gem-x's Elliott Wave forecast for Jan 17, 2002
Straight down...all characteristics of a Wave 3 or Wave C down.
NASDAQ got ugly between 10AM and 11AM, this is the time when the big guys first do their thing...and their thing was "sell". The close was something nasty...a straight line down with no retracements...what really got to me today was that the VIX barely budged to 24.50+. 200+ points down on the DOW and the VIX barely flickers...
All three indexes dropped to around 1.618 X the length of it's first wave down, and are fast approaching their December lows. So far I'm leaning towards "big ass" correction if the December lows are taken out like they didn't exist...in the next couple days, there's gonna be a bounce, but the size, measurement, and volume...and than the retracement, is important in determining what kind of correction is coming. That last hope for the bulls right now is the "expanded flat" correction, and if this is the case those December lows have to hold. There was an expanded flat in October, and the rally continued...but they would have had to alternate. A flat on Wave 2, and zigzag on Wave 4. Bearish waves down stink during earnings, because if you're short and earnings are good, you could face a 10%-30% bounce, but if you're long, a CHKP-type major wack. Especially this week, because of expiration.
NASDAQ 1918, DOW 9661, SPX 1114.5. EXTREMELY crucial if the bulls are hoping for an expanded flat correction. No doubt the correction the past week has been 1, 2, 3, 4, 5 on all three indexes, and to be a hero here is not a good idea until we know exactly what this correction is doing. I have a feeling, that if we break those 3 levels by more than 5% on a bad candles and heavy volume, the retracement could be .618 of the entire move from the Sept lows....on the NASDAQ that would be around 1656. If you look at all the tech stocks that have had huge runs from Sept 11, there's a ton of them that have had 5 of 5's, which are tops. If you look at all the major names in the SOX, just about all of them have had 5 of 5's. There's short bait everywhere...some shorts could be mind blowing.....Biotechs are just getting brutalized...I've never ever been a big fan of biotech, after the bell, watching CNBC every day, there are biotechs whose ticker p CHKP, for god knows what reason, didn't forecast a major loss for the next year, and got beyond blasted, and today there were a lot of heavy volume gap downs. More down days like this, and the entire NASDAQ could be a feast for shorts....Everywhere I look on the COMP, are 5 of 5's, and if this is the case, the upside's got a huge cement ceiliing. There are also NASDAQ/momentum names in 5 of 5's...ALL TIME 5 of 5's. Examples: THQI ERTS KKD (David Stern pointed this one out). I'm trying to find more all time 5 of 5's, because those are the names that could get the biggest smackdown. MMM hit it's 5 of 5, and today it paid the piper big time.
Companies have come out with blow out earnings, but traders are selling on anything remotely bad. Selling on the news mentality has taken over the market.
The safest thing to do now, is to watch how far the next bounce goes, if it comes tomorrow or the next couple days, and than see how far that bounce retraces.
Man, I hope that this thing is an expanded flat, because a wave 2 down could be beyond choppy...there's tons of dip buyers sitting on the sidelines, and shorting could be hard to forecast.
It's not a good idea to go short or long right now until things settle down, and when there's a clear cut wave move.., because there's a lot of techs that have gotten wacked, and are down 5 waves, because a fast retracement can hit you in the face....I know quite a few shorts on Silicon Investor who knew SYMC had a history of getting mega wacks after earnings, and if you were short SYMC, you would have gotten massacred by the huge 5 point bounce it had after hours...but if you go long tomorrow, the distributive forces that have been waiting for this bounce will be ready to tear it down.
What to do?
Well, there are techs that have clear cut 5 wave down patterns, from the Jan highs, and have tradeable bounce opportunities that could retrace at least .382/.618 of it's 5 wave drop. These stocks are only good for trades, and not to hold.
But after the bounce comes, it could be time to flex the old "short" skills if the major support levels are taken out.
All I see right now are 5 of 5's...
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