COMMENT 2001 - 518

(LTC, MKT NMBR 19)

1. In COMMENT # 515 of 20010920, we focused on the 20010914 high in this market and how the high ALIGNED WITH the weekly "Inversion Cycle Index" projected turn (see the "cycles sheet" for MKT NMBR 19 for the April-September edition of "The 2001 $upertrader's Book of Linear Time Cycles").

2. In the # 515 COMMENT, we discussed how the 914 high had just barely breached the high of earlier this year.

3. The breach mentioned in that COMMENT was of such import it necessitated a complete revision of the assumptions we had been operating under ever since the March high was identified in COMMENT #s 182 of 20010319, 188 of 20010322, and 192 of 20010323.

4. These COMMENTS were released right as the market was peaking on 20010322.

5. I mentioned in the # 515 COMMENT that the new high on 914 would cause an entire reassessment of this market, it was that important.

6. And since this market is so important to so many other markets, the new high on 914 would cause the assumptions of many others to also be reassessed.

7. It really bothered me that this market actually was able to make a new high and that I had so erroneously miscalculated.

8. So I went back a retraced the market action and obtained prices from several other sources.

9. Low and behold, but the data I had contained errors, apparently due to the WTC events of last week.

10. When correct data is used, what is revealed is that the December contract DID make a new high.

11. This new high for the year in the December contract, however, was not CONFIRMED BY either the continuous day session or overnight session contracts, thereby forming an important DIVERGENCE (see pages 171-84 of "The $upertrader's Reference Manual").

12. Further, momentum oscillators such as RSI and Slow Stochastics also failed to CONFIRM the new high on 914 versus the previous high at the end of August, thereby enhancing the DIVERGENCES (see pages 171-84 of "The $upertrader's Reference Manual").

13. Further, as we've oft highlighted in these COMMENTS, the # 19 market failed to CONFIRM the new high in the # 18 market as is oft seen in these two markets (such occurred at the March high of the year in the # 19 market - see the hereinabove cited COMMENTS for review), thereby enhancing the DIVERGENCES (see pages 171-84 of "The $upertrader's Reference Manual").

14. Of course, the reason the DIVERGENCES are especially important is because the 914 high in the # 19 market was made right as the # 19 market was experiencing a weekly "Inversion Cycle Index" projected turn (see the asterisk in the "WIC" column of the MKT NMBR 19 cycles sheet and the "INVRMAIL.txt" sheet).

15. The reason this 914 high is of such great importance is because it ALIGNS WITH the Elliott Wave assumption we've been operating under since the March high was identified.

16. Hence, we're back on track with the Wave I scenario from the 1998 high to the 2000 low/Wave II scenario from the 2000 low to the March, 2001 high.

17. From the Wave II high, the assumption is that the Wave III decline began at the 20010322 high.

18. The March to May decline was Wave 1 of III and the 914 high was Wave 2 of III.

19. Note that the Wave 2 of III high occurred 35 months from the 1998 peak in this market (FIBONACCI # = 34).

20. In terms of weeks, Wave I lasted 67 weeks and Wave II 61 weeks.

21. 128 total (2 X SQ FIBONACCI # 8 = 128).

22. Wave 1 of III then lasted another 8 weeks (FIBONACCI # again = 8) to the May low followed by a 17 week rally to the 914 high (2 X FIBONACCI # 8 = 16).

23. 25 weeks total from the March high to the September high (SQ FIBONACCI # 5 = 25).

24. The May to September rally may have broken down into an a-b-c movement of 5-2-10 weeks.

25. 10/5=2.000.

26. Hence, the movement from the 2000 low to the 914 high required 61+25=86 weeks (FIBONACCI # = 89).

27. Or, from the 1998, 67+86=153 total (BIBLICAL #).

28. 86/67=1.284 (SQ RT PHI = 1.272).

29. 153/67=2.284 (SQ RT 5 = 2.236).

30. 153/86=1.779 (SQ RT 3 = 1.732).

31. From the March (Wave II) high, we see somewhat the same proportions.

32. In calendar days, the Wave 1 of III decline was 54 days (FIBONACCI # = 55) and the Wave 2 of III rally to the 914 high another 122 days (LUCAS # = 123).

33. 176 total (100 + LUCAS # 76 = 176, 2 X FIBONACCI # 89=178).

34. 122/54=2.259 (SQ RT 5 = 2.236).

35. 176/122= 1.443 (SQ RT 2 = 1.414).

36. 176/54=3.259 (2 X PHI = 3.236).

