gem-x's Elliott Wave Forecast: March 13..Wave 4 or Wave 2
Today started nasty with a big gap down...not only did Nokia hand out bad news, so did Lucent and than came the rumors of Microsoft pre-announcing...and the more conservative scenario I outlined in the Sunday night e-mail, and was expecting for a few days that stated "this rally may halt at 1945-1965, and retrace 1/2 of the gains from 1696-1946" became more of a reality...usually the first wave of a new upmove stalls at the .618 Fibonacci retracement (which is 1945) and corrects, and this is what appears to be happening...these were 5 strongly bullish waves up, with good volume, so this retracement shouldn't break new lows from what I see..the 5th wave up turned into a leading diagonal with a fast drop channel break instead of an extended version. Pretty standard looking 5 wave up move, with no unusual extension, the extension was one of my possible scenarios, but the conservative alternate showed it's true colors by stalling at 1945-1946. Wave 1's usually stall at the .618 Fibonacci level, and this is what
Possible scenarios this week/tomorrow
Here's one of my alternate, and favored counts of the NASDAQ. Notice, I've counted 5 waves up, which means a correction of the entire move from 1696..
Wave 2 correction in progress?
If we're in a Wave 2, than the 5 waves down we saw today could turn into a zigzag targeting the 1841-1865 level...likely closer to 1841...That means we could get an upward correction tomorrow targeting as high as 1920, than another drop to the 1841/1865 level...BUT if this correction drops in the morning and turns into an ending diagonal, it could turn quick...which it might, so I'll be watching very carefully as usual. The move we saw today looks similiar to a setup for an ending diagonal..
TRANSLATION: Basically I have these three scenarios:
1.) NASDAQ retraces to around 1920, than drops to 1841-1865 and rallies..(zigzag)
2.) NASDAQ drops and creates an ending diagonal tomorrow targeting what I see around 1865 and rallies.
3.) NASDAQ completes it's 5th wave down in a flat and rallies.
Sounds confusing, but the best way to know which scenario may happen is to watch and wait...and wait for that downward channel to break...Stephen from the PalTalk chat room sees this move as a Wave 4 flat, but I see 5 waves up completed, and a Wave 2 correction...the 5th wave up was a leading diagonal equal length (give or take 5-10 pts) to Wave 1, followed by a gap down channel break.
>From a bullish perspective, though, is that even though there was a gap down, the candle was bullish..it was a white candle/semi-hammer, also the volume was light, and was lighter than yesterday, even though the drop was large..I also noticed in the past few months that if the first two days of expiration week were weak, than the next three days got stronger..this isn't an exact science, but it makes sense because puts that were essentially worthless and out of the money at the Monday high are all of sudden in the money..
Anyway, the levels to watch, should things get worse are: 1811-1837-1865: .618/.500/.382 retracement of the move from 1728 to 1946...if we drop to 1865 and rally, and break 1946 on the next move up, we could get to that 2020 level.. 1791-1821-1850: .618/.500/.382 retracement of the move from 1696 to 1946...NASDAQ drop to the 1790-1821 level and a rally would be the start of a new upwave.. The most important level, at the worst case scenario is 1750, (.78 retrace of ehtire 1696 to 1946 move) but that's the worst case scenario..of course it it breaks that level, the chances magnify of a new low (but I see this as a very slim possibility)
Another interesting note: Today's correction occured on a Fibonacci day...the 13th day of this rally to be exact.. I was expecting an important move on the 13th day, and we got it...
Summary/Other notes, indicators
Watch and wait is my strategy right now...the corrective wave needs to show a more clear pattern after 5 waves down...and we should see that tomorrow. angelfire.com |
