FIBONACCI FORECASTER WEEKLY REVIEW AND PREVIEW
Jeff Greenblatt
Dec. 4, 2006 — As you reference my September Lucas series article, we started with the analogy to a sports contest. When the horn sounds, the game is over. Last week, we looked at the various time cycles upon us and the markets finally decided to act on the 89-day cycle off the July 18 low. In the case of the Dow, this column gave out a price target of 12360 over the past month. The Dow hit that mark exactly, topping at 12360.84 on Nov. 22. Keep in mind that in football and basketball the horn sounds four times a game. What that implies for this cycle is a portion of the game may be over. The pattern has gone from up to corrective. What this corrective pattern has in store for us is yet to be determined. As the week unfolded, we really did not get any follow through until Friday.
As you know, we retested Tuesday's low late Friday. Tuesday's low did wash out a portion of the sellers and it looked like we may stay up, as the S&P 500 retested the top end of the range. But it failed and by the last hour of trade on Thursday, the indices all put in bearish candles on the close, a bearish omen.
The lows for the week were tested with mixed results. The Dow/S&P 500 did not take out their lows for the week and neither did the Nasdaq, which missed by a couple of points. But the Nasdaq E-mini and NDX did set new lows for the week. For what it's worth, the SOX also took out the low, electing to stop the bleeding at a small degree cluster of Fibonacci relationships. The last hour made a very strong recovery. What this means, for the time being is the markets have reached a point where there is strong support.
Friday's low in Techland is vitally important going forward. If they are broken, I anticipate a sharp decline of at least 100 additional points in the Nasdaq/NDX and possibly 200 points. But the market is holding and instead of a steep decline, I can anticipate the time axis taking over and keeping us mostly sideways for the coming week. If markets are not going to correct in terms of price, they will make up for it in terms of time.
Regardless of price, one way of determining whether we have an intermediate-term top in place is by watching the time cycles. Last week I went into this factor in detail. In the near term, we topped in an 18- (Lucas) week cycle. As we enter week 20, we are within plus or minus one of the 21-week cycle. In the larger picture, we also enter week 60 of the 60 to 62 week cycle off the October 2005 pivot and week 121 of the 120 to 124 week cycle off the April 2005 pivot. As I attempt to scale this down somewhat, the highest-probability time for a low would be next week, if the larger weekly trends are dominating. That would put us at 21, 61 and 122 weeks respectively. The 122-week cycle is one short of Lucas 123 and one more than Fibonacci derivative 121. That is the difficulty in dealing with weekly periods, there is a larger margin for error.
It now looks like we are dealing with a corrective start to the month and we are squarely in a trading range. Based on the action I saw at Friday's close, we should make another run at the high. The bottom of the trading range has held two times. If a run at the high were to fail, it is only then that I think another test of the low end of the range would fail and lead to a steeper decline.
Jeff Greenblatt
Fibonacciman@aol.com
