FibMaster update DOW, S&P, NAZ

[FibMaster]

Please post any comments, suggestions, or your own opinions about the indexes in this section of the TraderZine forum.

The Jan 22nd 2008 update on the DOW, S&P and Nasdaq is available here;
http://www.fibmarkets.com/members.html
(free registration required at that link)

-Neal (FibMaster).

[Llamedos]

Hi Neal

Seeing as you asked well, I thought I'd put my bit in. Hopefully I'll not get too far ahead of myself and everyone else this time! :)

I listened to your broadcast earlier (yes I know it was a day late) and it was spot on regarding the bounce. Though what I think you referred to on another chart as a 'dead cat bounce'.

And talking of opinions, here is mine (barking mad as it may be, we hope!) -

It appears that the market was stopped yesterday by the SK made up from the .382 from the low of Oct 2002 and the .618 of the low of Oct 2004.

However this may not be the last of this down trend. As I have said in another thread I have studied Elliott wave and feel that we are in the 3rd wave of the wave C of an irregular top. Yes that was the same type of correction seen in the Dow back in the early part of the last century.

If I am correct the progression may be as follows -

We should have seen a correction (the 4th wave as started yesterday) up to about 12600-12700 in the form of wave A. But much of that seems to have possibly taken place during the European hours. The FTSE has reacted up to a kind of corresponding place on its chart. It seems most likely to be a flat correction and so the market should come down and form a double bottom at yesterday's low. Then is should go back up to 12600-12700 again.

After this there should be a 5th wave which will likely take us lower. But that is only the 5th of the third. After that, another correction to about 12600 (most likely a flat so the market may be range bound for a while. And then onto the 5th wave down.

If you think this is all a bit mad. Consider these facts.

The guidelines of Elliott wave call for the wave C of an irregular top to be a Fibonacci ratio of wave A. This is usually 1.618. However, in the 'great depression' (if my memory serves me correctly) the third wave was 2.618 of wave A.

Below are some calculations. The extrapolations in (3) are carried out using a technique I have developed to 'correct' Elliott waves. I have found it to be surprisingly accurate on more than one occasion.

1) 2.618 of the wave A equals 3937
2) The start of wave C minus 3937 equals 10260
3) If my extrapolations are correct the potential end of this down wave could be anywhere between 8707 and 10058. The centre point of which is 9382. The .382 retracement of the recent high and the low of Oct 1987 is 9391 and the .618 of the same high and the low of Oct 2004 is 9370.

Let's wait and see!!

[FXtrad]

Interesting post about Elliott Wave. Thanks for that. Let's see how it plays out. The little bounce we have had is a good start, but can it last?

I also suspect more to the downside, the average investor is not done with panicking yet! More sellers waiting for any bad news.

[Llamedos]

Hi All

Well, if any of you are still with me on this yellow brick road to insanity (or was that Alice down the rabbit hole?), here is instalment 2 of my take on the Dow.

Before I go on I'd just like to clarify a couple of things for those of you who may have been confused by my last post (#2).

Firstly, the chart that I am referring to is the cash Dow (INDU) as this is the market that I study and trade. And secondly, if you are familiar with the tenets of Elliott wave, you will have heard of the main one raised by doubters of the method. It is - 'Put two Elliotticians together and ask them for an analysis of any given market and you will get 5 different hypotheses. Regrettably this is true! Such is the nature of the beast. Only in my case I don't need another Elliottician. I can confuse the situation all by myself, as you will read below. Trust me - Elliott wave analysis is not an ideal method of analysis for a Libran! :D

So, in the previous post I put forward the idea that the market was going to form a double bottom at 11634 (which it did) and then it was going to go up to about 12600-12700 – which it has – sorry but it overshot by 67 points. I hope no stops were hit. I also said that what was possibly forming was the 4th of the 3rd and that I reckoned the market would come back down to the double bottom at about 11634. Well, here comes the first instance of my Elliottician’s license - I am not so sure that this is the 4th of the 3rd. It may actually be the 4th wave in its own right. Not that this will affect the figures too much as 4th waves tend to start and end at about the same place irrespective of the degree they are in.

