I'm still looking at the long term wave count for the NAZ and Dow. Last week I started feeling optimistic about the market. This week I'm having doubts. An alternate bearish count in the NAZ caught my attention after a quick glance.
I made a comment about orthodox turning points a few days ago. The alternate count for the NAZ has an orthodox end of NAZ Bear Wave A was around 9/11/01. Since then NAZ Bear Wave B formed a running triangle. The upper edge of the triangle is the 2100 to 2200 level The Oct '02 and March '03 lows form the lower edge. Notice the NAZ bounced off the lower edge in Aug '04. There is a fibonacci time ratio of NAZ Bear Wave B to A of 2.08. The total time of 166 weeks is 3 time a fibbonacci 55 weeks. The price at this point is in the range of NAZ Bear Wave A4. The updated count puts the NAZ in Bear B Triangle wave E. An alternate wave from the 9/11/01 starting point is an incomplete expanding flat. NAZ Bear B Triangle wave E has not broken the upper edge of the triangle. This is not required since the structure is in place. The only weakness in the triangle scenario is that the NAZ Bear Wave B only retraced 19.4%. This is hardly a Fibonacci relationship.
One strong wave count for the Dow is at the end of Super Cycle Wave (V). The price pattern from the y2k top to Oct '02 lows has too much wave overlap to be motive, so I'm labeling it a SuperCycle Wave (IV). While the Dow dropped a fibonacci 38%, it dropped the least of most, if not all, of the world indices. The wave from the Oct'02 lows looks very motive on the weekly and monthly charts. Supercycle Wave (V) is 111 weeks old or 2 times a fibonacci 55 weeks long. Focus now on the Primary 5 of Cycle wave 5 from the October '04 lows. A pretty clear 5 wave pattern has formed. The Dow gained 890 (10 x Fib 89) points in roughly 21 (Fib) trading days. The challenge is to determine if this completes Primary 5, or if there are 4 more Intermediate waves to go. The implcations are significant bearish or bullish. The bearish implication is a double truncation predicts a dramatic price drop. The bullish implication is a new all time high, or pretty close to it.
Considering the NAZ and Dow bullish cases, the problem to resolve is how the Dow can have a single wave off the Oct '04 lows, yet the NAZ have 3 waves (maybe a zigzag?) off the August '04 lows. It is possible the NAZ and Dow will have different turn dates as occurred in y2k when the NAZ topped weeks after the Dow. The bearish cases for NAZ and Dow indicate simultaneous turning points. The weak 19% NAZ retracement is sends the same message a double truncated Dow sends. The near term trend is down, but how far?
