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Sunday, March 8, 2009

Revisiting the NASDAQ Wave (4) Triangle

The NASDAQ formed a perfect contracting (running type) Intermediate wave (4) triangle as opposed to the other indexes. That can give us a few clues on what may happen based on reading what the "Elliott Wave Principle" section has to say about triangles. I'm paraphrasing here:
1. Triangles often eventually travel the widest distance of the triangle. The "B" leg of 490 points is the widest part. Subtract this from the "E" point. That has 1107 as the ultimate low.
2. When triangles occur in the 4th wave position of powerful markets (who can doubt this is a powerful market?) a prolonged 5th wave can occur.
3. The apex formed by a contracting triangle often marks a turning point in the wave structure. In this case the apex either ended on Friday afternoon (hence late day rally) or will shortly this week. The placement of the trend lines have wiggle room when covering such a long distance I suppose. I propose that the apex turning point marks the end of wave 3 (5).
What’s interesting is the NASDAQ has not yet formed an ending diagonal type structure (yet) on this last wave push down of the past 3 days or so as compared to the SPX. So in that regard it diverges. Doesn't necessarily mean anything of course. The NASDAQ just made new lows on Friday so that too is and interesting fact. Also the NASDAQ was leading the charge lower on Friday morning's gap and crap plunge. It will be instructive to observe how the NASDAQ moves as compared with the DOW and SPX on Monday. The NASDAQ is of course full of the high beta stocks like Apple and Google, etc. Once it gets moving in one direction (up or down) its best to stay out of its way. Question is, was Friday a turning point or will we have another selloff? Maybe even some sideways consolidation? We’ll know by Tuesday.

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