When the Nasdaq crashed, I was on a roll, giving time and price predictions for the fall with a great deal of accuracy. Since the crash, I have been saying things like, the Nasdaq will go below 1000, and, the Dow will go below 4000, and even giving a rough time frame – the end of 2003 or beginning of 2004. However, it has all been unsatisfying because there have not been enough details, yet, to begin to hone in on a more precise target. During the Nasdaq crash, I could not get a handle on the Dow Industrials or on the S&P500.
Now, I cannot get a handle on the Nasdaq or on the Dow, but things seem to be coming together with the S&P500.
I have seen discussions on the Internet about a head and shoulders forming in the S&P500, but had not focused on it until Steve Hochberg of Elliott Wave International brought it up, again. I had done enough work with heads and shoulders to know that they "work" really well, unless they don’t. I need more evidence. So, I was playing around with charts this afternoon and found that the classic target for a breakout from a head and shoulders in the S&P500 (the fall from the breakout is the same distance as that from the top of the head to the neckline) gets us to around 330, which is also within a classic congestion "target area" that I use. When two pieces of information reinforce, I begin to take notice.
So, I think we will have a nice rally in here as prelude to a mighty fall in wave 3 or C in the next few months. The rally on Friday probably marks the end of a 22 week cycle in the stock markets, and if that is the case and the cycle holds steady, the next low comes in early December.
I don’t know how the December date fits with the 330 number – I don’t know whether 330 is the end of the bear market in price or a stopping point on the way farther down. Since December is a year early for the end of the bear market in time, this question will resolve itself in as we get closer to December. Right now we have a price – 330 – and two timeframes – early December 2002 and fourth quarter 2003.
More to come as we get closer to the top of the current rally.
Copyright Ó Kit Webster 2002