In Thursday’s trading the NDX moved higher in the morning and hit an inter-day HIGH of 1502.14, before giving it ALL up and “closing” at 1488.31. In Friday’s trading the NDX again moved higher in the morning, gave it ALL up into around 2:30 PM EST, and than had a rally into the final bell where the NDX hit 1503.91 before “closing” at 1498.38. The final surge, in both price and volume, in the NDX, NASDAQ, and SOX appears to be related to the rebalancing of the Russell 2000 Index that occurred at the close on Friday.
The DJIA and SPX on the other hand had a SHARP decline into the close on Friday. Both of these indices have traced out a smaller degree five-wave Impluse Wave DECLINE from Friday’s inter-day high; which indicates that Friday’s inter-day HIGH in both the DJIA and SPX may have completed their respective Wave-(c) of the next larger degree (a)-(b)-(c) Wave 2 correction since the LOW made on March 24th.
The inter-day HIGH on Friday in the NDX of 1503.91 is also rather interesting. The rally since the May 17th low can STILL best be counted as Wave-(c) of the next larger degree (a)-(b)-(c) Wave 2 correction since its LOW made on March 24th. The Wave-(c) within this larger degree Wave 2 will be made up of five smaller degree waves. A common relationship within a five-wave movement is for Wave-v to EQUAL Wave-i. In the NDX Wave-i of (c) was a Fibonacci 55.05 points in amplitude from 1372.46 on May 17th to 1427.51 on May 19th. For Wave-v of (c) to be “precisely” EQUAL to Wave-i of (c) the NDX would need to hit 1503.87. The actual inter-day HIGH hit on Friday in the NDX was 1503.91, before closing lower at 1498.38. So there is a technical argument that indicates that the correction in the NDX was completed at Friday’s inter-day HIGH; as found in the DJIA and SPX.
Since the DJIA and SPX look to have completed their respective initial Impulse Wave declines from Friday’s inter-day HIGHS, the markets should have a small corrective rally on Monday that will retrace a FIB portion of this initial decline. That corrective rally could also move the NDX up to 1512.75 where the larger degree Wave-(c) would EQUAL Wave-(a).
Next week promises to be pretty WILD in the markets. Particularly on Wednesday, where so much has been made in the press about the Fed FOMC Meeting and the Hand-Over of Power to the newly establishes Iraqi Government.
The market will SOON answer the Bull/Bear Debate as to whether the rally since October of 2002 was a Corrective Wave or Impulse Wave.
So, I am keeping my STOP LOSS at 1520 in the NDX.
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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