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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. Good trading! Dominick, © 2006
Dominick a.k.a. "spwaver" Read More about TradingTheCharts Forum!
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