|I decided to look at the chart of the S&P 100 index to do this for me, because I believe that the S&P 500 index follows too many stocks, and the Dow, too few. The two-year chart from September 2002 to September 2004 tells us the following.|
a. It starts from the low of October 2002. The chart can be considered flawed, in that it is decisively bullish, whereas the second chart, a long-term monthly chart, shown below is decisively bearish. In spite of this, you must realize that the chart is suggesting a very decisive impulse wave up. The low of Wave IV is very real, bottoming on the support line drawn parallel to the resistance line I - III. This then suggests that Wave V should be above 574. Wave theory suggests that Wave V should equal Wave I, which would place Wave V at 617. (486 - 387 = 99 + 518 = 617)
b. Cycles are suggesting a cyclical low on October 12th. This could be on a lackadaisical September, as September is notorious for being a dull market. You can almost use the high as a trend indicator, in that a high close to August 9th, would be bearish, while one close to October 12th will be bullish. A high at midpoint, that is a date midway between the two cycle lows, will suggest a sideways moving market.
c. My indicator of choice, a stochastic 8,10,3, is suggesting that the index is overbought, possibly trending down.
Figure 1: Daily chart for OEX.
|THE MONTHLY CHART|
I have kept the chart simple so that I may show the Fibonocci ratios and argue in their favor. The chart follows the preferred count and ABC retracement from WAVE V on March 31, 2002. The Index then fell, in what I believe to be a Wave A, to the low of 389.85 on July 31, 2002. From this level it should now retrace a Wave B upwards to any one of the Fibonocci levels shown. At the moment it has found resistance at the 38.2% level of 564.25. The question whether this level will hold or if it will break through it and test the 50% level at 618.53 before falling into Wave C. The rising RSI indicator suggests the latter, as does the daily chart.
|Figure 2: The S&P100 Index weekly chart.|
|Graphic provided by: AdvancedGET.|
Should the Index fail to reach the 617 level, then the entire count could change to a short-term bearish count. Do note that Wave V of the daily chart at 617 is the 50% Fibonocci retracement level of the monthly chart. From this I must conclude that the short-term trend is up, and that the market approves of the re-election of George Bush as President of the United States of America.
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