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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Donald Wennerstrom who wrote (40823)	10/11/2008 4:51:57 PM
From: Return to Sender	2 Recommendations Read Replies (1) \| Respond to of 95572

Amateur Investors Weekend Stock Market Analysis (10/11/08) amateur-investors.com The Volatility in the market is as high as it can get as the Volatility Index (VXO) rose over 100 on Friday which hasn't occurred since October of 1987. The 5 minute chart below shows how ridiculous this market has been recently with extremely large moves within a very short period of time. In fact on Friday there were two 800 point upside moves (points D to E) that occurred in less than 45 minutes. The late day turnaround on Friday has some people convinced that a major Bear Market bottom has occurred, however, although it could be a short term bottom I believe it's not the real Bear Market bottom based on Elliot Wave Theory. It appears the S&P 500 is exhibiting a longer term Bear Market Elliot 5 Wave Pattern. For those not familiar with an Elliot 5 Wave Pattern they can occur in both Bull and Bear Markets as described below. Typically we are used to seeing Elliot 5 Wave Patterns evolve in a Bullish environment where Waves 1, 3 and 5 are to the upside will Waves 2 and 4 are corrective to the downside. Once the 5 Wave Pattern completes itself then this is followed by an ABC type correction to the downside. Meanwhile Elliot 5 Wave Patterns can also occur in a Bearish environment as well and trends the opposite way such that Waves 1, 3 and 5 are to the downside while Waves 2 and 4 are corrective to the upside. Once the 5 Wave Pattern completes itself then this is followed by an ABC type rally to the upside. If we take a look at a current chart of the S&P 500 it appears that it's exhibiting Wave #3 at this time which may or may not be nearing completion in the short term based on Friday's action. Keep in mind once the 3rd Wave ends this will be followed by a corrective 4th Wave to the upside before the final 5th Wave to the downside occurs. This whole process could still take several more weeks before the 5 Wave Pattern completes itself. Meanwhile if we take a look at a long term chart of the S&P 500 going all the way back to the 1980's a few things really stand out. First the S&P 500 is exhibiting a very bearish looking Double Top Pattern which looks like the letter "M". The second thing to notice is that there is a longer term upward sloping trend line (yellow line) that originates from the low made in 1987 (point A) that comes into play just below the 800 level which intersects with the low made in 2002 (point B). Here is why I think it will be important for the S&P 500 to hold support at the 770 level in the weeks ahead. For example let's look at a chart of a stock (CTX) which formed a Double Top pattern from 2005 into 2006. Notice once CTX failed to hold support in the middle of its "M" pattern (point C) it continued much lower during the past few years. This is why it's going to be extremely important for the S&P 500 to hold support near the 770 level as a break below this level could lead to a much bigger drop in the longer term. As far as the near term the S&P 500 rallied up to its 20 Day EMA (blue line) near 936 using a 60 minute chart but then stalled out and reversed to the downside near the close on Friday. Thus in the short term one of two things may happen as either the S&P 500 will retest the intra day low made on Friday at 840 or it will rise above its 20 Day EMA and make a significant move up to possibly its 50 Day EMA (green line) near 1000. As for the Dow it rallied up to around 8800 which was very close to its 20 Day EMA (blue line) on a 60 minute chart but then reversed to the downside on Friday at the close. The key thing to watch early next week will be if the Dow can break above its 20 Day EMA or not. If the Dow can rise above its 20 Day EMA then it could make a quick move up to its 50 Day EMA (green line) which is nearing the 9400 level. On the other hand if the Dow is unable to rise above its 20 Day EMA then we could see a retest of Friday's intra day low around 7880. Finally the Nasdaq rallied up to its 20 Day EMA (blue line) as well but stalled out near the 1680 area Friday afternoon. Just like the Dow and S&P 500 further upside in the Nasdaq will likely depend on whether it can rise above its 20 Day EMA or not. If the Nasdaq can break above its 20 Day EMA then look for a rally up to its 50 Day EMA (green line) near 1800. Meanwhile if the Nasdaq fails to rise above its 20 Day EMA then it could retest Friday's intra day low near 1542.