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by Koos van der Merwe
When the technology sector crashed in 2000, the NASDAQ index crashed heavily along with it. But in the recovery phase, the Elliott wave B-wave , the index rose only as far as the 38.2% Fibonacci correction.
Position: Sell
Koos van der Merwe
Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.
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ELLIOTT WAVE
What About The NASDAQ?
08/12/09 10:17:20 AMby Koos van der Merwe
When the technology sector crashed in 2000, the NASDAQ index crashed heavily along with it. But in the recovery phase, the Elliott wave B-wave , the index rose only as far as the 38.2% Fibonacci correction.
Position: Sell
| With the bursting of the technology bubble, the NASDAQ index fell from the fifth-wave high of 5132.52 to a low of 1107.44, a fall of 78%. This collapse was horrific, and many small startup companies that climbed on the back of the floating bubble vanished. |
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| FIGURE 1: NASDAQ, WEEKLY. This chart suggests a wave count. |
| Graphic provided by: AdvancedGET. |
| |
| Since that date, NASDAQ has recovered, but cautiously, as though testing each step before putting its full weight on it. Figure 1, a weekly chart of the NASDAQ, shows how the B-wave rose gradually in an abcxabc wave count, and gradually, from the low of 1107.44 to the high of 2862.88 by November 2007. This high was slightly above the 38.2% Fibonacci level, showing how cautiously the index corrected. (By comparison, the Standard & Poor's 500 corrected over 100% in its B-wave.) The index then fell in a C-wave to 1266.07, not the 1107.44 of the low of wave A. This does suggest a C-wave failure, which means that in the years ahead, the NASDAQ will rise to exorbitant levels. The chart does suggest that the index has moved into a wave I upward, but the moving average convergence/divergence (MACD) indicator suggests that further strength lies ahead, and that the wave is not complete. For this reason, I turn to Figure 2. |
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| FIGURE 2: NASDAQ, DAILY. This chart suggests a different wave count than the weekly chart. |
| Graphic provided by: AdvancedGET. |
| |
| Figure 2, a daily chart, suggests a change in the Elliott wave count. The count suggests that the Index bottomed in a C-wave in November 2008 at 1294.48, and that the low of 1265.52, although lower than the low of the C-wave, is the bottom of a wave 2 of a wave I in the new bull market. If this is so, we can then expect a correction to one of the Fibonacci correction levels shown on the chart, the most likely target being 1742.79, the 38.2% level that acted as support for the wave 4 of wave I correction. The relative strength index (RSI) supports this count, and has given a sell signal, suggesting that a correction is on the cards. The NASDAQ is due for a correction, which should see it test the 1742 level, a level that previously gave support to a fourth-wave correction of wave I. |
Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.
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Comments
Date: 08/12/09Rank: 3Comment:
Date: 09/12/09Rank: 1Comment: This is not Elliott Wave as your wave two being lower than your wave one,breaks the rules of Elliott Wave Principle. The count suggests that the Index bottomed in a C-wave in November 2008 at 1294.48, and that the low of 1265.52, although lower than the low of the C-wave, is the bottom of a wave 2 of a wave I in the new bull market.
Date: 09/12/09Rank: 1Comment: This is not Elliott Wave as your wave two being lower than your wave one,breaks the rules of Elliott Wave Principle. The count suggests that the Index bottomed in a C-wave in November 2008 at 1294.48, and that the low of 1265.52, although lower than the low of the C-wave, is the bottom of a wave 2 of a wave I in the new bull market.
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