37. The rally from the May low to the September high lasted 84 trading days (FIBONACCI # = 89).

38. Note the missing days when the market was closed.

39. All decline since the 914 high over the last several days has thus assumedly been part of Wave i of 3 of III.

UPDATED 20010924

COMMENT 2001 - 519

(LTC, MKT NMBRS 15 & 16)

1. Now we need to go back and review COMMENT # 487 of Thusday, 20010830.

2. Here we were expecting that this market was about to move higher.

3. The market bottomed just after the Labor Day holiday on Tuesday, 20010904 and has exploded since.

4. This is as big a move as this market's experienced in a long, long time.

5. But note, in COMMENT # 507 of 20010911, the move forced us to reassess the very long term structure of this and similar markets.

6. Now a new high for the last year and many decades has been attained by a small margin.

7. But note that the new high occurred last week during the very high week projected by the "WLC" (weekly "Linear Time Cycle Index") which was valued at "+40" last week.

8. Note further that this market is set up for a sell entry today via the trading technique presented on pages 205-9 of "The $upertrader's Reference Manual".

9. This is a thin market.

10. Others in the complex can be approached in similar manner, however.

UPDATED 20010924

COMMENT 2001 - 520

(STA, 2nd HALF EDITION, Pages 298 & 300)

1. Let's turn to pages 298 & 300 in "The 2001 $upertrader's Almanac - 2nd Half Edition".

2. These two markets have certainly followed the long term seasonal tendencies presented in the middle charts on each of these two pages.

3. But note that, in both markets, the normal annual up moves are about at an end.

4. When we turn to page 328, we see that the next set of projected turning points on this page occur over a span of 3 calendar days.

5. Such points, when they are grouped together, form a "cluster" of projected turns and are much more important that isolated points.

6. Note how the page 300 market made a new high Friday which as not CONFIRMED BY the page 298 market, thereby forming an important intermarket DIVERGENCE (see pages 171-84 of "The $upertrader's Reference Manual").

7. Note that, even in the page 300 market, the new high on Friday was not CONFIRMED BY such momentum oscillators as RSI and Slow Stochastics, thereby forming an important price/oscillator DIVERGENCE (see pages 171-84 of "The $upertrader's Reference Manual").

8. Note how the Friday, 20010914 high in the page 298 market ALIGNS WITH the projected turn for Monday, 20010917, on page 328.

9. Although topping action is suggested, it is just as likely that we are a week or so early.

10. Nevertheless, it would appear appropriate to begin positioning on the short side in these markets by using the trading techniques in the Almanac(s) and "The $upertrader's Reference Manual".

11. For example, note, in both markets, that the trading technique presented on page 156 is set up for entry today.

UPDATED 20010924

COMMENT 2001 - 521

(STA, 2nd HALF EDITION, Pages 324 & 326)

1. Let's take a look at page 326 in "The 2001 $upertrader's Almanac - 2nd Half Edition".

2. What we want to do here is draw a down trendline on a chart of weekly cash prices.

3. Let's connect the intraday lows of April of LAST year (2000) and March of THIS year.

4. Note how this down trendline intersects last week's low at the approximate low of last week.

5. Now do the same on a weekly chart of cash prices for the page 324 market.

6. Use October's and March's intraday lows.

7. The "fit" is not quite as good here, though it's still close.

8. Now let's take a look at the "expanding triangle bottom" formation in "The $upertrader's Reference Manual" (see the "Index" at the back).

9. Keeping this pattern in mind, let's return to the weekly chart for the Page 324 market.

10. Let's go all the way back to the 2000 high early in the year.

11. From this high, the market traded down 8 weeks (FIBONACCI # = 8).

12. For this exercise only, we're going to call this decline "Wave I".

13. From the Wave I low a year ago March, this market rallied 4 weeks (2 X FIBONACCI # 2 = 4), declined in an extremely complex "b" wave for 16 weeks (2 X FIBONACCI # 8 = 16), and then rallied 6 weeks (2 X FIBONACCI # 3 = 6).

14. 4+16+6=26 weeks total from the March low to the September high (2 X FIBONACCI # 13 = 26).

15. Note in this interpretation that Wave b/Waves (a+c)=16/(4+6)=1.600 (PHI = 1.618).

16. We label (for this exercise only) this a-b-c upward movement as Wave A of II (see pages 283-92 of "The $upertrader's Reference Manual").

17. The movement from the January, 2000 high to the September, 2000 high thus lasted 8+26=34 weeks (FIBONACCI # =34).

18. It is from this Wave A of II high of last September that this market then began its "expanding triangle bottom" formation.

