gem-x's Elliott Wave Forecast: Feb 25, 02
On Friday, the NASDAQ dropped down to 1696, and the NDX, QQQ tested their
.618 Fibonacci levels....an ending diagonal formed, and one of those out of
nowhere, end of the day rallies developed..the rally this time, wasn't a
sharp V shaped and obvious rally, but one of those stealth, catch you by
surprise, and not to mention "round" reversals...the drop and rally from
Thursday to Friday looks like nice round bowl (I'm not very familiar with
the cup and handle formation, but this looks like one.)
Here's what I was looking at on Friday around 1:10PM...(When I sent the
intraday e-mail I closed my QQQ puts at the 1697 level for 32% from the
channel break on Thursday.)
(Copy and paste this URL)
angelfire.com
Here's my count from Sept to now on the NASDAQ:
geocities.com
What wasn't too convincing, though, was at 3PM, after the sharp, almost
parabolic rally developed, there was a sharp and equally as parabolic
drop....but at the close of the day, the volume was moderate to strong, and
the candlestick was bullish...and, yes, I'm going to say it again, a
"morning star" hammer.
Here we go again, right? Like I said last Thursday, when a potential
morning star failed again, we NEED to have a strong volume big white candle
rally the next day. Major bottoms usually terminate with a morning
star...I've looked at charts going back as far as 1990, and among the
bottoms and rallies that had the "morning star" reversal occured in Oct 98,
April 01, and Sept 01, each followed with large rallies. So again, there
MUST be that large volume rally, or this potential rally could fail again.
If this is another failed rally, I'm looking for a 3-4-5- drop tomorrow to
1685....I'll be watching the channel again, as usual..
But, tomorrow would mark the 53rd day on the COMP NDX and QQQ. If you count
the half days and full trading days from Sept up to now, there was 53 days
up from Sept 21 to early December from 1387 to 2065, and Monday would be day
number 53...like I've said in past e-mails, the "wave 2" in a bullish move
after a "wave 1" can last .618 the time of wave 1, or equal length. So
I'm watching tomorrow extra carefully. The typical amount of time that
"Wave 2's" have lasted, or corrections before they rallied strong has been
55-57 days (like in the Summer of 1998 to Oct 98), and the longest, 89 days.
The 89 day drops include the drop from 4200 to 2251 in the summer of 2000 to
early Jan 2001, and last summer from May 2001 at NASDAQ 2328 to Sept 2001,
to NASDAQ 1387. So the odds are, if the NASDAQ can get the big volume
confirming reversal rally on a morning star, tomorrow, would be day number
53, and the rally from Sept would resume.....and my nosebleed prediction
high of 2893 by the summer could occur....
If you look at the put/call ratio now....it is REALLY at an extreme level
now. The highest put call ratio 21 day moving average in Aug-Sep 2001 was
.88, and I believe that was an all time high. The 21 day moving average
right now, for the put/call ratio is at .84....all it would take to make the
level of greedy put holders get to the extremes of September, would be
another day or two with a put/call over .95. The March QQQ Puts are
literally 5 to 1 leading up to March expiration, from 33 up to 40.
The importance of tomorrow's move, to me is very significant....I'm not
ready to go long if we get another failed morning star, and one of those gap
down "island reversals".
"...but if this correction lasts longer than 53-57 days, and breaks 1646,
the chances get more magnified, that the NASDAQ will hit new lows...and like
I said in past e-mails, this makes no sense at all, unless something worse
than 9/11 occurs. The DOW has been outperforming the NASDAQ, and it
comformed to the 55 day up, and 34 day correction...the DOW dropped to the
.382 Fibonacci level of 9400, and has held it's lows from the Fed meeting
like I expected.....but much of it has to do with the defensive names
getting more mileage, like MO and JNJ....when I look at the charts of
defensive stocks, I see pretty clear cut "5 of 5's" which means "major
tops"....a lot of those defensive stocks are getting the 5 of 5, and when
the buying dries up, these guys will really take it in the chin. I'm not
saying the 5 of 5 is about to end, but it's getting pretty darn close..."
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Subject 51336
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