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July 30, 2006

The NASDAQ is Crashing. Have You Noticed?
by Robert McHugh

The NASDAQ 100 has been crashing since May 8th, but has anybody noticed? Since the NDX topped at 1,721 on May 8th, three days before our last Hindenburg Omen, the NASDAQ 100 has crashed 15.94 percent. It is down nearly 18 percent since its January 11th top, and is down 12 percent for the year.

The Elliott Wave labeling has wave i down finished, as are the first two of three legs for corrective ii up. Once ii up finishes, a huge decline, wave iii down should occur. This is the start of primary degree wave (C) down, the third leg of an (A) down, (B) up, and (C) down that started in 2000. (C) has the potential to take the NASDAQ 100 down to the 700 area.

Guess what else is crashing? Since Trannies topped on May 10th at 5,013.66, the day before we got our last Hindenburg Omen, they have crashed 722.93 points, or 14.4 percent (we define a crash as a 15 percent plunge over several weeks). They quickly plunged 479 points, or 9.6 percent, over two weeks in May to reach their Micro degree wave 1 bottom at 4,534.63 on May 24th. Trannies' wave {a} up was a three-wave affair that topped at about the .50 (was .53) retrace of Micro 1 down, up 254 points to 4,789 on June 2nd. Wave {b} down took Trannies to 4,410 on June 8th. Wave {c}-up of 2 completed a Rising Bearish Wedge termination top pattern on July 3rd, at 4,975.

Since then, we got a decisive break below 4,850, the bottom boundary of the Wedge, confirming that wave 3 down is underway. So far, this wave is close to 1.618 times the length of 1-down, which would be about 775 points. If wave 3 wants to be 2.618 times wave 1's, we re talking about a 1,254 point massacre, taking Trannies down to 3,725ish. Wave {1} down of 3 down looks complete, ending in a Bullish Declining Wedge. Friday's rally looks to be the start of corrective wave {2} up.

"Are not five sparrows sold for two cents? And yet not one
of them is forgotten before God.
Indeed, the very hairs of your head are all numbered.
Do not fear, you are of more value than many sparrows.
And I say to you, everyone who confesses Me before men,
the Son of Man shall confess him also before the angels of God;
But he who denies Me before men
shall be denied before the angels of God."
Luke 12:6-9

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Robert D. McHugh, Jr. Ph.D.
Main Line Investors, Inc.

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com. The statements, opinions and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.

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