19. The entirety of this formation from last September's high to last week's low has thus lasted 6+11+11+9+17=54 weeks total (FIBONACCI # = 55).

20. Note that the first two declining movements are equal to 6+11=17 weeks which is equal to the final declining movement (to date).

21. Hence, all three declining legs of the expanding triangle bottom are equal to 6+11+17=34 weeks total (FIBONACCI # = 34).

22. Note that the two advancing movements total 11+9=20 weeks (FIBONACCI # = 21).

23. The 55th week of this formation thus occurs this week (FIBONACCI # = 55) which is also the 8+26+55=89th week from the early 2000 high in this market (FIBONACCI # = 89).

24. Note that, on a weekly chart, such momentum oscillators as RSI and Slow Stochastics are failing to CONFIRM the lows of last week in this market, thereby forming an important oscillator/price DIVERGENCE (see pages 171-84 of "The $upertrader's Reference Manual").

25. In calendar days, the two up legs lasted 78+61=139 total (FIBONACCI # = 144) while the three declining legs lasted 42+77+123=242 total (FIBONACCI # = 233 and 2 X SQ LUCAS # 11 = 242).

26. Assuming the movement ended Friday, there were thus 139+242=381 total calendar days in the expanding triangle bottom (FIBONACCI # = 377).

27. 381/242=1.574 (PHI=1.618).

28. 381/139=2.741 (SQ PHI = 2.618).

29. 242/139=1.741 (SQ RT 3 = 1.732).

30. Let's look at the May to September decline versus the January to March decline.

31. Here we have 123/77=1.597 (PHI = 1.618).

32. Of course, since 123 and 76 are LUCAS #s, we can see that the relationship is but one day off perfection.

33. And when we compare the 123 days to Friday's low versus the 42 calendar days (2 X FIBONACCI # 21 = 42) in the September to October decline of last year, we see 123/42=2.929 (3.000) which would be a perfect 3.000 were the low to occur today (don't bet on it).

34. Let's compare the total number of days in the formation to the number of days in each of the declining legs to Friday's low.

35. 381/123=3.098 (3.000).

36. 381/77=4.948 (5.000).

37. 381/42=9.071 (9.000).

38. Now let's look at the number of days in our assumed Wave I decline and Wave A of II rise.

39. Since this movement spanned 8+26=34 weeks, we already know that the number will turn out to be somewhere around 7 X 34=238 calendar days total.

40. We turn to "THE COMPUTATIONAL CALENDAR" on pages 148-51 of "The 2001 $upertrader's Almanac - 2nd Half Edition" and calculate the correct number at 235 (FIBONACCI # = 233).

41. Now we compare our assumed "expanding triangle bottom" formation of 381 calendar days with the 235 days in the January, 2000 to September, 2000 movement.

42. 381/235=1.621 (PHI = 1.618).

43. 381+235=616 (FIBONACCI # = 610).

44. 616/381=1.617 (PHI = 1.618).

45. 616/235=2.621 (SQ PHI = 2.618).

46. Ah, that Mother Nature.

47. Always jealous of her guarded secrets!

48. But since I've a few more minutes, let's look just a little bit more and see what else She's been up to ...

49. And we'll do so by looking at the change in price in these four swings (note that 5 points produce 4 swings).

50. We thus see a rise of 13650 tickees, a decline of 19150, a rise of 22435, and a decline of 32878.

51. We first compare our last declining leg with the initial declining leg.

52. 32878/19150=1.717 (SQ RT 3 = 1.732).

53. Then the two advancing legs.

54. 22435/13650=1.644 (PHI = 1.618).

55. HOW 'BOUT THAT ???

56. Then the last declining with the last rising.

57. 32878/22435=1.465 (SQ RT 2 = 1.414).

58. And we're not done yet.

59. Let's now break down the last declining leg from the May high to Friday's low and compare it, on both a time and price basis, with that last rising leg from the spring low to the May high.

60. The rise spanned 22435 tickees over 61 calendar days.

61. The decline occurred in an a-b-c movement to the 711 low, 802 high, and 921 low.

62. In TIME, this movement declined 50 calendar days from the May high to the July low, rallied 22 calendar days to the August high (FIBONACCI # = 21), and has since declined 50 more calendar days into Friday's low.

63. Hence, the entire decline lasted 50+22+50=122 calendar days (SQ LUCAS # 11=121, LUCAS # = 123).

64. Note, of course, that Waves a & c were equal in terms of TIME on Friday.

65. But the rise from the March low lasted 61 days.

66. 122/61=2.000.

