12/2/20085:58 AM Pacific

I will look at the NASDAQ e-minis because it made the deepest retracement. If the higher level thesis is wrong, it will show up here first. In this 233 minute chart the NQ (NASDAQ e-minis is painting a picture of 5 waves down with good ratios. I can get 3 waves, but it would include an extended 3rd, uncommon in retracements. The problem is that we have already retraced .618 of the entire move up. In order for this to be 5 waves and the 5-3-5 thesis to still work, we will need to finish the 5-3-5 retracement inside the 5 waves up. The most common retracement levels are .500 and .618. Beyond .618 I generally consider a bias shift. However, in this bear market, .810 has been a fairly common retracement level in the NASDAQ.

Looking at this updated chart from this morning, if we were to turn down right now and extend .618 of the 5 waves down yesterday, we would be right at the .810 retracement level. A turn there and the 5-3-5 thesis is still alive.

12/2/20085:58 AM Pacific

If we extend up first, the next chart shows several scenarios of the thesis playing out with a 1:1 extension of the move up overnight (which coincides with a .500 retrace of yesterday’s move) and a 1.618 extension up (confluence with .618 of yesterday’s move). It then shows the subsequent move down as .618 extensions or a 1.00 extension all ending at normal retracement levels of the 5 wave set up off the low.

12/2/20085:58 AM Pacific

In summary, I am showing patterns that allow for the move up off the low to be 5 waves (my preferred count) and the move down yesterday to be 5 waves (my preferred count). If either of these counts were wrong then these scenarios will not play out. Above 1161, the bias shifts that yesterday’s move was 3 waves instead of 5. Below 1052, the bias shifts that the move off the low was 3 waves instead of 5. TMD/DW The market detective provides personal market opinion based on sound technical analysis and research. However, no warranty is given or implied as to its true reliability. The market detective will make errors and mistakes. The market detective is not an investment adviser and is not making recommendations to buy, sell, or place orders relating to the futures contracts, ETFs, or stocks that he writes about. The responsibility for decisions made from information contained in this service are solely that of the individual subscriber. The individual must fully research and make his/her own decisions before acting on any information provided by the market detective. The market detective assumes no responsibility for subscriber investment or trading results.