Short Term Trading Member Forum

[techcharter]

I'm getting sea sick.

There are so many different ways to count waves on index charts, both bullish and bearish. At the heart of the matter is be correct at multiple degrees of trend. The largest trend is the wave from the 1932 lows. The debatable question is did y2K mark the end of the 68 year wave? Since the Dow tracking stock is DIA(monds), I'm going to call the proposed timefram a Diamond wave.

Diamond Wave 1 from 1932 to 1934
Diamond Wave 2 from 1924 to 1942ish: ZigZag
Diamond wave 3 from 1942 to 1964ish: extended
Diamond wave 4 from 1964ish to 1974: expanding triangle
Diamond wave 5 from 1973 to 2000???

It's possible to count Diamond wave 5 as
Multiyear Wave 1 from 1974 to 1976
Multiyear Wave 2 from 1976 to 1982
Multiyear Wave 3 from 1982 to 1987
Multiyear Wave 4 Crash in 1987
Multiyear Wave 5 from 1987 to 2000

Let's introduce a second count for Diamond wave 5:
Multiyear Wave 1 from 1974 to 1976
Multiyear Wave 2 from 1976 to 1978
Multiyear Wave 3 from 1978 to 2000: Extended
Multiyear Wave 4 from 2000 to 2002: Complex Crash
Multiyear Wave 5 from 2002 to 20041112?

Under the second count, the Dow is at a critical point. On Friday Wave 5 of Multi 5 completed a clean 5 wave sequence in the pre-election rally. There is no indication either way of being finished or not. The implications of this being the last wave is it would be a truncation at two degrees of trend. This is a good condition for a crash.

I don't think SuperBear is in the phone booth yet. The SAP500 and NAZ waves off the August'04 lows only counts as two motive waves. A less severe bearish situation for the NAZ and SAP500 I have not yet seen in print is the Wave 1 of the Bubble burst ended on 9/11/01. The wave since then has been a flat. Since the Dow is so close to its y2k high, I would lean toward the second Multiyear wave case. The only thing technically consistent among ALL indexes is that they are overbought on the daily chart AND they have completed a motive wave at some degree. For the three markets to top simultaneously in the timeframe projected by the boards cycle analysts, the SAP500 and Naz form an ending diagonal, and the Dow makes a motive wave (probably truncates). Stochastics on the weekly charts are only entering overbought, so more time is needed to reach longer term overbought.

I'm not the only one whose head is spinning. Robert D. McHugh, Jr. Ph.D. of Main Line Investors, Inc. http://www.technicalindicatorindex.com came up with a chart of the Ratio of the Dow Jones Industrial Average vs. the 30 Year U.S. Treasury. He points out a head and shoulders pattern and its implication. He concludes "There is no resolution to this pattern that is positive for the economy."

Expect the markets to head lower this week.
NAZ target 1900 50% retracement of 5A
SAP target 1125 50% retracement of 5A
DOW target 10222 38% retracement of 51

A break below the lows of the year would be a high probability the beginning of the next major bear market wave was under way.