold 43-44 in the next few days, or it's gonna visit the 30's..
ERTS has a more bearish chart...it's had a "leading diagonal", or a "rising wedge" from $25 in April 2000 to $67+ in Dec 2001...rising wedges usually retrace to the starting point of it's intial move...which is $25.00. Pretty textbook, 3-3-3-3-3, A-B-C-D-E.
So if the NASDAQ breaks down, those three are prime short targets.
-gem-x
Regards
Stephen |
