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August 08, 2004

One More Rollercoaster Ride
by Don Delavan

The 2004 stock market has felt like three different rollercoaster rides so far, and the fourth one should start next week with a new multi-week cycle. However, the fourth ride might make the first three look like a kids ride.

On Friday, SPX probably completed it black wave 4 down right at its 50% retracement of its black wave 3 up and at its 322-day moving average. The 322-day moving average is interesting in that it is a Fibonacci number and it provided support for SPX in April and May 2000 before the big decline in the second half of the previous 4-year cycle. Black wave 4 down lasted exactly 22 weeks or 5 months for SPX. Also notice that the 4-year moving average has crossed below the 8-year moving average.

The next rollercoaster ride will likely be black wave 5 of C up to a lower high in September, which would complete green Wave B up that started on October 10, 2002. Then the downhill portion of the ride would be the start of green Wave C down into the fall of 2006, which will be the second half of the current 4-year cycle. Green Wave C down will be a stronger decline than green Wave A was in 2000-2002.

The DJ Industrials looks more like SPX, but the DJ Transports is unique in that it is completing an ascending ending diagonal as its black wave 5 of C up. So DJT might make a new high for 2004 while DJIA makes a lower high.

HUI and XAU rose strongly Friday despite the strong market sell-off in all the other indexes. That is because HUI and XAU already started a new multi-week cycle on July 27. I originally thought HUI might make a lower low in late July than its May 10^th low, but it made a higher low on July 27 to complete the previous multi-week cycle by touching its 2-year moving average for the second time.

Thus, HUI, XAU, DJT, DJU, XOI, and XNG will probably be the only stock indexes to make new highs for 2004 by late September. Obviously, new highs in gold, silver, crude oil, and natural gas will explain why.

Don Delavan
SBRB Management Corp.

Don Delavan is the editor of the Market Waves newsletter. For subscriptions, contact dondelavan@adelphia.net

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