Thursday, August 16, 2007

E-wave count with 9 month cycles

I am no cycle expert and the only cycle that i follow is the 9 month cycle. The last wave B bottom in June 2006 was a 9 month cycle bottom off of which this wave C impulse began, based on my phasing. Given that we have seen the largest monthly candle since the rally begun in 2003, it is safe to conclude that Phase I of the bull (A-B-C) is now complete. What follows the wave C is the wave X, in a complex correction. March 2007 was the second 9 month cycle bottom since June 2006, when we concluded the mini-panic. The next 9 month cycle is ideally due around Dec 2007.

If my count is right, we should find a good traedable bottom soemtime this week or early next week in the SPX 1360-1390 area, which should conclude wave A of X and begin a wave B of X bounce. Wave B of X bounce should consume roughly 10 weeks into late Oct 2007 and then a wave C of X decline into Dec 2007, which should conclude in the SPX 1320-1330 area (near the wave b channel top). Once the wave X concludes, we should begin another multi-year advance into 2009 (phase II of bull market).

In case we go straight up from here and take out the July highs on SPX, then it means that wave X already bottomed and phase II of bull has already begun. That would also mean my 9 month cycle phasing is wrong. It will be interesting next few months....

Wednesday, August 15, 2007

Bottom spotter fails

I posted the bottom spotter signal here a few days back. It's only appropriate for me to update it, since it failed. The signal failed when it took out the Aug 6 lows. Now we have a open ended risk again here with that broad area of support into focus again - SPX 1360-1410.

I see two possibilites here. A washout move i.e a drop of 30-50 SPX points today and a reversal, which would create a nice IT bottom. Instead if we begin a sharp rally from the get go, then a ST low will be confirmed setting the stage for a couple of weeks of rally and then another retest probably in late Sep or Oct. Which one ? It's too early to say. I would prefer a washout here, in which case i would load up on LEAP calls heavily. But then, everyone wants it. Markets are perverse.

All said and done, we continue to remain in a LT bull market. Nothing has changed in that regard. The only sectors currently in a bear market are HGX and REITs. I woudn't touch these sectors even with a 10 foot pole, at this stage of the game.