HERES a HYPOTHESIS from Steven Rock at the Crystal ball group
IF IF IF 2000-2002 was an A wave of a FLAT correction (since the '07 top is basically the same as the '00 top) then we are (roughly) in the C=A area right now. BUT if C extends to 1.618 *A in nominal terms you're looking at an SPX in the very low 300's:
Wave A (max using '02 low, not 3/03) = 1552.87-768.83 = 784.04
784.04*1.618 = 1268.60
Wave C = 1576.09-1.618*A = 1576.09-1268.60 = 307.49
As bad as that is, what really spooks me is this natural log calculation:
The entire ABC measured in natural logs from the 2000 top of 1552.87 to the (ugh) C target of 307.49 is........
1.619!!!
Sounds coincidental and alarmist, right? Well.....
Consider the entire advance in the SPX from the October '74 low of 60.96 to the 2000 top of 1552.87.
That's a natural log move of 3.23764...which is twice 1.6188!
So, the (ugh) move to 307 is ALSO an EXACT 50% retrace (in ln) of the move from '74-'00! AND 307 is less than 3 points off the 80.9% (half of 161.8%) retrace in nominal terms of the entire advance from the 1932 low to the 2007 top!
Less impressive perhaps are the facts that when square roots of prices are used, the 307 level marks the 61.5% retrace of the advance from the 1949 low to the 2007 top, and in natural logs, 307 is 99% close to the 61.8% retrace target for the 1982-2007 advance.
Unfortunately, there are even some calculations within the move down from the '07 top which point to the same area...for instance, the ln move from the May 2008 top will be 1.618^4 times the initial move from the October 2007 to the March 17 2008 bottom at 305.50 (perhaps in EW terms making the net move of waves 3-5 a Fibonacci 6.854 ln multiple of wave 1). But you can fiddle around with "scenarios" all day without hitting upon the path the market is actually going to take. Not necessarily an endeavor of futility, but perhaps one which can alert you to the possible importance of certain levels.
Of course, we've all seen calculations like these fall by the wayside as the market forges through time, but at least, if that 307 level was met, you'd have some reasons to believe the worst was over, and could act accordingly.
Best,
Rock
More later
Jay
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