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(2/28/09) The market had another bad week as all three
major averages are now exhibiting their final 5th Wave down in association with
a longer term Elliott 5 wave pattern that began in October of 2007.
A classic looking Elliott 5 Wave pattern is shown below. Keep in
mind once the 5th Wave down ends this should be followed by a substantial
"ABC" type corrective rally that may last several months.  In the chart below I have labeled
all of the sub Waves and major Waves for the Dow. Also notice the
Nasdaq and S&P 500 are exhibiting similar patterns as well. 
Nasdaq 
S&P 500 
At this point I know many investors
are wondering when a bottom may occur. As mentioned above it does appear
we are seeing the final 5th Wave down so that is a positive sign.
However it's nearly impossible to know when the exact bottom will
occur. According to Elliott Wave Theory the 5th Wave should have 5
sub waves to it with "3" Waves down and "2" Waves
up. If we take a closer look at the S&P 500 on a daily chart it
appears we are in the 3rd sub wave down at this time which eventually should be
followed by a 4th sub wave up and then the final 5th sub wave
down. 
Finally one thing to keep an eye on
in the weeks ahead is the 5 Day Average of the Put to Call Ratio. So far
since the October 2007 top it has done a good of signaling the completion of
major Waves. Notice when the 5 day Average of the Put to Call Ratio
has risen above the 1.15 level (purple line) that this was followed by the
completion of Waves 1 and 3 Down. Meanwhile when the 5 Day Average
of the Put to Call Ratio dropped below the 0.85 level (green line) this was
followed by the eventual completion of Waves 2 and 4 Up shortly
thereafter. Now what is a little bit mystifying
to me at this point is that the latest drop in the S&P 500 hasn't generated
any fear among the Options crowd as the 5 Day Average of the Put to Call Ratio
has actually been falling (points A to B) and is getting close to the 0.85 level
again. Thus you really have to wonder what it's going to take to get
investors fearful of this market to allow for a bottom to occur. At
this time it appears the Options crowd believes the market is getting near a
bottom so that is why they have been loading up on Calls of
late. Thus we shall see if they are right or not over the next
few weeks. 
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