On Wednesday I stated that two BEARISH wave counts are STILL valid at this point. The first was that at Tuesday’s “closing HIGH” the markets “completed” their respective Wave-2 of C corrections from the LOW made on March 24th. The alternate wave count was, and STILL is valid, that Wave-(ii) of 3 of C was “completed” at the “closing HIGH” made this past Tuesday. The one BULLISH wave count of an A-B-C Wave-4 correction in the NDX was “completed” at the March 24th LOW is STILL valid; but its probability is “declining” with each passing day.
The wave-count of Wave-2 of C being completed at this past Tuesday’s “closing HIGH” is advancing as the “Higher Probable” wave count. The preponderance of technical evidence is supporting the conclusion that a Wave-2 of C Running Flat correction was completed at Tuesday’s “closing HIGH” from the LOW made on March 24th. This Running Flat Correction can be found in the DJIA, SPX, and NASDAQ. The NDX has formed a Regular Flat Correction. The DJTA has formed a Zig-Zag Correction.
There is a variety of technical information that supports this Wave-2 of C wave-count as having the “Higher Probability”. First. the wave structure of the rally from the May 17th LOW looks to have a completed five-waves; that is consistent with a completed Wave (c ) of a completed (a)-(b)-(c) Running Flat, Regular Flat, and Zig-Zag correction. The BULLISH argument would be that this is the first Impulse Wave off the May 17th LOW and is now just correcting; we will have to wait and see if this scenario holds up over the coming weeks. Second, this past Tuesday was fifty-five (55) FIB trading days from the March 24th LOW; when counting the two (2) Trading Holidays during that period. The inclusion of Trading Holidays is an ongoing study of mine, and is still inconclusive. That being the case, the markets could STILL move Higher on Monday; which would then be (55+1) trading days long. Third, this Wave-2 wave-count is consistent with the corrections found in recent weeks in the STOXX 50, FTSE, Nikkei 225, and Hang Seng. Markets around the WORLD are at or near completion of their respective Wave-2 corrections. Fourth, this Wave-2 of C correction has been contained in a very well defined Channel from the March 24th LOW to the June 8th HIGH. Fifth, the markets are Very Overbought in various oscillators and are poised to roll over.
In conclusion, I cannot completely rule out one more short-term move HIGHER on Monday; but the preponderance of evidence suggests that Wave-3 of C is DEAD AHEAD. Also the fact that this Wave-2 of C is a Running Flat or Regular Flat portends that the coming Wave-3 of C DECLINE will be POWERFUL and EXTENDED in both Amplitude and Time.
I am keeping my STOP LOSS at 1508 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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