So, over the next few days I expect (hope?) to see the market move back down to the 11600 level in a series of three waves, 2 pointing downwards (the first is in place from yesterday) which will be interrupted by a corrective wave up (this may be formed by today’s action). So what are the numbers that go with this? I think they are as follows.....

As mad as this sounds, the recent top (at 12767) may not have been the actual 'top' had the weekend not intervened. The real top (according to the progression of the waves that followed yesterday) should have been closer to 12800. And extrapolating the rest of the series brings us down to the low yesterday.

And where to from here?

If I am somewhere near the mark, the correction I mentioned earlier should take the form of a zigzag (similar to Harry Potter's scar) in an upward direction to somewhere in the region of 12500. Coincidentally, there is SK at the 12493-96 level (when Fib retracements are calculated using 'my' corrected highs and lows).

Once this has topped out the market should then drop to (at least) the 11630 area to complete the wave B of 4 of 3 (or wave B of 4) or it may even confound us all (well me at least :confused:) and barrel right on through the 11630 support and turn out to be wave 5. This would be because the afore mentioned wave 4 was a zigzag and not a ‘flat corrcetion’ as is being presumed here. There I told you I didn't need another Elliottician to help me! :rolleyes:

I hope this has at least raised some eyebrows if not some interest. I look forward to your comments - derisory or not. :eek:

[FibMaster]

Only in my case I don't need another Elliottician. I can confuse the situation all by myself, as you will read below. Trust me - Elliott wave analysis is not an ideal method of analysis for a Libran! :D


I hope this has at least raised some eyebrows if not some interest. I look forward to your comments - derisory or not. :eek:

Great post and entertaining too. I'll check back to see how the chart progresses.

-Neal.

[Llamedos]

Hi all - welcome to this week’s edition of 'The Never Ending Story' and 'Fantasy Island' all rolled into one. Welcome too to the world of a tormented Libran and its corresponding ifs, buts and maybes.

Just to recap on my last missive (and clarify a few of the 'buts'), I said the market would retrace down to the 11640 area in a series of 3 waves with the first being in place at the time of writing. Well, have you ever notice how the market takes a sort of perverse pleasure from seeming to say - 'Na, na, na. I'll show you Mr Smarty pants!' - soon after you have made public your well thought out and carefully calculated predictions? Yes, it did it to me last week with, what we Elliotticians call, an extension. This is something provided for by the very understanding Mr Elliott and is designed so that us Elliotticians can hide behind it when the market doesn’t do what we tell it too. Rather like some kind soul throwing you a blanket over you a few seconds after you have failed to resist the urge to show your bare ar$e in Woolworth's window on a Saturday afternoon.

Anyway, moving on from what I do for fun and back to that extension. As I said last time the bottom should have been in place at 12264 (the low of the 5th Feb) but it would seem that the market decided to extend its third wave a bit and put in the fifth wave a bit later. Usually a sign of market strength in the direction of the extension.

So, where do we go from here? Back to my dark and very safe cupboard if I had my way. But, no! Woolworth's window beckons.

As you will have learned from my last post I have a habit of 'correcting' the waves to fit them into some sort of logical pattern (logical to me anyway) and here is this week’s attempt ..............

If we take it that my calculations were correct last time and the 'correct' top at the beginning of the month should have been closer to 12800 and the bottom I mentioned on the 5th Feb was the 'correct' bottom. Taking 50% of that down move and adding it to 'my' bottom (there's that ar$e thing again - do you think I need therapy?) will bring us to 12532. Not a million miles away from 12572. The high put in on the 13th.

