gem-x's Elliott Wave Forecast for Jan 28. '02
Tomorrow should answer the question of whether the move up from 1879 to 1959 was wave 1 of a new upleg, or merely a Wave 4 of the move down from 2099 to 1879. So far, the assumed expanded flat on the NASDAQ on a Wave 2 has been: Wave A: 2065 to 1918, Wave B 1918 to 2099 (exactly 1.236 of Wave A), and Wave C has moved 1.50 X Wave A to 1879. My forecasted move down to around 1890 became a reality last week, when the NASDAQ dropped to 1879, so the Wave C COULD have completed. I would have preferred to see 1859 or 1826, just because I love retracements that end in fibonacci perfection...but with Greenspan reversing his negative comments last week to a more positive outlook, buyers have better reason to dip in here.
As you can see, I'm being very cautious watching and reacting to these moves...it's very important not to jump the boat and automatically assume that a bounce from a 5 wave move down is Wave 1, especially the move we saw during Wed-Friday. Short or long, it's good to be careful....sure, if it's Wave 1, we'd miss the first part of a rally, or shorts would get squeezed...but if the retracement of that move breaks the Fibonacci .618 and .78 support levels of that move, than 9 times out of 10, that would invalidate it. If you're long, and those support levels break, you'd be catching a falling knife, but if you're short and those support levels hold, and a good rally develops, the squeeze would be vicious. This week is very "watch and wait" because Fed meetings can, as you know cause huge eruptions to the downside or upside. Sometimes, the announcement at 2:15PM causes a rally...but than all of a sudden, at 3PM, the dam breaks and ka-boom, a large 50 point drop in the last hour, or
I'm pretty 50/50 on things right now, because as a typical Elliott Wave reader, would love to see fibonacci perfection. Wave 2's typically retrace .382 to .618 of the entire Wave 1 move...so far it's been around .382 on the COMP, but exactly .382 (give or take 10-12 points) on the NDX. .382 sounds great, but the .618 retrace is still a little monster that's locked in it's little cage waiting to unleash carnage on the market.
The amount of time taken to correct is reaching the 33-36 time frame...as R.N. Elliott put it in "Nature's Law - Secret of the Universe", emotional human cycles, be it greed or fear, last around 33-36 days. Monday would be day 34, Tuesday, 35, and Wednesday 36...the Fed announces on Wednesday.
I have a feeling that the next couple days could go sideways...potentially an ascending triangle leading up to the fed meeting like the past two times. Or the other possible scenarios, is that Monday-Tuesday could get a golden ratio rally to 2060 if 1879 to 2059 was Wave 1, and without question, that would confirm a new upleg (crossing my fingers).
On Friday, the candle looked somewhat neutral, if not a little bearish...not quite an inverted hammer, because the body was fat, but not quite a full white candle that would cause a follow through rally into Monday.
Most of the technical indicators look pretty bullish...10 day MA for the put/call ratio is .72, and 21 days is .70....NASDAQ Trin's 21 day MA is around 1.29...Investor's Intelligence reading in the new Barron's was 52.5% Bulls, around 24% Bears, which is getting to be a little too bullish, but not as bad as Jan 2001, when it hit 65%+. There's a lot of QQQ puts compared to calls in the 36-40 range, and it's pretty noticeable, and is pretty bullish from a contrarion standpoint. Fast Stochastic for the past couple days has been pretty low, and is edging up towards 100, around 75-80, the MACD is moving up, but not quite bullish, RSI is following the rally, and not diverging too much ( the move isn't confirming much the past couple days).
BUT...the one thing that's kinda ticking me off is that VIX. The VIX spiked to around 26 last week when the NASDAQ dropped to 1879, but since than has gotten back to 21-22. During bull markets, though, the VIX can keep dropping, like in 95-96 when the DOW and NASDAQ rallied hard, and the VIX moved between 7 and 15. But, just to be on the cautious side, that reading creeps me out, just a little bit.
A couple stocks that I'm watching from the storage sector:
BRCD and QLGC, specifically. EMLX, on the other hand, has barely retraced enough of it's move from Sept to Jan to be real aggressive on it.
I like the chart of BRCD a lot, from Sept to Jan, because the rally fit textbook rally wave lengths, which makes it an easier stock to forecast. BRCD has rallied from around 31.50 to 36 the past couple days, retraced .618 of that move and rallied again. If it breaks 37.71 on a nice move up, it could get back to 41-42. (And also be the start of a whole new bigger upwave.)
Wave 1, Wave 2, Wave 3, Wave 4 and Wave 5 locked in perfectly....take a look at the chart I just read on BRCD:
photos.yahoo.com
or: photos.yahoo.com
If the flat correction is completed, than Wave 3 could take it to 75+, but there's a ton of overhead supply at 50-60......maybe BRCD will have blowout earnings like EMLX, who knows...(or the market could have a much more positive bias by the time they report, and it'll move up no matter what comes out).
QLGC has a similiar chart to BRCD, but hasn't completed it's flat correction. A flat typically retraces to the bottom of Wave A, around 42.75-43, and if it gets there on low volume, and a higher MACD, I might get in there. But a clear break of 42.75 or 42.30, and I'd stay away (a good range to put a stop). Last Friday, it got a "BIG UHH" around 2-3PM, so BRCD could be a better trade should the market rally hard.
As usual, I'll be watching tomorrows market movements very carefully, and as usual, will be sending out intraday e-mails....
See y'all tomorrow.
gem-x
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