29th April 2005
By Tom Hougaard
11.03
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Good morning,
I am not sure what the SP500 futures are doing up here at 1150. I was long overnight and up until 6am this morning, the contract was trading between 1142 and 1144. Once the European traders came in, they pushed the market up on very light volume. I don’t think it means that something fundamentally has changed. The earnings of Microsoft by no means rallied the market after-hours.
However, given that we are VERY CLOSE to a major turning points, you can expect volatility to be fierce from now on.
Back in 1987 we saw a crash in October. The period from the high of the market that year to the crash low was 55 days, a Fibonacci number. While I am not suggesting we are about to witness a crash, the price action in the market certainly does have a smell of panic to it, so I thought I would point out that on this Sunday it will have been 55 days since the high in the Dow on the 7th March. In other words we could expect a low either Friday or Monday with a potential retest on Tuesday for the final low.
The chart below shows the wave formation in the Dow. You can count two distinct waves down from the highs or you can simply count it as one. There is a good relationship between the two waves as you can see from the Fibonacci projection. Ideally the target was 9964, where wave 1 would have been 61.8%, while wave 3 would have been 38.2% over the entire move. We fell 36 Dow points short of that.
Either way it would set up a perfect relationship between the waves. Another target would be 9929, where wave 3 would be equal length of wave one.
If we are to see a panic today or Monday some of targets are shown on the chart below. They are 9929 and 9690.
If we were to retrace the move from the lows of 10,000, then targets would become 10376, 10492 and 10608. If a panic low were to occur into the 55 days, then you would expect to see it today or Monday. From a Matrix point of view Tuesday looks like the major target date with SP500 prices around 1126.
The short-term cycles point to higher prices initially and then lower prices again. However, it does have the potential for a huge rally into the final hour of the day, according to my calculation. If the cycles have already turned higher, then we will see a steep move higher, followed by a deep retracement and then a big final hour rally.
Many of you have asked how the Market Matrix works. As the Matrix is focused predominately on TIME, I have shown a little clue in the chart below. The Matrix is calling for a low on Monday/Tuesday in combination with the Delta points.
As you already know I have by the use of the Matrix forecasted the turn in the Euro Bund market at 120.89 and the turn should be today. So far the high was 120.91 and I am short Bunds now. This short was achieved by using Time calculations. My stop is currently 121.89. I will not move that yet.
To conclude: I am expecting the US equity indices to make a major turn on Monday/Tuesday, and I think we will see higher prices after that. For now we have to contend with the possibility of much lower prices today and or Monday.
I will leave it here for today. I am sure that will more than enough for you to digest.
Have a nice weekendTom