Having just reread that last paragraph I am sure there will be a number of readers out there that are seriously questioning my sanity. The fact that I give Elliott wave any credence at all is enough for some people to condemn me but invent market turning points in places where there are none and then to actually risk money on these fantasies?........... Well, to put those kind and caring people's minds at rest, I don't actually trade Elliott wave. I just use it as a support to my other analyses. That said, and just as my doubters are feeling comforted by my assurances, here is another of my theories that I've never found anyone else brave enough to put into print on a public forum.

I think the waves correct themselves.

Now you KNOW I've really gone over the edge, don't you? But here is my logic.

I have found this kind of occurrence in all kinds of markets (especially Forex) on many occasions and this last down move is just another one.

If we take it on faith that the real top should have been 12800 and the real bottom should have been the low of the 5th Feb at 12264. The fact that, on the 13th, the market turned about 40 points away from the accepted Elliott wave (and the much maligned Fib point!) of 50% of the difference between these two points is, I feel is rather enlightening. Just keep that in mind for use in a few moments while I explain some more about Elliott guidelines.

Generally a 50% retracement of this nature - 2nd waves or B waves of a 4th wave correction as is the case here - take the form of a zigzag (like Harry Potter's scar). However, there are guidelines in place that allow for either the first or the third part of the zigzag to be (generally) 61.8% of the other. I've found that it is usually the third part that is the shorter of the two.

This brings us to two separate points in the tale as follows.

Firstly, I believe it is this kind of occurrence that accounts for some of the confusion expressed by non-Elliotticians as to the unpredictability of Elliott wave analysis. How can you rely on any form of predictive method that accepts a supposedly even looking zigzag when it looks like an uneven impulse wave?

And this brings me onto the second my two points. I quick glance at the wave from 12069 up to the top at 12572 on the 13th would have the vast majority of Elliotticians asserting that is the start of a major up move in the form of an impulse wave, rather than a 'correcting' corrective wave in the form of a unbalanced zigzag.

And it is precisely this kind of observation that brought me to the conclusion that the waves correct themselves. As in the case over the last few days, the top should have been at 12800 and the bottom should have been at 12264. The proper 'top' of the corrective zigzag should been at 12532. The actual top being 12572. As I said - not a million miles away.

So the bad news is that I still think there is a very good chance we are going to see lower lows in the not too distant future. How low exactly is anybody's guess but mine would be that this is the fourth wave - possibly a zigzag correction and the next time we will see these levels will be a while away.

Do I really think that this is all possible? Well we’ve got a 50/50 chance haven’t we? Am I going to trade all of the above? What do you think I am - mad?

Anyway, I'd better stop now otherwise this post will get rejected under the administrator's 'Anti-flooding' policy. I hope you enjoyed reading this and it gives food for thought.

[lori]

HAHA! i LOVE it! that was a great update. i dont follow elliot wave theory; i read some about it in a book once, but virgo's need things to be much more precise! so i ditched it--WAY too many if's and but's! this update made things as clear as mud for me! (i have enough of that) however, i like reading ur updates and checking them out, so thanx. and the woolworth activity---do it every sat! --lori

[Llamedos]

Hi All - I trust you are keeping well. Me? I’m fine too, thank you for asking. Except, of course, for this weekend insomnia - 4.30am this morning. Never mind, it gives me a chance to type my weekly guess at the Dow.

Before I start, however, I'd just like to ask you all an important question. The answer to which will be of great interest to me.

Does anyone know if you can get such a thing as a neurotic chicken? :eek:

I know this may seem to some to be less important than where the world's markets are going. But, in my small universe, the chicken is king - well according to my wife and children they are. I’m way down in the pecking order. :(

We've only got four chickens (or should I say hens?) - just for the eggs, you see. But one of them has taken to making a hell of a row an hour or so before dawn every morning. It is a repetitive sound that hints at some sort of distress and I sure upsets the rest of the chickens no end.

Does anyone think there is still hope? Should I introduce Prozac to their morning mash? Any suggestions or comments would be welcomed.

