To: Lee Lichterman III who wrote (31932 ) 10/30/1999 8:20:00 PM From: Gary Burton Read Replies (1) | Respond to
My reading of the Elliott count on TYX (the key to the stock market)is that it has just completed 5 waves up (to 6.40) from the 4.69%low yield in Oct98. Again, based on Elliott, the retrace after the completion of a 5 wave sequence should be into the "area" of the "4th wave of one lesser degree". That targets the 5.40-5.70 area.... A 50% retrace would be 5.55 and that is where I think we are likely now heading towards... Bottom line-declining yields will likely now provide the fuel for the spike to new highs in the major stock averages...The first target area is the 11500-600 area on the DJIA and about 1450-60 on SPX, where we may or may not turn back from.....I also think the various gaps in many individual stocks as well as Nasdaq will not turn out to be island reversals but are instead indicative--along with very low TRIN 5--of a thrust change in character.... Add seasonality to the mix and one has all the ingrediants for a contination of the uptrend..... They will likely try to take it down early next week, but retracements will likely be surprisingly shallow, just as they were in the first few weeks off last Fall's low. It is a sign of a sea change in character that everything looks overbought in the short run. Far too many people now want in to enable a material retrace to take place in my view----Now the hook for buy and hold types---Having said all that, Elliott also says that after an initial 5 wave sequence off a major low, a retrace sets in BUT then a second 5 wave sequence ensues that goes beyond the top of the first 5 wave sequence. That means that it is highly likely that, after a drop in yields into say the mid-5's, long rates will then start rising again and then will likely move above 7%--bottom line, as I see it, we have an excellent window of opportunity to make new highs in the major stock averages but after such new high we are then VERY vulnerable to a much more serious % correction. My 2c
