9/21/2008 9:06 PM Pacific

The retracement of the 5 waves down from 1977 on a daily chart shows a possible 1:1 ratio a-b-c retracement that stopped at the .500 Fibonacci retracement level and clustered with the declining 20 period ma. Without any context of how this five wave set fits into a bigger picture, or, viewing an intra-day chart for corroboration, an argument can be made that we go lower from here.

I will attempt to put this wave into context first. I don’t use line charts a lot with Ewp, but they do provide an advantage of showing closing values only. I look at them when there are huge spikes in the data to try and get a cleaner count and ratio. In the first line chart based on closing prices only, there is a possible 5 waves down, 3 up, and then a 5-3-5 zigzag. That is an uncommon but acceptable pattern, and at least opens the possibility that we could be finished going down. However, just by changing the count I can present the possibility that we still have a long way to go, and Prechter’s Revenge is still on the table. It would take a rally through 1963 to take Prechter’s Revenge off the table. Longer term context isn’t going to help much right now.

9/21/2008 9:06 PM Pacific

9/21/2008 9:06 PM Pacific

Below is a 60min chart of the NASDAQ e-mini futures at 11:15pm EST on 09/21. I definitely favor the count of 5 waves up from the 1612 low over the 5-3-5 retracement possibility previously shown on the daily chart. In my opinion the 5 wave count is pretty clean. Since 5 waves never travel alone except as the C wave of an expanded flat, and I don’t believe we just completed one of those, I place a high probability on another 5 waves up. The most pressing issue however, is whether or not we have completed the retracement of the first 5 waves. I can believe that we are finished, I can count a 5-3-5 wave set down from B with close to a 1:1 ratio, and the spike below a .618 extension of A stopping at the .500 retracement level of the entire move off the low. However, if B-C extends down, then the most probable target is then 1685, a 1:1 ratio of A, and a .618 retracement of the entire move off the low. I believe that either the current level or 1685 will complete the retracement.

Now I will go back to a daily chart to project where the next 5 waves could take us. I will be optimistic and assume that that 1705, the .500 retracement of the recent high holds through the night. That projects to the 1822 to 1838 zone created by a .618 extension of the first five waves, and the .618 retracement of the move from 1977 to 1612.

9/21/2008 9:06 PM Pacific

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