Anyway – on to the Dow. Did I say last week that the markets have a tendency to thumb their nose at you just as you are sure you've got them sorted? If you doubted it then, this last week’s action must have proved the point to everyone's satisfaction. Only a really dedicated Elliottician would still be searching for the waves as described by Ralph Nelson surely? Either that or someone that suffers from insomnia and desperately needs something to do during the wee hours. Well, on both counts, it's Llamedos to the rescue. Just give me a moment to find a telephone box so I can transfer my underpants to the outside of my trousers. Hhhhmmmmmmm - doesn't bear thinking about. :rolleyes:

The Dow. What has it been doing all week? I think much the same as I said it would last week - but in a most erratic manner. Please let me explain.

Last time I banged on about that extension and how the waves correct themselves. This time it's going to be more about the fact that Elliott waves do not need to be picture perfect in order to be technically correct. But, as in the case of an RRT, there are some that are much better looking and more preferable to trade than others.

If memory serves me correctly and just to further your (unwelcome?) education in the laws of Elliott wave, I would like to take this opportunity to mention that there are only 3 'rules' that govern this most complicated of studies.

Doh! So how can it be complicated then? If all you need to do is learn 3 rules and be able to count up to eight!

They are as follows -

1. Wave 2 can never retrace back past the start of wave 1.

2. Wave 3 can never be shorter than both wave 1 and wave 5.

And this next rule is the one that causes me most concern these days and, yes, I am going to possibly attract the wrath of the classic Elliotticians by putting forward another new theory of mine - this time by changing one of the cardinal laws.

3. Wave 4 can never overlap the end of wave 1.

Well I think it can and does on a regular basic but only with conditions applied. Well, one condition and that is that the bar creating the extreme of wave 4 cannot (shouldn’t) close inside the body of the candle that forms the end of wave 1 – well, not by too much anyway (that should cover most examples! :D). The question that springs to mind then is - in what time frame? Well that can only be left to the individual analyst to determine.

My justification for this preposterous suggestion is as follows. In Elliott's day, when he was putting together the Elliott wave theory, I don't believe there was the kind of volatility that we see in today's markets. And so it was less likely, and probably unheard of, to see a retracement of that magnitude after an impulse wave as strong as the 3rd wave would be. Add to that the fact that, what appears to be a wave 4 is often turned back after ‘bumping’ into the end of wave one. But there is often an overlap to accompany the repulse.

To explain this more clearly I have attempted to upload a couple of charts showing what a 'normal' wave progression should look like (in my opinion) and an example of an extreme retracement by a 4th wave as we saw at the close yesterday. I hope I have more luck in saving the charts than some other members have had.

I've just finished 'doing' the charts and it was considerably harder to find a 'good' wave to use. So you'll have to excuse the lack of perfect form and ratio. And also the fact that I've used the same basic section of chart for both examples.

To any Elliotticians out there who are condemning my wave count – yes, I could offer several other alternatives too. But to do so would just muddy the waters even more, eh Lori.

So, after all of this, where is the market going next week? In my opinion – still down. The same 'down' as I expected to see last week. Though hopefully in a more straightforward and speedy manner - yeah! I should be so lucky.

Down to where - you may ask - if you are still awake. To the low at 11640 or thereabouts – maybe even further? I've done the calculations, I’ve corrected the waves and it all works out – on paper at least. Whether it’ll all come true is anybody's guess. We’ll have to wait and see.

OK, I reckon I've probably outstayed my welcome again so I'm off. The sun has come up over the horizon and there are chickens to let out.

Until my next bout of insomnia............................

[Llamedos]

Hhhmmmmmmmmm...........well I did put a note on the second chart to the effect that 'time would tell if I was right or not' and it didn't take 'time' very long to let me know exactly where I stood! :o

Berlioz wrote, "Time is a great teacher. Unfortunately, it kills all its pupils." I wonder which will come first in my case. Or would it just be better for me to realize that it is better to keep my mouth shut and appear stupid rather than to open it and prove the fact.

