The markets meandered sideways all trading day long today, until approximately 2:00 PM EST when the markets conducted a SHARP decline into the close. The NDX broke BELOW the 1455 level, that I discussed on Saturday, which NEGATES the “potential” smaller degree Contracting Triangle that was possibly forming from the June 8th HIGH of 1496. As the NDX moves LOWER and places further and further distance from the 1496 level over the coming days, the “probability” will increase greatly that the 1496 inter-day HIGH was the completion of Wave-(c) of an (a)-(b)-(c) Wave 2 Correction that began from the March 24th inter-day LOW.
One way to “confirm” that the rally from the May 17th LOW to the June 8th HIGH was a “completed” five-waves of Wave-(c) is to watch for a break of the (.786) retracement level from the 1496 HIGH on June 8th. The (.786) retracement level is at 1398.90. Any DECLINE upto and including 1398.90 can still be considered a smaller degree “correction” of the previous five-wave movement from the LOW made on May 17th to the HIGH made on June 8th. Note that the (.618) retracement level is at 1419.65, and will likely provide some short-term support. But a “close” BELOW 1398.90 would ALL but NEGATE the possibility that the DECLINE from 1496 is “corrective”. While a “close” BELOW the May 17th inter-day LOW of 1372.46 would eliminate any doubt that the Larger Degree Wave 3 of C was underway.
A “close” BELOW 1398.90, over the next few trading days, would also break BELOW the ascending channel that has contained this entire rally since October of 2002. Note that this is an ascending channel, so that BREAK POINT rises with each trading day.
Note also, in the NDX, both the 50-day MA and the 200-day MA are roughly at 1445. A “close” BELOW the 1445 level will be the next sign that this market is starting its Next Leg down.
Also note today the DAILY Slow Stochs crossed-over and are heading DOWN.
In conclusion the levels to watch over the next few trading day, in descending order, are 1445, 1419.65, and then 1398.90; each “close” BELOW these levels is further and further evidence that the BEAR is BACK; and will “accelerate” its DECLINE once it BREAKS BELOW the ascending channel that has contained this entire advance since October of 2002. If on the other hand the markets can put together a succession of rallies (with some volume for a change) and exceed, in ascending order, 1496, 1508, and then 1520; I would have to declare the BEAR is DEAD. So we wait for the market to tell us what has been really happening since October of 2002, Corrective Wave or Impulse Wave.
I am keeping my STOP LOSS at 1520 in the NDX for the next few days.
Currently, I have a position in the Rydex Venture (RYVNX) Fund, established on 04/12/04 at $24.92, 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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