October 2007 Commentary

Following up from last month, we continue our study of the NASDAQ 100 Index. The Index has moved above 2060, so we know that wave 3 is taking place. Our next step is to evaluate the next resistance or target level. If we only look at the 8% sensitivity, a possible target would be 161.8 % of the whole wave 1, another one would be 100% of wave 1 and a third would be 161.8% of wave 2. These are common projections and we know from experience that some are more frequent than others. What we must remember is that a conservative approach is better; we should establish way points and monitor the progress along those points. If none of these are along the path of the price, we must reassess the wave pattern. Our way points will be the various resistance levels in order of ascendance, as we cross one we expect that price will make it to the next.

Double click to enlarge

Let's go through the calculation for those who don't have a software to display the values. We measure wave 1 from the bottom (the trough) to the top (the peak), in this example it is 2060 and 1450 (this value is the end of the larger sensitivity 13% wave (4)). The difference between the 2 numbers is 610, the size of wave 1. Then a projection of 161.8% of wave 1 would be a wave 3 of 987. Wave 3 has its base at the end of wave 2 so we should add this 987 to the trough of wave, 1806, hence 2793. This is our largest and last conservative way point. The most conservative would be 161.8% of wave 2, 2060 less 1806 times 1.618, 411. This first way point would be at 2217, a conservative target for wave 3. This would make wave 3 smaller than wave 1, something that can be true only if wave 5 is even smaller. For now we assume that wave 3 will end between 2217 and 2793. Remember, this is for educational purpose only, there is no certainty that price will move accordingly.

 

Previous Commentaries

September 2007 Commentary	June 2007 Commentary
May 2007 Commentary	April 2007 Commentary
January 2007 Commentary	November 2006 Commentary
September 2006 Commentary	July 2006 Commentary
June 2006 Commentary	May 2006 Commentary
March 2006 Commentary	February 2006 Commentary
December 2005 Commentary	October 2005 Commentary
August 2005 Commentary	July 2005 Commentary
June 2005 Commentary	May 2005 Commentary
April 2005 Commentary	March 2005 Commentary
January 2005 Commentary	December 2004 Commentary
November 2004 Commentary	October 2004 Commentary
September 2004 Commentary	August 2004 Commentary
July 2004 Commentary	June 2004 Commentary
May 2004 Commentary	April 2004 Commentary
March 2004 Commentary	February 2004 Commentary
January 2004 Commentary	December 2003 Commentary
November 2003 Commentary	September 2003 Commentary
August 2003 Commentary	July 2003 Commentary
May 2003 Commentary	April 2003 Commentary
March 2003 Commentary	February 2003 Commentary
January 2003 Commentary