I could offer several different options for the potential future of this Dow chart but, in reality, there are too many for them for this to be a serious option. Apart from that, if any of them were to be somewhere near correct, I could be accused of doing nothing more than 'flinging enough sh1t at the wall so as to ensure some of it sticks'. And we don't want that now do we?

So, it's back to my nice safe and darkened cupboard for a while. Woolly’s window will have to wait.

Nothing on the chickens then......................? Oh well, just thought I'd ask.

[Llamedos]

Well it would seem that time hasn't killed off this pupil yet and, no, I haven't learned the subtle advantage of keeping quiet either! Woolly’s window awaits. :eek:

So, at the first sign of insomnia, here I go again.

Last week the markets, once again, proved to me that just because I say it may happen (and if it does happen), it will happen in the market’s own sweet time not mine. Just because I want it NOW, doesn’t mean it will happen now. Sometimes the markets have other places to go before they agree with me. Perhaps there is a lesson to be learned there?

This time last week I said the market would go down and after much discussion on the various possibilities of the fourth wave, it went up! Admittedly, after going up it did come down - most of which happened on Friday. Now that was a wave 3!

That, however, doesn't preclude the fact that I was totally confused on the wave count last week. They just didn't seem to make sense - not even to me, and you all know just how far I can stretch the sensibilities. That was until I remembered to look around at the other indices, principally the FTSE. I can't for the life of me understand why I don't do this more often. After all, while the markets do have their 'RTH', they are still affected by what happens to the other indexes being traded around the world during their closed hours. So after I 'remembered' this and did a bit of digging I discovered that the waves do make some sense (to me) after all and my faith was restored.

It was a complex wave 4.

Don't even ask me to go there! There are innumerable permutations of the damn things and, as last week clearly demonstrated, they confuse the helloutofme. So I'm the last person you want to listen to. One of these days I may even learn to stop trading them. I’m sure I’ll be the richer for it.

So where to now? Or is this the bit where I ought to keep my mouth shut and just appear stupid?

Nooooooo, can't do that - so here I go. :rolleyes:

Still down - generally. But, its downward path will be interrupted by the odd retracement. In fact, a correction may be the opening gambit on Monday. A retracement up to about 12400-12450 and then a fifth wave down to 12050'ish. This will be in line with the low from 11th February.

That should be the completion of wave A of wave B of wave 4. And just so I don't rush on, that should be enough for next week. More on waves B & C of wave B of wave 4 next weekend - the latter stage of this wave 4 correction down to the low around 11600.

Are there other potential options according to the rules of Elliott wave? Yes, several, but I think the one I have described here is the most likely. Again, time will tell!

And just because I can (learned how? :cool:), I've attached a chart showing my expectations.

'Til the next time.

[Llamedos]

Well, wasn’t it good of Ben and his buddies to come up with a rescue plan and shove a few quid into the pot to help the banks? Just a tad too early for the markets to reach the bottom at 11634. But still, it did the trick – for now. If they had waited for another day I’m sure the market would have got right down there. Do the maths yourself and you’ll see that the length of the first section of the zigzag wave (from 12756 on 27th Feb to the low at 12032 on 4th March) equals 724 points. Subtract this from the top at 12349 on the 5th March and it brings us down to 11625. Not a million miles from the bottom at 11634 on the 22nd Jan.

Anyway, if you’ve looked at the chart I posted last time (post #10) you’ll see that the markets have pretty much followed the path I predicted (not that I’m gloating or anything). Well it almost has...................but you can’t expect perfection everytime. :D

Point 4 turned out to be more a ‘squiggle’ than a retracement (wave 4’s do that – I think I’ve mentioned it before) and we were 50 points shorts of point B. But you must admit that the 5-section wave down from the high at 12349 on the 5th March until Ben et al’s intervention was pretty conclusive. Perhaps there is something to this Elliott wave stuff after all!! :eek:

So, where to now? Up for a while is the short answer to that. But don’t go putting on a trade and then shooting off on holiday. It should only go up to the recent highs at about 12700-12850. A classic five-section wave C signally the end of this wave 4.

