gem-x's Elliott Wave Forecast: Feb 6, '02
Yesterday had some real volatile action..
The NASDAQ dropped down to test it's .382 Fibonacci level, of 1826/1828 and bounced....the level it retraced to was 1868 (looked like a wave 4 up), which is a .382 retrace of the percieved wave 3 down from the past 2 days (1923 to 1828). The volume was pretty strong, and what looked like what could have been a promising close, turned into a nasty "big push" wave at the close. The type of action we saw at 3PM is the main reason why I choose not to take a serious position until around 3:30PM, because the big guys are ready to do their thing, be it massive dumping or buying. Today's random out of nowhere drop at the close had a lot of "will of the people" in it....namely what Daschle did today. I'm not going to get into politics, but you should get the point.
The candlesticks on the NASDAQ, DOW SPX and NYSE were inverted hammers with small bodies on large volume....this is 2/3 of the way through a morning star (again), big red candle down, hammer....so what the bulls would really like to see is a big white candle rally tomorrow on strong volume. If we gap down and break below 1828 tomorrow, that would invalidate a potential morning star reversal, but if there's a strong rally tomorrow that breaks 1916, I might re-enter, but right now I'm all cash, and that nasty drop we had at the close sure isn't a sign of accumulation...
I've counted 5 waves down on the NASDAQ from last week's 1942 level, with the 5th wave down completing tomorrow...that would mean a retest of yesterday's low, and a retracement of that entire wave, be it .382/.618 of the move down from 1942 to 1828, so after 5 waves down, there should be a bounce...if it's a weak volume upward a-b-c zigzag, which it might be, given that CSCO's earnings are after the bell, than it might be a good idea to use that rally to get out, if you haven't already. The quality of the bounce or rally, should it develop tomorrow is important. And of course, the reaction to CSCO...as we all know, CSCO is a big time rally igniter or a rally killer...it was CSCO and Chambers' positive comments last October that kicked off the large rally from 1387 to 2099...but it was also CSCO in Feb 2001 that started the really nasty drop from 2893 to 1619 to eventually 1387...
But, there's also a chance that we had 5 waves down from 1942 to 1828, and the bounce from 1828 to 1868 was Wave 2, and a brutal Wave 3 beatdown wave down could appear tomorrow or after CSCO.. CSCO is going to be very important, and their earnings are conveniently at the time when the NASDAQ is ready to breakdown, or breakout.
The put/call ratios are getting as excessive as the week of Sept 17-21, so something is going to give soon...the 10 day is now .77 and 21 day .76...if the put/call ratio spikes over 1.10 tomorrow, the 10 day would be over .80 and 21 day over .80, which is as high as the week of Sept 17-21...there's simply no way that that many puts that were previously out of the money won't be closed out before expiration. Expiration is 8 days away. There's a large amount of index puts that just got in the money in the past couple days, with puts numbering 6 to 2 on the QQQ 36, 37, 38. From past experience, there's no way that these levels cannot provide support leading up to expiration. And should a rally ignite, these excessive put levels could make any move up pretty strong.
But the general them right now is: Watch and wait.
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