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Saturday, February 6, 2010

Saturday updates

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Since it is Saturday, and no markets are open, it is time to play around a little with the longer-term projections in a big "What if it is really a perfect world", with the charts and counts. These projections never end they way the picture perfect text-book says, but it still is interesting to build up a hypothetical scenario.
This is what I have came up with, the target of the first wave down should be $947.91, using these criteria:
-Wave 3 equals the length of wave 1, times 1.618. Length of wave 1 is 78.41, times 1.618 equals 126.87 points. And since wave 2 up ended at 1104.73, we minus 126.87 from that point, and we have the bottom of the 3rd wave at 977.86.
-Wave 4, offen retraces the 3rd wave by 38.2%. Length of wave 3 is 126.87, times .382, equals 48.46 points of retracement from the low of 977.86 making a high for the 4th wave at 1026.32
-Wave 5 equals the length of wave 1, this one is easy, wave 5 is 78.41, and subtracted from the high of the 4th wave comes to 947.91.
So now we have perfection, the fifth and final wave down completing the first wave down, one degree higher would finish at $947.91.
But, wait, now we know that length, we can go one step further, and figure where that wave will end. Wash, rinse, repeat.
-Wave 1, equals 202.54 points, times .382 equals the length of wave 2. 77.37, plus 947.91 is the top of the 2nd wave at 1025.28.
-Wave 3, equals 1.618 times 202.54, comes to 327.70, and minus from the high of the 2nd, comes to 697.58 for the bottom of the 3rd wave
-Wave 4, .382% retracement of the 3rd wave, or 125.18 points to the upside at 822.76
-Wave 5, equals the 1st wave at 202.54 points, for a low of $620.22.
OK, Now we have a new low in the projections, but if you think I am crazy enough to run at and buy puts looking for that level you are really nuts.


  1. Mike, well thought analysis. Remember though, 3rd waves make out of money the money options.........

  2. Mike,love your blog.
    I agree with your projection, however, my count is that we might have reached the bottom of 1(blue) at 1044.50 (close to 23.6% from top), and 2(blue) up is underway with a target of 1110.95, before turn down again.

  3. Mike, I'm curious did you run this type of hypothetical analysis projecting potential upside, after the market bottomed last March?

    While the path may not be identical to your perfect EW world hypothesis the destination has, I think, a fair chance of being correct.