And after that – down. Down to about 11200 or thereabouts in a 5-section wave 5. Which should show the bottom of this correction. Not as bad as the 8707 to 10058 area I mentioned back in post #2 but bad enough and certainly something to aim for in our trading.

It is also the area of the 3/8 retracement calculated from the recent high at 14198 and the low way back in April ’97 at 6356.

After that ..............well next time I’ll explain my other chart. My ‘what if’ chart. What if this is just the start of a really big correction? After all, everyone is saying that the economy is going to be in a poor way for a couple of years and surely it ain’t gonna take that long to get down to 11200? So, what if?

Let’s wait and see!!

[Llamedos]

Well the Dow hasn't exactly been behaving all that well over the past week. But, on the other hand, it hasn't done anything that would negate my reckonings either. I still think it is still on the way to the 12700/12800 sort of area in the short term. But I must say, it is getting there in the most erratic and round about way.

The main thing that is confusing is the depth of some of the retracements. Is it my imagination or has anyone else noticed that the markets seem to be in a hurry to get to the downside these days? Up moves only seem to happen when the Fed intervenes. But when those exaggerated and over played moves are corrected, they are corrected quite severely and to the extreme. Even more so than would have been reasonable to expect in light of the prior up move. Hhhhmmmmmm, or maybe it's just me! :rolleyes:

Anyway, on the short term prediction front there's not a lot new to predict. Like I said earlier, I still think the market is headed up to the 12700/12800 area. Though a short fall of this target is a real possibility if the current economic woes continue to act as a brake on any upward movement. We should find out over this next week.

But onto something altogether wilder and more outrageous than just about anything else I mentioned in this thread. Yes I’m referring to my 'What If?' chart that I posted last week. And, as promised, here is my explanation and the logic (did I really say LOGIC?) behind these claims.

Now this is really hanging it out in the wind to get it shot off............. If Ben even thought that this was possible I reckon he'd take early retirement in a hurry just so he didn't get the blame for it. ;)

Can the Dow really drop to 7000/8000 over the next year or so - I think it can - and worse still for the world at large, it may very well happen. Doesn't it make you feel all warm and fuzzy to think you can make money by shorting the market?

Anyway, as the ‘What If’ chart shows we have been happily making our way through a predominantly bull market for the last 30 years or so. Yes there has been the odd correction but, in the main, it has been up.

This is how I see it as an Elliottician -

Not to dwell to long on the early years, if we take it that the start of wave 1 was around 500 and the recent top at 14198 as the end of wave 5, the 'calculated' points at which the waves should have ended are pretty close to actual highs and lows shown on the chart.

The end of wave 3 is calculated to have been somewhere between 10500 and 12200. The actuality was 11749 in mid January 2000.

The end of wave 4 should have come out at 6900 and 7900. The bottom, as I see it, was 7197 in mid October 2002.

And then we have the COP of that up move that ended in the most recent high at 14198 in mid October 2007.

So where should the ensuing correction take us - according to Ralph Nelson? It should be somewhere near a 50% retracement of the entire prior up move. That, ladies and gentlemen (am I being overly optimistic using the plural there?) would take the Dow down to between 7000 and 8000. What if?

What if indeed?

Is it possible? Sure it is. Are the present waves supporting this preposterous suggestion - sadly, yes! :(

Without going into the maths too deeply, a wave 2 is more often than not, a zigzag - yes, you've guessed it - like Harry Potter's scar. And, if the down move we have been experiencing since last year is expanded in my own inimitable fashion, it would take the Dow down to about 8000 - maybe a touch further. And when (if?) it does, just remember that you read about it here first. :D

And that's about that. Don't have nightmares. Remember, you can short the market too.

