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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Mon Feb 05, 2007 5:46 am Post subject: Stocks & Commodity Markets Elliott Wave Analysis -4th Fe |
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It wasn't easy to present yet another update last week that anticipated additional highs in the face of an outside down week, which has a great track record of being correct. The January 28 th update stated:
“Could the reversal looking pattern only be part of a larger correction that's stalling for time? When I look over many of my charts, the answer that pops out is yes. So, even though I can label a top is in, I won't do it yet for several reasons. The sentiment on that drop wasn't what I wanted to see and, believe it or not, I have two very valid setups for additional highs. Another huge leg up isn't in the cards, but I'm not about to be short prematurely into the squeeze of all squeezes and get taken out of the position minutes before it turns.”
Once again, the market had most traders convinced last week the top was in only to leave them on the sidelines or, worse, short. It's amazing the market simply won't pull back and continues to grind upward leaving no one a chance to get in cheap.
I'm sure sentiment has played its part in recent weeks and is still fueling the markets' move higher as the old tops appear on the radar screen. Last week started with some decent sentiment readings, but closed with everyone again throwing money into puts trying to be top pickers. Of course, sentiment can change in a day, but that's what the numbers read as of Friday's close.
Still, an interesting development occurred as a different tune arose from the bearish camp late in the week. Every single bear I spoke with on Thursday and Friday now wanted to buy after having fought the relentless upward move every day, week and month since June. All of a sudden, the S&P has hundreds of points to rally, and quickly. That, my friend, is the smell of capitulation!
When the bears capitulate, it's usually the sign that we're topping. Short term, sure, you can still make some money on the long side. But for the most part, these were not short-term trades I was hearing from the former bears. I think an exaggeratedly bullish view can be as bad as an unbearably bearish view, so I'll pass on the idea of a several hundred point rally from here one and work with something a little less biased. In fact, I think I'll stick with last summer's idea that I thought the ultimate target for the NYSE was a hidden Fibonacci magnet of 9314.
It was a great event this week when the NYSE hit the exact number I'd called last summer. Mission accomplised! More than 60 of our full time trading members watched from the chatroom as the target got hit. Since then I've also received emails from many weekly readers expressing their thankfulness because that target kept them from shorting this market week after week after week, and I hope many of you have had that same good luck. If you're not sure what type of disaster you might have removed from your life by staying long, take a look at a daily S&P chart. There's lots of margin calls and pain on them.
As you know, we nailed the 9314 target and then decided to “vibrate” around it instead of falling off or knifing through. In my understanding, the market recognized its destination and is now deciding where to go from here. If you're struggling to understand what the play is now, it's easier then you think if you just play the markets' hand. We're right on schedule so far and have reached many targets, but does that mean we HAVE to stop here? I hope you all understand the answer is NO.
While I'm not absolutely calling the TOP yet, you should understand why I'm not buying the bullish, “to da moon” case. I had a plan and now I want to see it through. I started with SPX 1360 and adjusted the targets every week until I saw confirmation of a top or the NYSE reach its target. Well, the NYSE did that this week and I'm prepared to look for a turn. But no, we did NOT have confirmation that this week was it. No way. But I do have enough evidence that if things remain as they are, we will rollover soon.
http://www.marketoracle.co.uk/Article305.html |
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