HiTech:
Thanks for the vote of confidence. I've been tarred and feathered so much lately (much of it deserved), that it is a refreshing change. I am busy working on an organized format to present daily ideas to the thread, and hopefully it will be a thought starter for some. In the meantime, I'll give one last viewpoint of where I see the market.
From the July 20th highs, which I do believe represented the end of the 16 year bull market from 8/82, We've begun a very long term ABC correction. When I say longterm, I mean very longterm. The only modern day models that can give us a glimpse into what it should be like are the '29-'42 period, and the '66-'82 period. Large Scale ABC corrections occupied the entire time frames from their respective peaks.
In '29, "A" began from the peak, and ran into early '33's lows. Then the B wave up began, and took the market higher into '37. Then C down took over, and finished on the lows in '42. In '66, "A" began from the January peak, and completed at the lows in late '71. Then the B wave ran from there into the '76 highs (3-3-5 expanded flat, with the B of B wave being the lowest price point of the entire correction). Then C completed itself from '76 to 8/82, wrapping up the 16.6 year correction.
Important points about these two supercycle corrections are that most of the price damage was done in the A wave (as the bubbles first popped). The "'29 crash" occurred in the 1st wave of A (then after the wave 2 rally, it really got ugly over the next 2.5 years). The 1st wave of A (A being a 5 wave move) in '66 brought the markets down 25% from their peak. In '29, the same 1st wave of A leveled the markets by 47%. This Supercycle correction that began on July 20th has in my opinion much more similarity with the '29 debacle, due to the fact that it appeared to occur at the end of a GrandSupercycle. There is in my mind a strong probability that this current one did too.
So what does all this mean to us now? Well I have us still in the 1st wave of A in the current Supercycle correction. Thus far, we have seen an 11.6% decline at its lowest point on Wednesday (currently at 8.7% off the peak.) Within this 1st wave of A, which itself subdivides into 5 waves, I have us in the 4th wave (which is of course an up wave in a 5 wave down move). Within this 4th wave (which is, itself, a 3 wave or abc move), I have us in the b portion, which is what that selloff was about this afternoon. this b portion may have a little unfinished business on the downside first thing Monday, but then, we should have a "c" wave up of 4, which will bookend the "a" wave of 4 rally that we experienced from early Thursday morning's lows to todays highs. That means this "c" wave of 4 rally SHOULD RUN INTO TUEDAY. Once the c wave of 4 is completed, we will then have completed wave 4 up of 1 of A, and WILL BE READY FOR WAVE 5 DOWN OF 1 OF A. That down wave is not to be taken lightly, as it resulted in the bulk of the downward action in '66 and '29 (yes, the '29 crash occured during this parallel phase).
From the 7/20/98 Peak:
Wave 1 of 1 of A took 4 trading days to complete (7/20 til 7/24). Wave 3 of 1 of A took 4.5 days to complete (7/30 til 8/6). This means Wave 5 of 1 of A should take from 4 to 5 days to complete, unless it contains an extension (making it even more damaging to the downside). I don't have specific projections as yet, but am looking at a range between 900 and 1020 on the SPX for this wave 5 of 1 of A. It will probably just be completing as the President gives his testimony on the 17th (glad he's gonna get alot of the credit for the coming debacle).
In summary, my call is this: A dip first thing Monday, depending on how severe the drop is in the Globex Session from Sunday night, and the nature of any possible recovery from that drop. 1085 (futures) should contain any slide in the overnight, as well as any residual weakness on Monday. Then we move higher into a last gasp rally that will run into Tuesday, hopefully up to the 1120 area SPX, but anything over 1100 would be nice. (Note: if at any time on Tuesday, prices find themselves lower than Monday's low, I will consider Wave 4 complete, and Wave 5 Down of 1 of A as underway, with or without a last gasp rally having occurred). So I will be looking to establish shorts into strength on late Monday and Tuesday, and will look to add to them as Monday's low gives way, and as this past Wednesday's low is taken out.
Continued higher highs past Tuesday, 8/11, or a run beyond 1135 SPX would void this read and scenario. Otherwise, I'll be playing it wide open.
Regards,
David
P.S. How are you set up for upcoming action? |
