Yelnick has noted that Prechter has hinted at changing his count in recent newsletters. Today he unveiled his new count. The count may be different, but the message is the same, and the prediction is much closer to Yelnick's view: a top of around Dow10K at around Nov 11.
Prechter had counted the Dow since Jan00 as a nested series of waves 1 - 2, so that we were nearing the 3 of (3) of [3] wave. This is what normally happens. However, the recent wave 2 of (3) of [3] has proceeded longer and higher than should have been expected of a wave 2 of third degree down. In particular, it had passed the normal 61.8% retracement and was heading for a 78% retracement, as had the prior wave (2) and wave [2]. While explainable by the unusual circumstances of the mania, it nevertheless is rare for wave 2's to retrace that far, let alone three times in a row.
A simpler way to count the bear market would be to see the whole drop to Oct02 as wave [1] down. Zoran had moved to that view a while ago. Yelnick had suggested that view in informal communications. Now Prechter has found the systematic justification for that view.
The best reason for this change is the psychology of the current wave we are in, which is now relabeled as wave [2]. The investment climate has been uber-bullish, as expected in a wave 2. Wave 2's are often more bullish than the peak of the bull since investors are convinced that they have caught the bottom, so feel they have deeper justification for their bullishness. The level of bullishness now is higher than in the prior waves [2] and (2), which suggests that THIS is the highest degree wave [2], not the previous ones.
Under this new count, we look for a 61.8% retracement of the full wave [1] down from the peak. The former Yelnick target was 78% of the wave 1 of (3) of [3] down, or Dow9930. The new ideal target is essentially the same, since whole drop of the new wave [1] is full of fibonacci relationships. (78% is the square root of 61.8%, so since the prior wave 2's each retraced 78%, it should be no surprise that 61.8% of the whole drop calculates out as 78% of the most recent drop.) Suffice to say the target is Dow10K +/- 200 points.
Dow 10K is also a major psychological barrier. When the Dow first broke 100, it took another 18 years (and the Roaring '20s) to go above it again. When the Dow first broke 1000, it bounced off it a few times but didn't break through for another 16 years. It should be no surprise if we slightly break through the 10K level and then turn south again.
Timing for the top is anywhere from Oct15, the day Zoran has already called as the top, to Nov 14, with a most likely time around the first full weekend in Nov, or Fri Nov 7 through Tues Nov 11.
Yelnick sees Nov11 as one of two likely times for the top. Besides the above analysis of Prechter, Nov11 also fits the pattern the market saw in 1987. If the 1987 model continues, it would point to a crash the first week of Jan04. The other likely time for the top would be in late-Mar/early-Apr04, reflecting the impact of the Presidential four-year cycle on the timing of this wave [2]. To put it in simpler terms, Bush and Greenspan are doing everything possible to pump the economy and get re-elected. Their manipulations will either have worked or not worked by the end of the first quarter, right smack dab in the middle of the primary season. These manipulations have the effect of extending the timing of the wave, but not affecting its height or overall pattern.
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