Replies to post #8095 on Profunds index and sector trading (PRO)

[was Steve]

refreshing to see a man with a plan.

im no EW dude, but it has been my belief for months that we corrected into the march/april timeframe (current targets for lows 1330-1350) and then bounce and actually make new highs. this obviously would require going above your 1460 target and getting to at least 1560. my target timeframe for the peak this year are the july/august timeframe and a WAG at levels is 1650-1730 but i will refine that quite a bit once i see how low we go on this decline and the nature of the ensuing rally.

good stuff, thanks
steve

[Z-M-L]

The NDX index chop around in a sideways manner on Thursday all day, until the last hour and half of trading. The NDX then plunged to close bottom TICK for the day at 1402. This sideways chop on Thursday was smaller degree 4th Wave. What appears to be happening is that Wave iii of (iii) is itself going into an “extension” with the five-wave decline from 1494 to 1402 simply being a smaller degree Wave 1 of Wave iii of (iii). A normal Fib retracement of this smaller degree decline would be:

(.236) 1423
(.382) 1437
(.500) 1448
(.618) 1459

Note that the NDX close TOP TICK on Friday at 1431. So a slightly higher open on Monday would reach the (.382) retracement level; although the (.618) level could also be achieveable.

What supports this Wave iii of (iii) “extension” outlook is the current wave structure of the SPX. The SPX has completed a clear five-wave decline from 1163 to 1106 over roughly five (5) Fib trading days; which completes Wave (i). Note that the HIGH made at 1163 was only two points above the calculated 50% retracement of the ENTIRE decline from the HIGH in March of 2000 to the LOW in October of 2002. A normal Fib correction will take the SPX back up to:

(.236) 1120
(.382) 1128
(.500) 1135
(.618) 1141

The SPX close on Friday at 1120 which was the TOP TICK of the day. So the Wave (ii) correction in the SPX may be over, but I cannot rule out the higher Fib retracement levels until the SPX moves back below 1106. But from whatever Fib retracement level the SPX ultimately completes Wave (ii), the Wave (iii) decline that follows will likely be 1.618 times that of Wave (i); which means “significantly” lower LOWS are dead ahead. If the 1120 level for the SPX holds as the completion of Wave (ii); then Wave (iii) will have a target of roughly 1030, which in fact is where an Unfilled GAP remains.

A drop of this magnitude in the SPX indicates that the NDX will move through 1364 level (that I have been targeting) like a hot knife through butter. Note that 1364 was a target based on a completed Wave (iii) having a magnitude of 1.618 over Wave (i). Because of what the SPX is indicating, the completed Wave (iii) in the NDX could have a magnitude of 2.000 or even 2.618 over Wave (i). That means the next targets for a completed Wave (iii) in the NDX, that would line-up with a completed Wave (iii) in the SPX, are now either 1324 or 1262.

In light of the current information, the probability is HIGH that the NDX will plunge through 1364; and therefore then, I must revise my strategy of exiting my short positions in QQQ and RYVNX at that level. I will keep an eye on the SPX for guidance as to when I should exit the NDX.

I am keeping my STOP LOSS to 1460.