Til next time.

[Llamedos]

Well obviously insomnia strikes again and so it is time to ask, what has been happening in the markets? Much the same as I said would happen 2 weeks ago. Yeah, sorry I didn't post last week but there didn't seem much point. The markets were doing what I said they would, albeit erratically, and that was that. OK - gloating over for now!!

And the more important question - where to now? That really is the question - the answer to which will be very enlightening (to me at least).

I think I have mentioned before that I wasn't too sure whether this current consolidation between 11600ish and 12700ish is the 4th wave in this predominant 5-wave move down. Or whether it is the 4th wave of the 3rd wave.

Let me explain for the benefit of those that are interested. For those that aren't, buggerorff and go look at the Forex threads. You'll find a lot more sensible conversation there than you will here.

Sometime back I said that one of the cardinal rules of Elliott wave is that the 4th wave in a downward 5-wave sequence must not retrace to past the lowest point of the 1st wave. Well, in my view, the low of the 1st wave (in the cash Dow) was 12724 on 26th November. The close was 12743.

And the high of this latest consolidation (so far) is 12767 on the 1st February and the close was 12743. The same as the close of the day that gave us the lowest point of wave 1 back in November.

OK, at this point I’d better remind you of one of the numerous sacrilegious comments I have made in this thread and it was as follows –

I have come to believe that the current volatility in the markets is far more than would have been the case in Elliott's day. And so I think we cannot hold fast to that rule of the wave 1 wave 4 overlap anymore. That is not to say that we discard it altogether. No, not at all. We just relax it a bit to say -

Wave 4 must not close in the area of wave 1. And by that I mean inside the body of a candlestick. That would be between the open and close area to those that don't follow candle charting.

So, if my new definition of that rule is adhered to it does nothing to help us out of our quandary. Namely, are we in the wave 4 or the wave 4 of wave 3? Because, just in case it slipped by your attention - if so, please try to keep up - the close of the lowest day of wave 1 was the same as the close of the highest day of wave 4 at 12743.

Now this to me doesn't smack of coincidence. Two days - months apart - that represent two such important clarifying points in the Elliott wave method closing at the same price. And it’s not as if their transgression were all that extended. On the 26th Feb the market’s excursion into the area below 12643 lasted a total of a couple of minutes at the end of the day and on the 1st February it lasted from 15.05 to 15.16; a mere 11 minutes. Hmmmmmm - coincidence? No, I don’t think so.

So, as things stand, I’m betting that this is the wave 4 proper and that it is going to bounce off that 12743 ceiling and then start its journey south. If it doesn't I will have to reassess my expectations and my wave count. But as I've said elsewhere too, if it does turn out to be the 4th wave of the 3rd wave, it bodes worse for the Dow than the other option.

So that's it from me. Hopefully next week we'll know the answers to the questions and be the richer for them.

[Llamedos]

Well, last week seems to be a long way away. But, never mind, here we are again with a load of highly definitive, informative and precise if, buts and maybes that make up the ramblings of this Libran Elliottician. I also trust that the delivery will be more timely on this occasion and not subject to life’s anomalies. ;)

I must start by saying that the market really is in a very confused state at the moment. No, it's not all in my mind. I am filled with clarity and focus as are all those born under the sign of the scales. It is the markets that are in a state of turmoil - or at least I think they are - not exhibiting any concrete signs of future direction at all.

Just to give prior warning, this missive is going to be more full of the whys and the wherefores of the charts at this moment in time, rather than the direction they will take over the next week or so. So if you are looking for direction, all I can offer is the advice that they will either go up or down. And if you trade it on that basis, you won't go far wrong. Well, only by 50%! :eek:

In my last post I mentioned at some length this thing about the disallowance of a meeting of the distal end of the wave 1 and the same extremity of wave 4. Along with, of course, my views on the variation it has been necessary to implement in our modern day volatile markets. Well, it is towards this question that we must turn again.

