Tom, RE: The $OSX - After careful analysis, this is what I see regarding the Philly Oil Services Sector Index:
- A Large Degree, 5 wave rally ensued from May '97, and terminated on 10/10/97.
- From 10/10/97, the index began a CORRECTIVE pattern, unfolding in the typical ABC format.
* The A wave rolled out in the prescribed 5 wave format, and lasted from 10/10/97 to 11/12/97. (1 terminated on 10/17/97, 2 on 10/24, 3 on 10/28, 4 on 11/6, & 5 on 11/13).
* The B wave rolled out in the prescribed 3 wave format (or ABC), and lasted from 11/13 to 12/9. (1 [or a] terminated on 11/17, 2 [or b] on 11/25, and 3 [or c] on 12/9).
* The C wave rolled out in the prescribed 5 wave format, and lasted from 12/9/97 to 1/12/98. (1 terminated on 12/15, 2 on 12/17, 3 on 12/23, 4 on 12/31, & 5 on 1/12/98).
- Considering that the corrective wave requirements have apparently been fulfilled, I firmly believe the corrective action in this sector is completed, and that we have already resumed a whole new set of impulse waves higher. I believe the rally that ensued from 1/12/98 is a wave one rally in the first series of of a 5 wave rally in the next, large degree, cycle higher. However, there are no guarantees as to how high this next larger degree impulse wave will carry this index, so I would focus on short term patterns to determine upside target projections (and subsequent minor corrective wave target projections, for that matter). I am fully aware of the negative fundamental developments in this sector recently, and understand that the size of the impulse waves higher, and subsequent corrective action, will be influenced accordingly.
- The OSX double bottomed intraday on 1/12/98 (With extremely Important trend reversal implications). This d-b pattern's intitial target was 99, which it successfully took out in no time, and the pattern's 2ndary target is 118, which looks well within reach. A small degree correction could ensue before this target is achieved, but I would expect the 99 area to hold on a closing basis.
- The OSX broke out of the large down channel yesterday (Another extremely important trend reversal confirmation) when it took out the 102 area. This channel began from the high pt. in early November, and ran into the low of Jan.12th '98. This channel break targets the mid 120's for an additional short-term objective. I would certainly expect a small degree correction to ensue from this area, but would want to see the intraday pattern formation after this happens to set a downside target
So to sum it up, keep in mind that corrections ALSO include 5 wave moves (Both A & C of a correction are always 5 waves). All indicators point to this corrective move being complete, with a run into the 120's very likely within the next month. Could the ensuing corrective move, which would be considered wave 2, be nasty, and even take out the 1/12 low? it is certainly possible, as wave 2 can certainly take back all the ground covered by wave 1. That's a call we can make when we analyze the s-t topping pattern that forms at the end of this wave 1 up, thus setting relevant downside targets at that time.
Good Trading,
David |
