June Commentary

Let's have a look at the NASDAQ Combined Index with a slant on a particular occurence hat took place in April 2006. Looking at the chart, we are drawn to the thick red line at the 2800 level, the target for 2006. Is this achievable? Or rather when is this likely to occur? Obviously a strong resistance has been met and the index has been dropping since. It paused a little on the previous peak (wave (5)) support but today it is seeking a new support. At the time we reached a peak of 2380, we were also reaching a Fibonacci time projection. The time projection is slightly after the peak but as we know time is not quite as accurate as is price. Why we are bringing this is that we have to expect a correction that could be a bearish impulse. We have an important support level to test, at 2030, if it is penetrated we will have break of the bullish 8% pattern. That pattern is already in poor condition since the index dropped below wave 1 peak of 2230, we know that a wave 4 should not penetrate a wave 1 territory. It did and the next test is wave 2 trough!

Double click on any image to enlarge

Should the index drop below 1900, a bearish trend will be set. It will put an end to the 2800 target for a while. Another important consideration is the blue trendline at 2100, it is still holding and that trend is major. When it is penetrated, we should expect a bearish market. Again, the Elliott Waves are giving us a sense of direction by outlining the sensitive levels that we should watch. It is important to carefully measure our exposure in a market that could change direction. The accuracy of Elliott Waves and Fibonacci is about 70% in trending markets. It does not mean that the probability of a successful trade is as high as there are other considerations to factor such as commissions and execution time.

Let me repeat last month heeding, it is not allowed to make forecast or entice investors to act one way or another. This commentary is for educational purpose and addresses the use of the software distributed by the company.