gem-x's Elliott Wave Forecast for March 11, 02. More dramatic move ahead??
March 10, 2002 gem-x's nightly Elliott Wave Newsletter..
Previous day's/Today's move
From Thursday's Newsletter:
1.) If the move from 1841 to 1910 was just Wave 1 of Wave 5, and 1910 to 1865 was Wave 2 of Wave 5, than a 3rd wave up could occur tomorrow...taking the NASDAQ to 1973-1976...this 5th wave, could be one of those extended versions taking out put holders left and right going up to expiration if this is the case...what was pretty interesting, was that the NASDAQ closed directly on the downward channel from 1910 to 1865. If the NASDAQ moves just 1-2 points up, that would be a channel break, and a rally.."
When the channel broke in the morning, I immediately bought a lot of mo-mo semiconductor names when the bell rung at market....NVLS at 51.60 (I didn't expect it to run the way it did), KLAC at 68.60, NVDA at 58, TSM at 19.97, and my favorite storage name, QLGC at 48.50...at that point, if you noticed, I was only able to send out one intraday e-mail...I sent it at 8:45 in the morning, but than , the e-mail software stopped working...AGAIN.
Right now, the best charts I see are all in the Semiconductor sector...there are a ton of breakouts, and you can basically take your pick as to which one to buy during a large NASDAQ rally...AMAT, MU, NVLS, KLAC, NVDA, TSM, KLIC, NSM, XLNX, ALTR, TXN, TER, LLTC, MXIM, LSCC, BRCM, INTC....just about all these semi companies have awesome charts and even breakout charts...of course, there's also the other mo-mo's like NTAP EMLX BRCD VRTS and QLGC, but, right now I'm more into the AMAT KLAC and NVLS's than the storage names...that MCDT news sure rung the sector's bell hard. (I was also told of a stock "ESST", and that has one nice chart too.) ...basically, my strategy would be, wait for a pullback, look for a downward channel break, especially if it's the beloved "ENDING DIAGONAL", go long until there's an "uh oh, upward channel break", and than re-start the strategy again...I'd be buying the strongest name in that list of semi's the day a rally occurs. It all depends on the day, and which one is really moving. I wouldn't be too excited about destroyed sectors like biotech, optical or networking....I'd wait until the "3 of 3" before buying them. The clear leaders right now are in the Semiconductors, and the momentum is behind them. The best thing about them, is that not only are they following the NASDAQ, they're LEADING the NASDAQ, or even moving ahead of the NASDAQ. I like stocks that follow the NASDAQ during rallies, instead of the left for dead companies like in optical, networking or biotech.
...by the way, the corrective move on the Wave 4, that I see that occured from 1886 to 1841 to 1910 to 1865 could have been a "running flat". I was expecting a flat on the Wave 4, but not the running flat...an expanded flat would have retraced back to 1841, but since the downward channel broke in the morning on Friday, it became a running flat....
TRANSLATION: The corrective move to 1865 could have been the entire correction of the move from 1728 to 1910, which means there's going to be another move up this week. The original target was a retrace to 1841, but it became a new corrective wave based on the downward channel break and rally the next day.
Possible scenarios this week/tomorrow
So right now, since we got all the major comfirmations that the NASDAQ hit a bottom on Feb 22, with very strong volume on the buying side going up, combined with improving and strong internals on the advance, where is Wave 1 going to end if this is the actual Wave 3? And how far is the cherished "Wave 3 of Wave 3" going to run, and how long? And where is the Wave 3 going to top out?
-TRANSLATION: How far is this potentially massive rally going to go, and how long?
Here are my projections for the possible Wave 3... Since Wave 3's are usually 1.618 X the length of Wave 1, (712 pts X 1.618), and 1.618 X the time Wave 1 lasted (53 X 1.618), than the first target, and first target date for what I see, is 2848-2893 (coincidentally, also the Jan 2001 top) and the date, (85-86 days from Feb 22) is around June 22.
-TRANSLATION: Based on how far the rally lasted from Sept-Jan, the next logical move in this new rally is the Fibonacci 1.618 Golden Ratio measurement. (First move up 53 days X 1.618) = 85-86 days, and (First move up 712 X 1.618) = 1696 + 1152 = 2848-2893.