67. Hence, at Friday's low, the components of the decline of the last leg were thus in PERFECT PROPORTION to each other AND to the rise of the prior leg.

68. Plus, 122+61=183 calendar days total (1/2 solar year = 183).

69. We already know that this market declined 32878 tickees into Friday's low over these 122 calendar days.

70. Now we compare with the a and c legs of the decline (note that we disregard the Wave b rise of 22 days).

71. Here we have c/a=25466/12292=2.072 (SQ RT PHI X PHI = 2.058).

72. 32878/25466=1.291 (SQ RT PHI = 1.272).

73. 32878/12292=2.675 (SQ PHI = 2.618).

74. Now let's compare the high of May with Friday's low.

75. 113501/80623=1.408 (SQ RT 2 = 1.414).

76. Or the July low to Friday's low.

77. 101209/80623=1.255 (SQ RT PHI = 1.272).

78. Now turn to page 89.

79. We want to focus on the information in the middle of the box directly above "Ember Day".

80. If you don't think this information is important, then take a look at WHEN the all-time high in the Page 326 market occurred in March of LAST year and WHEN the prior low of the year occurred in this market in March of THIS year.

81. (Friday was 1 1/2 years from the first event and 1/2 year from the second).

82. Note, on an hourly chart, that the new lows on Friday were not CONFIRMED by such momentum oscillators as RSI and Slow Stochastics, thereby forming an important price/oscillator DIVERGENCE (see the "Confirmation and Divergence" discussion in "The $upertrader's Reference Manual").

83. Given the pristine nature of the manner in which this market has unfolded, it is most appropriate to have entered long this market at the close on Friday, if not earlier in the day (see the "Entering and Exiting" positions discussion in "The $upertrader's Reference Manual" for intraday trading strategies, last paragraph).

84. Also, see the "Pyramiding" discussion in "The $upertrader's Reference Manual".

85. At the very exact all-time high in the Dow Jones Industrial Average at the beginning of last year, it was suggested, in COMMENT # 18 of 20010115, that long positions not just be exited, but that new shorts be established.

86. The position was identified in that COMMENT as "a $ 1 million trade".

87. Chances are RIGHT NOW as good as they get that this is the exact opposite of that opportunity (ie, long instead of short).

88. There's no reason you should have been left behind then and no reason for you to be left behind now.

89. It would, of course, be IDEAL if we had some information from the April-October edition of "The 2001 $upertrader's Book of Linear Time Cycles" IN ALIGNMENT WITH the information in this COMMENT.

90. There are several other markets which are set up in similar manner.

91. You'll have to use the books to uncover them yourselves, but they're there now.

UPDATED 20010924

COMMENT 2001 - 522

1. Last, but not least, let's take a glance at the stock market indexes.

2. The advance/decline line, after moving to new highs for the year in late August, has broken down and is sitting, as of Friday, at the lows of the year established in late March.

3. Price has, thus, moved to new lows while the advance/decline line has not, thereby forming a bit of a DIVERGENCE (see the "Confirmation and Divergence" discussion in "The $upertrader's Reference Manual").

4. As Friday was "triple witching" day, the large down opening was understandable.

5. Two important fundamental items occurred last week, however, which give rise to concern.

6. First, the market was unable to rally in the face of the federal reserve 1/2 point rate cut on Monday, and, second, was unable to rally in the face of what was purportedly a great speech by President Bush on Thursday evening.

7. The inability to rally in the face of good NEWS is an important DIVERGENCE between price and the NEWS (see the "Confirmation and Divergence" discussion in "The $upertrader's Reference Manual").

8. Nevertheless, this is now the first time since the September and October bottoms in 1998 that Investors Intelligence survey of investment advisors has found more bears than bulls.

9. The 1998 report marked a very important bottom in the market at the end of a brief but steep slide fueled by Asia's economic crises, Russia's debt default and the near collapse of the Long-Term Capital Management hedge fund.

10. The latest weekly survey of American Association of Individual Investors members showed 44.6 % bears and 31.1 % bulls.

11. This was the second straight week where bears exceeded bulls.

12. At the same time, the put/call volume ratio rose to 1.21, its highest level since tracking began in 1985.

13. And the Chicago Board Options Exchange's Market Volatility Index (VIX) rose to 57.31, its highest level since the week ending 19981009.

14. Astonishingly, some are just now finally declaring the market to be in a "bear" mode.

15. As an example, as the Dow Jones Transportation Average plunged to a 5 year low this last week, a prominent Dow Theorist commented that the new lows posted by this average confirmed that we're officially in a bear market.

16. Perhaps in hibernation for the last 21 months would be a more accurate description.