On Monday, and again repeated on Wednesday, I stated, “ If this is the correct interpretation of the wave count in the NDX”. The reason I said that is because the NDX could be counted in three ways, as of Wednesday March 31st:
1) The decline form January 20th had completed Waves (i), (ii), and (iii) at the 1368 LOW; and rally that we are in was corrective Wave (iv) which MUST not exceed 1461 to continue to be the correct wave count. Note that I have changed the Degree notation from Wave 4 to Wave (iv). This was the primary count I was working towards.
2) The decline from January 20th had completed Waves (a), (b), and (c) at the 1368 LOW; and the rally that we are in is the early stages of a larger degree Wave (v) from a Impulse Wave that started at the LOW of October 10th, 2002.
3) However, there is a third wave count that is STILL valid at the current levels of the markets. It is also the “higher probability” wave count in the DJIA and the SPX. This wave count suggests that the decline in the DJIA, SPX, and NASDAQ, and NDX from their respective 2004 HIGHS to their “common” LOWS on March 24th have completed Higher Degree Wave 1 for ALL of these indices. That would indicate that ALL these indices have fallen in line into the SAME wave count at the Next Higher Degree; a common occurrence. If this is correct, then the rally over the last eight (8) FIB trading days is Higher Degree Wave 2 unfolding and is near completion.
So what needs to happen to begin ruling out these various wave counts:
1) The first wave count is already ruled out when the NDX exceeded 1461, and why I had the STOP LOSS at that level.
2) The second wave count which is currently valid, and will remain so until the NDX moves BELOW 1445 or better yet 1430. If the NDX continues HIGHER and moves through the recent HIGH at 1560, then we will have confirmation that the decline over the last several weeks was Waves (a), (b), and (c) of Wave (iv) of the Larger Impulse Wave that started in October of 2002.
3) This wave count, and the one that is supported by the DJIA and SPX, suggests that the rally since March 24th is Higher Degree corrective Wave 2. We will have confirmation of this wave count, an indication that it is completed, once the NDX moves below 1445 and better yet 1430. A NDX move below these levels would signal that Higher Degree Wave 3 is underway and will take the NDX to the 1155 level or lower before it is completed.
So in conclusion, I am in CASH until one of two things happens in the NDX:
1) Upon a NDX move above 1560, I will take a position in the Rydex Velocity (RYVYX) Fund.
2) Upon a NDX move below 1430, I will take a position in the Rydex Venture (RYVNX) Fund.
I will let the market tell me what to do.
I was STOPPED OUT of my RYVNX position, established on January 20th at $24.41, on April 2nd at $25.13 for a gain of 2.95 %. Disappointing considering I had a 20% GAIN just eight (8) trading days ago. Reminds me of the old trader’s saying, “ PIGS get FED, but HOGS get SLAUGHTERED”. I let myself get HOGGISH, and as a result the “boys” took back most of my gains.
Currently, I have a CASH position since 04/02/04 within the Aggressive Portion of the portfolio; while the Conservative Portion of the portfolio has been in Cash or Cash equivalents since 01/02/04.
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