Sunday, September 27, 2009

Dow Industrials Elliott Count Reviewed

Analyze This @ started publishing 2 months ago. So of course only those on my IM list received the opinions and market comments prior to July 27 2009.
Another look at the Dow and it's wave structure is critical at this juncture.

One of the early questions argued by Elliott Wave practitioners was where the Super Cycle 4th wave ended. Was it in 1974 at the 577 low or as is more commonly believed today, in 1982 at the 800 low?
In 2007 , using the 577 low, I targeted Dow 14,160 as a final Super Cycle 5 top. It was exceeded by roughly 40 points. The target was derived by using the common 5 = .618 of 1 through 3 (577 to 11,700 ) added to the Oct 2002 4th wave of lesser degree at 7286.  As turns it out the 5th wave was .621 of 1 through 3.

At that time I also targeted an initial collapse to between 7400 and 7100 as 50% of the move up from 577 to 14,200  AND a gross 50% pullback from 14200 respectively.  It was also the area of the 4th wave of lesser degree.  At that time very few believed it possible.

I also called for a bounce from those 7200 area  levels to between 9500 and 10,000 on the Dow.  From the 7200 level 9874 would have been a perfect .382 retrace up. ( I believe the highest settle in the last few weeks has been 9827) . And the 9800 level is the area of the 4th wave of lesser degree.

The Dow of course exceeded the 7100 target on the downside. In the moment I saw the selling panic as dynamic, stayed flexible BUT got very bullish equities on a clear 5 wave count down to the 666 SP Mar lows.

Of course now the Dow is in the previously assumed and targeted retrace zone. It topped in classic fashion:  terrible volume leading into it , abc wave structures, historic bullish sentiment, and HEAVY insider selling, a Fed announcement pushing to quick unsustainable fresh highs and a reversal close. Additionally there are confirming wave counts on other index s discussed elsewhere

It has had a potential 5 waves of minuette degree down from the 9917 high, but they may also be counted as a 1, 2, -1-,-2-.  This consolidation from Fri and over the weekend will tell  us where we are. An acceleration to new lows anytime Mon or early Tues prior to getting back above 9735, and we're likely in a 3 down (consistent with taking out a wedge support line ).

And that is likely either within a 3 down of Super Cycle Degree or a C of Super Cycle Degree.
What targets can be generated for that? How about C=A , the 7760 points from 14200 to 6440? Puts the Dow at 2157, ALSO an 85% pullback from 14200.

Sound bad? How about the 4th of lesser degree ? That would be the previously mentioned 577 (or is it 800?)

Lets get really optimistic. How truncated could the next wave down be? If the C or 3 = .618 of A or 1, that targets 5122. A gross .618  pullback from 14,200 targets 5424, still a LONG way down from here.

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