gem-x's Elliott Wave Forecast: Feb 19, 02
So far I'm watching these correction scenarios that I drew up from early Jan:
1.) Dow and NASDAQ rally 53-55 days from Sept 11, and on the 34th/35th day, the indexes bottom and rally. Not all the indexes on that day bottomed, but among the indexes that did, the DOW and SOX are currently holding the low from the day of the fed meeting, so that count was valid on those two. That day the VIX hit close to 30, and the put/call ratio around 1.29 intraday but closed well below those levels (put/call closed at 1.05)...I was looking for the .382 retracement levels on the DOW at 9400, and the SOX, and so far they're holding...if you didn't notice, there have been breakouts...like in the SOX there's: KLAC AMAT and MU (AAPL did too) and bottomed that day, and appear to have already broken out from their Jan highs and entered possibly a new upwave, or a Wave 3....(despite the breakout, the RSI didn't follow, and needs to do that in the next week or two to confirm them). Despite AMAT being pretty overvalued if you look at AMAT's potential 2002 earnings, it keeps moving up. Same thing applies for MU and KLAC (although DRAM prices keep getting stronger and stronger, and MU's locked up Hynix)
2.) Another scenario I was looking for was for the NASDAQ to retrace to 1659/1700, or around the .500/.618 Fibonacci level, in an equal amount of time that it rose (53-55 days). After the Great Depression crash wave, and rally from the low, from 1932 to 1937, the Wave 2 correction took an equal amount of time to correct. After the large rally from those lows, the correction that followed retraced to the .618 fibonacci support level, lasting from 1937 to 1942. And so far, the NASDAQ from 5133 to 1387 has acted like the Great Depression crash wave....The "C" Wave down on the zigzag from 4252 to 1387 was 1.382 X the length of the wave "A", as was the "C" wave in the Great Depression zigzag. A lot of what I'm looking at is the comparison between those two periods. Both the drop on the NASDAQ and the DOW in 1929-1932 were zigzags, and if all the other heavily bearish biased "e-wavers" are going to count it as "1-2-3-4-5" , be my guest. It's your money. So far, the NASDAQ is in it's 49th day from the December high (I'm counting December as "the high" because that was QQQ and NDX high) counting Friday, so if the percieved Wave 1 up in the new bull market lasted 53-55 days, than the Wave 2 could last just as long. If this is the case, 1795 would break tomorrow (the .78 support level of the move from 1772 to 1877), and in the next 4-5 days, a drop that would shake a lot of bulls out would ensue. I'm targeting 1739, because I'm counting the move down from 2099 to 1879 as "Wave A", 1879 to 1959 as (Wave B, .382 retrace), and a Wave C should be equal length to "Wave A" which was 220 points (1859 - 220 = 1739). If the NASDAQ retraces to 1659, that would be the bottom of the "Wave 4" from my count. I don't buy the NASDAQ count of 1387 to 1794 Wave 1, 1794 to 1646 Wave 2, 1646 to 2065 Wave 3, 2065 to 1918 Wave 4, and 1918 to 2099 as Wave 5. It doesn't make sense, because none of the waves extended. My count from bottom to top is 1387 to 1529 as Wave 1, 1529 to 1418 as Wave 2 (.78 retrace), Wave 3 as 1418 to 1794 (about exactly 2.618 X wave 1), 1794 to 1646 Wave 4 (exactly .382 retrace of Wave 3) and Wave 5 as 1646 to 2065 (equal length to Wave 1 + Wave 3). I've included a chart of the Zigzag NASDAQ wave count from 5133 to 1387:
photos.yahoo.com
3.) Another scenario plays out as this: The zigzag started from the Wave A, 2099 to 1879, lasting 9 days, the Wave B retracing .382 of Wave A, 1879 to 1959 lasting 3-4 days, and the Wave C we might have already seen, from 1959 to 1772 lasting 9 days, as long as Wave A. But the percieved "Wave 4" we saw from 1772 to 1877 was different, if it was a Wave 4, because it retraced .618 of the C Wave. There's a chance that this 5th wave down, or Wave 2 to hold 1772 or truncate, but we're going to have to wait and see.
Also, if you've noticed last Friday, the put/call ratio hit an extreme....and what's crazy is that it's at a level that rivals the September highs. You can't look at a put/call ratio of 1.15 and become bearish. A put/call ratio that high with only a drop of around 300 points on the NASDAQ is significant. The 10 day and 21 day MA has equaled or exceeded the p/c ratio of any time in over a decade this week. I believe that the put/call ratio of 1.27 in Sept 2001 was an all time high. Compare the October 1998 10 day MA and 21 day MA with the p/c ratios from Jan-Feb 2002. If history repeats itself, from put call ratios this high, than we could be headed for a larger amd more sustained rally in the next few days. I wouldn't mind at all to see more weakness....it could bring the put/call ratio to new highs. What's pretty odd too, is that the put/call ratio is at an extreme, and the VIX isn't....could the VIX break new lows and trade between 7 and 15 like it did in 1994? A VIX like that means a large sustained upmove that barely corrects...in other words, a "Wave 3".
Aug-Sept 2001 .88 21 day, 10 day 1.02 = 712 points V, 712 points ^, high p/c: 1.27
Jan-Feb 2002 .81 21 day, 10 day .89 = 325 points V, 1152 points?? ^, high p/c: 1.15
Oct 1998 .80 21 day, .89 10 day = 671 point drop, 1176 point rally, high p/c: 1.15
March 2001 .79 21 day, 10 day .85 = 1275 point drop, 712 point rally, high p/c: 1.08
Dec 2000 .72 21 day MA .77 10 day MA = 750 pt drop, 642 point rally, high p/c: .95
Oct 2000 .68 21 day, 10 day .81 = 1220 point V, 550 point ^, high p/c: 1.01
For tomorrow, the level to watch is 1795, and the put/call ratios...
A quick and violent drop could finally bring the type of fear (and possibly new highs on the p/c) needed for a new sustained upmove.
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Gem-x is pretty much where I'm at - especially seeing the Dec 6 top as the end of wave 5 on the NASDAQ with the January top being a B wave. The 34 day bottom turns out IMHO to be the end of wave C of a zigzag correction. What happens next is an X wave and another zig-zag. The zig-zag teminates in an ED. We then get what could be 5 waves up from a week ago Friday in what could be a leading diagonal and then 3 down with some mess at the bottom. If that mess turns out to be wave 4 in the decline the bull count is in trouble... but still we could be having a rather extended 5 wave C wave from the January top. Bearish e-wavers think that January is wave 5 (or maybe C) in the NASDAQ and hence think that this is either a new impulse down or just wave A.
David |
