weekend update

I wrote last weekend (compx 2160.35):
The minute wave 2  (abc) correction COMPX, that started Aug 02, is now in it’s third and final phase: wave A declined to 2121 on Aug 26th; wave B rallied to 2183 on Sept 12th; wave C should now bottom either at 2110 -2120 (flat) or 2060 – 2080 (zigzag). It’s too early to tell, but it will become more apparent as the correction nears conclusion. My MMI (market momentum indicator) continues to decline, typical of a correction, and has just turned negative for the first time since May. I expect it to get more oversold before this correction ends.
Then, on tuesday wrote (compx 2162):
I posted this on the Elite Traders board this morning: 09-20-05 11:32 AM
I can count 5 waves down from the 2186 high in the COMPX:
1…2164, 2…2172, 3…2143, 4…2161, 5…2140
The rally late yesterday/today brings us right into the previous wave 4, and about a 50% retracement of the entire decline. Remember we had a triple top at 2186 (the high), and then six attempts to break thru 2172 (wave 2) in three hours. I see 4 attempts already to break thru 2162, between 10:15 and 10:45, this morning. It’s FED day so it should be interesting.
Wednesday I wrote (compx 2130):
If the market can drop 2% between now and friday. i.e. INDU 10270 and COMPX 2188

It’ll be sufficiently oversold on my MMI and stochastics

And probably with completed wave patterns in the INDU (flat) and COMPX (zigzag)

If we drop 2% straight down till friday

Thursday I wrote (compx 2107):
If the ongoing wave C were to equal wave A, 97 points each, that would conclude the correction at COMPX 2086: A (2218 -2121=97), B (advanced to 2183), C (2183-97=2086). With wednesday’s close of 2107, we need another drop of 21 points to reach the 74 point decline in (c of C), and the 97 points of wave C, and the entire correction of ABC or minute ii… The print low on the COMPX might come in at 2079.
Needless to day it’s been a wild week. With hurricane Rita bearing down on the Gulf the market went into a tailspin. Then on thursday, with reports of it veering further to the east than expected, and weakening a bit, the COMPX found a bottom at 2093. Just seven points away from our closing target of 2086 and 14 points from our print target. Thursday’s low of 2093 was retested and the market rallied somewhat into the close. On friday, the market sold off a bit, but this time 2100 held and another lackluster rally into the close of 2117.
Technically this is what I am seeing. The COMPX has become sufficiently oversold on my MMI (market momentum indicator) to generate a significant bottom and the end of the two month correction. However, it typically gets more oversold than it is at major turning points. Also, the INX and the INDU have not reached sufficiently oversold levels as of yet. Indicating there is more downside price action ahead for both the Dow and the S&P500. All three indices are oversold on the slow stochastics indicator that I follow, as they should be, after two weeks of steady selling. Thus, I sense that we are getting closer to a total market bottom, but are not there yet.
At this point, I believe, the prudent thing to do would be to start scaling into some COMPX stocks that you like, as I plan to do. Some of them have been waking up of late and appear ready to advance, but the uncertainty of the market seems to be holding them down. The QQQQ, the Nasdaq 100 index, should also be considered, it is an ETF that mirrors the COMPX: it’s less volatile and less risky than individual stocks. I’m planning on establishing an initial position there as well.
In summary, the overall markets are mixed, reflecting overall market sentiment at this point. We did not get the climatic selloff to end the two month correction. The COMPX has reached a bottom, or very close to it. The INDU and INX still have some more correcting to do. I feel we’re very close to a major market bottom, with minimum risk on the downside and 20+% potential on the upside.
Best to your week!          

About tony caldaro

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