Keene Little : 3/2/2008 11:17:24 PM
Monday's pivot tables: Link
Friday afternoon I had shown and discussed the bearish wave pattern possibilities for SPX, using the daily ( Link
) and weekly ( Link
) charts. Whether we're set up for an immediate leg down, or get a bounce (or sideways consolidation) over the next couple of weeks first, the pattern is not a pretty one for the bulls as the market could be on the edge of a steep cliff at this point. A break below 1317 would confirm the more immediately bearish scenario.
Using the NDX I want to show the possibility for "just" another leg down before setting up a larger correction, probably into June. The daily chart shows the consolidation since the January low as a 4th wave triangle (typical pattern for a 4th wave correction), shown in dark red: Link
A break below 1715 would confirm the 5th wave down is in progress. At that point a downside target for the move would be near 1550 where wave 5 would equal wave 1 (wave 1 being the initial drop off the October high). That 5-wave move would then create the one larger degree 1st wave down. Doing the same thing I did with the SPX weekly chart, this is how the bearish wave count would likely unfold for NDX over the next 18 months: Link
The downside Fib projection at 1550 is very close to the January 2004 high at 1560 (where the big rally off the March 2003 low stopped) and a likely support level. Completing the larger degree 1st wave would then set up a correction of the decline from October so perhaps back up to about 1870 by June (as wave 2). From there it would then roll back over for a steep decline back down to the October 2002 low by the end of the year.
The ultimate low in 2009 could be 400. That would mean NASDAQ back down below 700 (1994 low). This is based on the long term EW pattern and where a typical retracement of a parabolic move would finish. The October 2002 low was 1108. I know many will poopoo this projection and that's OK--I must admit it's a bit hard for me to believe as well. But the longer term wave pattern is quite clear about what the downside possibilities are from here. I offer it as food for thought in your personal financial planning.