No Comments Written by Anthony Truong on February 17, 2008 – 9:07 pm

Straight to the point: if this 3rd of a 3rd of a 3rd wave is going to occur, this next week would be an ideal time for it to happen. There are other permutations to recent market action, but I’m sure there are some subscribers who want a definitive diagnosis, and so I’m going to go out on a limb and say CRASH IMPENDING! The drop might not be as dramatic as a single day crash (aka 1929, 1987), but let’s just say we should see some significant losses.

Daily Chart: That’s not bad grammar, the chart merely cut off the “n” in “broken”. We will receive confirmation that a 3rd wave is underway once the bright green line is broken.

Hourly Chart: Last week, I drew the first 2 bright green lines as support areas that needed to be broken to confirm the beginning of the 3rd wave. As you can see, prices have penetrated these lines, so the last “line of defense” is the third green line (connecting the lows of 7th February and 11th February).

5 Minute Chart: I didn’t anticipate a complex 2nd wave, but I suppose as the markets are about to turn in a big way, price action will do just about anything to gain every last point before dropping. What alerted me to a potential turning point was the convergence of the 2 purple lines (the first connects the highs of 7th, 12th and 13th February; the 2nd connecting the lows of 11th and 13th February) which had encompassed market action for a week or so.

As you can see, once the lower purple line was broken, a textbook 5 wave impulse formed, followed by a 3 wave flat correction. The C wave of wave 2 may still have some strength left in it, but I don’t anticipate that it will move much above 1360 before jumping off the cliff.

Bottom line – hypothetically, if I were:

- an investor, I would either sell any stock holdings I had now, or at the VERY LEAST move my (guaranteed, if applicable) stops to levels very close to current prices.

- a conservative trader, I would wait for the bright green line (on the daily chart) to be penetrated before taking some short positions.

- an aggressive trader, I would open short positions as early as possible (overnight trade?), with a stop level at last week’s high (14th February).

THIS IS NOT A RECOMMENDATION!

Perhaps we’ll get another “holiday surprise”, seeing as Monday in the US is President’s Day (Washington’s birthday). Remember what happened on Martin Luther King day?

Happy trading!