Sand Spring Advisors LLC
The B-Wave Down
September 3, 2002
by, Barclay T. Leib
As we write this early Tuesday morning, the major equity markets have already started a new week on the negative side. The steep upward-sloping trendline on the cash S&P 500 chart extending up from the July 24th lows has now clearly been broken and left behind. As we previously anticipated, the 923-975 zone represented an A-wave zone of resistance, with a B-wave down now in force within a larger A-B-C corrective period that will likely extend into early November.
Chart constructed using Advanced GET End-of-Day
How far down could this B-Wave extend?
Wave A up spanned 188.4 points (a non-trivial 24.2% bounce) and lasted just short of a month. At this point, Wave B down could stop at several different areas, but the most likely level would appear to be near 814 toward the end of September. This would still allow time for a substantive Wave C advance that could travel the same distance as Wave A (a typical phenonmenon in A-B-C corrective moves), and end at or near and S&P price level of 1002 by November 7, 2002 -- our next cycle date of some importance.
We simply like the look and feel of our red lines drawn above in making such a prognostication, and this view certainly would adhere to rules of Elliott Wave analysis for corrective bounces. Psychologically, the B-wave down tends to scare the hell out of people without making new absolute lows, with the A and C waves near-equal in magnitude and slope of advance (thus also encompassing near-equal lengths of time). We hope that this offers a useful short term roadmap for readers to stay on-sides in choppy corrective times. While short-term bearish, we do remain positive overall into November.
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