A yet-to-be confirmed pattern popped up on my radar screen today and it looks juicy enough to share with other investors with a technical flair.  If you examine the chart below, you will see a potential head-and-shoulders pattern that, if confirmed, could portend the onset of the strongest part of any bear market.  It is the infamous Elliott Wave the Third (E.W.III).  Let me introduce him to you.

E.W.III is supposed to be the strongest, the baddest, the meanest bear of the Elliott Family out there.  Until last week, we just didn’t see anything as strong or bad for over two years!  That was only Elliott Wave C, which is a distant cousin to Wave Three.  So where was it?  I think it went into hibernation just like Rip Van Winkle.  Like ol’ Rip, it woke up, took a stretch and looked around to see the landscape had changed.  All of the low-hanging fruit he had eaten three years ago had re-appeared on the trees.  Time to eat!   So for three days, ol’ rip-snorting Three had a feast.  The fruit on the SPX tree went down 3.8% The fruit on the Dow tree declined 4.5% and the Nazz tree turned down 5.5%.

Whoa!  That old stomach don’t churn out the juices like it did three years ago!  Time to rest and have at it again.  This time old E.W.III is ready to eat twice as much!  The stomach is stretched and the juices are flowing.  Time for the biggest meal of the lot.  Ol’ Three has his strength back for the next marauding episode.

The low-hanging fruit might be gone, but there is still plenty left for a hungry bear.  Now, class, if E.W.III has only eaten 3-5% of the low-hanging fruit in three days, how much do you think he will eat next week?  Stay tuned for further developments!

© 2004 Anthony Cherniawski
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Anthony M. Cherniawski
President and CIO
The Practical Investor, LLC
East Lansing, MI USA
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