From my friend Keene Little, who graciously allowed me to pass on this thorough EW analysis of OEX:
Since I've been making reference to OEX several times lately I thought I'd show more reasons why I think we're topping out here around this 670 level. We'll start with a weekly chart and move in closer.
I'm starting with the premise that the move up from the 2002 low is a correction to the 2000-2002 decline. I can say that with a fair amount of certainty because of the corrective wave structure and because of the total lack of impulsiveness in the techs (and a whole slew of sentiment indicators for this rally). A new high for the DOW doesn't change that since an A-B-C correction can have wave-B (the rally off the 2002 low) make it higher than the previous high--it's called an expanded flat correction in that case).
First we have a 62% retracement of the 2000-2002 decline at 670. For the "bounce" from 2002 we have a complex correction in that it's basically a double zigzag up (two A-B-C's separated by an x-wave). There are several ways to label it and not be wrong and this chart shows one of them. After the pullback into August 2004 we've had the 2nd A-B-C move up and equality within that move is at 673. Nice correlation with the 62% retracement.
Zooming in to look at the leg up from July 2006 (wave-C) this shows the wave count for that move. Since the pullback into the low at the end of November we've been in an ending diagonal 5th wave: Link
Projecting where wave-5 will equal wave-1 in the run up from July we get 670. Again, nice correlation. Each of the waves inside the ending diagonal is a corrective move (so a 3-wave move or something more complex). The move up from January 26th looks like it will be an a-b-c move. So zooming in on that move this 30-min chart shows how it's developing: Link
Equality in the move up from January 26th is at 672. So you can see how every step of the way as we zoom in closer and closer to the move all the way back from 2002 has the Fibs pointing to this 670-673 area as a potentially very important Fib level. I don't think the OEX will make it through it.
I show the wave count for the c-wave, the move up from February 12th, as complete at Wednesday's high. It failed short of the top of its parallel channel and the 672.83 equality level. I don't have any heartburn whatsoever about that considering the longer term pattern is running the show here. But if the current pullback since Wednesday should lead to another push higher then watch that 672-673 area for a shorting opportunity. This happens to be one of those once in a lifetime (maybe twice) shorting opportunities and it's why I'm working so hard in identifying the top.
This entry was posted
on Thursday, February 15, 2007 at 2/15/2007 04:54:00 PM.
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