But the first hurdle we'd need to get past, is to see how far Wave 1 of Wave 3 goes, and how deep Wave 2 of Wave 3 corrects. I think the best strategy for really getting heavy long is to play it light during this move up, and than wait for the pullback Wave 2...if the next move up breaks the previous high, and doesn't break a new low, this would be the beloved "Wave 3 of Wave 3". In order to see how far this rally could possibly go, we'd have to first see how far Wave 1 goes and not have a retracement that gets ugly. But from what I see, a retracement from here that breaks new lows is very unlikely.
TRANSLATION: The move we've been seeing could break the January high this month, but at that point, I'd be a seller at those levels, than wait for a pullback before throwing all the eggs into one basket. If that test of the lows is successful, the next move could be very very large if it breaks a new high. If the re-test is unsuccessful, and breaks 1696, which I find to be very unlikely, than it's all cash for a while.
Looking at historical "Wave 3's".....The Wave 1 of Wave 3 in the DOW that started in 1942, had the standard Wave 1, than Wave 2, than Wave 3 1.618 X Wave 1, Wave 4...but instead of being a small Wave 5, it extended....it extended just a hair above the top of the Wave 1 move. If the Wave 5 extends on the NASDAQ, it could be equal length of Wave 1 + Wave 3, 214 + 1865 to around 2080-2100...at that level, I'd sell all my longs and the leaps I bought Feb 19...I see a possible extended 5th, because the move from 1865 to 1935 could have been just the Wave 1 of Wave 5(!)....but if it doesn't extend, the rally we've been seeing could halt at 1945-1965..(1945 is the .618 retracement level of the move down from 2099 to 1696), and retrace the entire move from 1696....If threre's an upward channel break around the 1945-1965 level, I'd have tight stops to lock in my gains from Friday...but a break of 2010 (.78 retracement of the 2099 to 1696 down move) could potentially rocket the NASDAQ to 2080-2100...and a break of 2121 (.78 of the move down from 2328 to 1387) would be the important breakout move that takes the NASDAQ onward, upward, and skyward..
TRANSLATION: We could rally as high as 2080-2100 the next few days, but if this rally stalls at 1945-1965, and the upward channel breaks, I'd be out pretty quick, because there would be a correction retracing around 1/2 the gains the NASDAQ made from the move from 1696. But if the NASDAQ breaks 2010, it could rally to 2080-2100, and a break of 2121 would be THE breakout level for a large run..
If the NASDAQ's Wave 1 of Wave 3 imitates the move the DOW made, than this week, if the NASDAQ extends, it could rise all the way to 2099 in the next week or two and possibly take out those highs.....this is possible, because 1.) The put/call ratio on the 21 day MA has been well over .80 for a month now, and got as high as .86, just .02 away from the Sept extremes, and 2.) this week is triple witching....also there isn't a whole lot of resistence in the QQQ's, call wise, between 39-41..
This would also make sense for my 2848/2893 projection....if Wave 1 of Wave 3 rose all the way from 1696 to 2099, which would be 400+ points or more, than the Wave 2 of Wave 3 would retrace .382/.500 of that move back to 1900-1950, and the Wave 3 of Wave 3 would be around 650 pts (1.618 X Wave 1) from 1900-1950 to 2550-2600, Wave 4 would retrace around .382 of that move to 2352, and the Wave 5 would possibly be .618 X the net lengths of (Wave 1 + Wave 3) 550-560 pts + 2352 = 2893-2910.
TRANSLATION: If the move we've been seeing goes all the way above 2000 to around 2080-2100 without correcting in a large way, chances would magnify significantly the retest would be successful, and the next move up would take the NASDAQ to 2550-2600 in the next couple months, before topping out at around 2893-2910 in the middle of the summer.
Summary/Other notes, indicators
TO SUMMARIZE THINGS FOR THIS WEEK: What could be the big back breaker for the bears, is an extended 5th wave move during expiration....which would mean the NASDAQ this week breaking a new high for the year around 2099, or getting close to those levels. At this point, I see this as a likely possiblity. But this rally we've been seeing could stop at 1945-1965 and than retrace the entire move from 1696, which would be around 1/2 the gains. BUT, If we break a new low during this re-test under 1696, which I find extremely unlikely, than it's all cash and watch again....but if that test is successful, and breaks a new high, the coming rally we'd be probably be seeing could be pretty massive. This is called the "3 of 3", and the crown jewel of all bullish Elliott Waves. It's the wave that makes people RICH. Of course, in order for you to know if this is going to happen or not happen, fail miserably or start with a huge bang, or when to get in at the absolute best time, you'd have to stay tuned to a bullish Elliott Waver from Silicon Investor who has a very consistent track record for being "incredibly accurate". You know who.
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