Will the Real Market Please Stand Up?
So where do we stand with the Markets after a 3 year rally? Many of the Elliotticians have been screaming bear market rally since the March 2003 lows, as the markets seem to still be extending. So where is a bear market B wave rally to end? First you need to decide if you are in fact in a bear market rally. If we look at the Dow or S&P 500, seems as if the Dow is in reach of taking out it's old highs while the S&P would need to really scream from here to catch up to its 2000 high. But, are we paying attention to many of the other markets?
When you look at the Transports, Value line, Russell 2000, and small caps to name a few, they have all exceeded their old highs and still screaming to the upside!
So, might these indexes only now be reaching their 5th waves and were not in a bear market since the 2000 highs? Seems like that's a possibility. Many traders and technicians have had their targets and patterns exceeded and are about to capitulate if we take out another high. What's really happening might be quit the opposite. Maybe the next high would be a big problem for the markets rather than the start of a new bull market.
Below you will see charts of the Transports and Value line. Both have reached all time new highs and might be hinting a Top is in place or real close to one. Both charts have the appearance of being terminal.
I have been bullish for some time, but now ready to slowly start slipping into a bear suit. IF I could have my way, I would like to now see one more high be made (or at least a retest) in certain indexes. There would be nothing better than to see the S&P500 make a new high, while leaving some of the leaders of this rally behind, such as the Trans, Value line, and small caps. Along with that, more confirmation would come if the advance/decline line wouldn't make a new high THIS time and cause a divergence. Working a bit lower in the near term to about the 1242 area and setting up for final rally would be nice to see. Will it be that easy?
Below is a chart of the Dow Composite, which seems to be in a different stage than the Dow.
It has already taken out the 2000 high and still advancing. The chart shows a combination of Elliott work combined with long term Fibonacci studies. The IDEAL setup would be that we go up to the target at around 3900. Unfortunately, there is a small case to be made that the January high was the top, so some caution is advised. I would imagine that one of the counts will show itself within a week or so. IF the top is already in, I would expect a more serious decline to have started and not the up/down we are getting. Till we get confirmation that we may have topped, I will be looking to achieve the target at 3900ish in the Dow composite.
I don't study Cycles enough, but getting interested in them as I have started to talk with many Cycle traders in my newly opened Forum. To me, it sure does seem as the market is trying to reach a time projection as well, if not more, than price. Seems as if we have been tossing and turning in the broader averages in an attempt to kill TIME. Traders seem to be focusing on some cycles like the 4 yr, 78 week, and some others that are due to hit soon. Could it be that we have reached a place for time and price to finally meet and end the rally from the Oct 2002 lows? Time will tell.
About my newly opened Forum, Tradingthecharts.com was opened on January 3rd, 2006. My goal in developing this site is to provide daily market analysis from some of the best traders and professional newsletter writers out there covering Elliott Wave Theory, Gann, Cycles, Delta, and more. One can expect to find daily postings and charts from traders around the world as well as periodic updates from some of the most respected market advisory services available. This Forum has the potential of becoming one of the best resources available for any level trader, beginner to professional. The response thus far has been very exciting with superb technical analysis including charts and cycle work which have produced some excellent entries on the latest turns. I would say that 90% of the members are futures traders, but would assume that many of the equity traders will find their way to the Forum soon. All markets are planned to be discussed as well as any trading method. A realtime chat room has just been added so that traders can take advantage of discussing setups as they happen. Hopefully many in the trading community will be able to take advantage of this Forum as it grows. Stop by and register to be a member to our free Forum @ www.tradingthecharts.com and Good Trading!