To: +rrman (14402 )
From: +David Plonk
Thursday, Feb 26 1998 4:39AM EST
Reply # of 14414
Dear RRMAN, LISA, & BEARSHARK:
Thanks for your responses & inquiries to my prior posts... Sorry so late getting back to
you. I've had the petal to the metal on this move up to the 1050 area as you might
expect, and have devoted (nearly) all my attention to trading these wild swings on the
way here.
Attaining the 1050 area on the SPX futures & Cash, and nearly 8500 on the dow has
temporarily exhausted the buying pressure for this leg. I picked this area in my prior
post #13647 because of the break of a large upward pointing channel that had been
etched out on the daily SPX Cash from late July until the eventual upside break of this
pattern on 1/29/98 at 981.50. You can find these channel lines by connecting the lows
from 8/18/97,8/29,10/30,11/12, and 1/12/98... and the highs from 8/6/97, 10/21/97,
1/5/98, and 1/20/98. The width of this channel is 70 points, so the break of the channel
at 981.50 immediately targeted the 1050 area on the cash. There are multiple patterns
in place that formed mainly over the past 9 months that project to 1065, 1075, 1085,
1110, 1150, 1285 & 1325 on the SPX Cash. I expect all of these to be attained, with
s-t reversals occurring as each target is achieved. And yes... I firmly believe these will
be achieved by mid-July.
Currently, we are due for a completion of the ABC corrective pattern that began on
Monday's open... Yes.. this week's activity has been corrective in nature. We had a 5
wave A down pattern beginning on Monday's open that completed Tuesday at around
3:15pm. B up took over from there and carried us into new highs, but terminated at
around 2:20pm Wednesday at 1045 on the SPX cash. We began C down from there,
and are still working on the 1st of 5 waves down. This pattern is due to complete itself
by 1:30pm on Friday, so I would be looking for a spot to begin building long positions
again at that time, and certainly not before.
WARNING: C Wave corrections are potentially very harsh and dramatic, so we could
see anywhere from 20 to 60 SPX points (160 to 480 dow points) by Friday
afternoon, with much of that coming on Friday's open. I would be very careful about
open long positions til then, especially after Thursday's trading. But worse case, I
expect 986 Spx Cash & approx. 8000 on the dow to hold. I'll know the depth of the
correction as i see wave 3 of c unfold late Thurs. & early Fri.
The basing intraday action in Vix at 19 and the 5 day Trin moving from 4 to over 5
now also are confirming factors of a potentially severe 1.5 days of market action ahead
of us. If the 5 day Trin gives its typical buy signal for the next leg of this bull run, which
is a reading of 6 or better, then we definitely have a radical short-term selloff ahead.
My best guess for a reason would be a couple blue-chippers coming out with drastic
earnings warnings, coupled with a continued sell-off in the bond market taking the 30
yr. yield to as high as 6.15%. Short-term action in the transports looks bearish, and
that could spill into the general markets as well, along with a pull back in the NDX after
a 28% climb in the past 1.5 months.
Good luck & Best Wishes!!
David |