Last time I said that I thought the current range bound action of the market was the main wave 4 of this down move. A fact that had since been shown to be incorrect due to the crossing and CLOSING of the current wave into the area of the wave 1 as first happened on the 18th April and has continued to be so ever since.

So that forces us to embrace the fallback plan and assume that this may be the wave 4 of wave 3. A possibility also suggested last week and, thus far, not negated to my satisfaction.

Yesterday was as close as it has come to throwing this wave-rider into total confusion when the market moved into territory previously occupied by the lowest day of the wave 1 of wave 3 on 18th December last year. However, the market shrank back from the challenge and so didn't fulfil my criterion.

But what if it does? What if the market closes above that mythical point, that line in the sand and continues to rise? Will it mean that we are out of the woods and back in the sunshine? Are the markets to rise to new highs? Nah! It just means that ‘someone' has been throwing lots of money into the system and given it temporary relief. I think we all know it ain't that easy.

However, if this does happen and the market returns to the record highs shown back in October 2007 I think we are just postponing the inevitable. The start of it will be what was described on national news the other night as an empty 'W' top. Not sure where they got that from, the BBC isn't renowned for having an adventurous or predictive nature. Whatever, it'll just mean that they are delaying the pain - IMH(umble)O! - if there can be such a thing. :D

For now, I'm still looking to trade the cash Dow to the short side (in the main) until such times as that line in the sand is crossed and confirmed. Until then, the upside has very limited attraction for me.

And just a quick personal note to all the lurkers out there. I don't know how many of you there are, but I'm sure there are a few. Well, it would be nice to have some feedback on this, or any other thread on the forum. We all have a great opportunity to learn from a very successful and knowledgeable trader and it seems to me that it is being wasted. 'Use it, or lose it' is an adage that springs to mind here. I know it is normally applied to other areas of life but in this instance I believe it to be very appropriate. It seems rather ironic that the most used thread on a Fibonacci forum is one filled with the gibberings of an Elliottician! So come on guys and gals, let's 'use it' so we don't 'lose it'.

The chart below is just an image depicting the 'line in the sand' as mentioned earlier. Open it up, print it out and, if you see the day chart close above that point over the next few days, sit back, close your eyes and imagine an image of me retreating to my small dark cupboard complete with comfort blanket in hand and determined not to come out again until the bogey man has gone away - or until next week – whichever is the sooner, when I may return with more unsound and irrelevant ramblings.

'Til then - ttfn.

[Llamedos]

Hands up all of you who thought I was mad when I mentioned the figure of 8707 in post #2 way back in January of this year? And step forward anyone that thought the chart that accompanied post #11 back in March as the ramblings of a lunatic! Today's reality makes those numbers seem tame. And all before the words 'credit' and 'crunch' or 'toxic' and 'debt' were ever seen next to each other. If it wasn't so serious, I'd gloat.


Can the Dow really drop to 7000/8000 over the next year or so - I think it can - and worse still for the world at large, it may very well happen. Doesn't it make you feel all warm and fuzzy to think you can make money by shorting the market?

So where should the ensuing correction take us - according to Ralph Nelson? It should be somewhere near a 50% retracement of the entire prior up move. That, ladies and gentlemen (am I being overly optimistic using the plural there?) would take the Dow down to between 7000 and 8000. What if?

What if indeed?

Are we at the bottom? I don't know is my answer to that but I fear we may not be. The funnymentals have taken control of the markets and we can only wait and see.

I'll keep watching, after all that's what I do, and I'll post here if I see some form of predictable pattern emerging from the chaos that is the market. You probably won't believe it but, heyho, what's new? ;)

One other thing. Has anyone actually seen one of these black swans I keep reading about in the press? I don't think they really refer to a rare bird at all. I think it's a representation of our great and glorious leaders. Looking all calm and serene above the surface, but paddling like heck below. :eek: