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Advanced Technical Analysis - OSX



Note: the following analysis is formulated as an assimilation of Fibonacci, DeMark, Elliott Wave and other technical indicators. It is offered as education and not intended as advice in any way.

We're updating our OSX technical note from 8/13/04. At the time we suggested that a correction within a wave III advance could be complete in the 102-105 area and that a good risk/reward scenario favored higher prices.

Once again, we find the same type of bullish divergences present today as we did in mid August after what has been a very similar decline in terms both of price (~ 12 pts) and time (27 days) for each corrective move. If our larger Elliott wave count is correct, then the correction we are witnessing from the peak on 10/7 to Monday's lows is an internal wave iv correction within the wave III impulsive move up that started in May. Indeed, if the current correction is nearly complete (we estimate that it is 90%+ complete), the OSX could advance some 20% and perhaps more from the 112-114 area, putting the next Fibonacci target in the 135 area +/-.

In the short term, though we have not seen hourly Demark trend exhaustion indicators, we are seeing some hourly momentum divergences and a nearly complete Elliott wave correction (an ABC zigzag) that has nice overlapping peaks and troughs, indicative of a corrective pattern down from the 10/7 peaks. Though it would be ideal if the OSX registered a new low beneath Monday's low at 113.77 to complete all the "parts" of the correction, it is not necessary and prices could have put in a low on 11/2 at 113.77.

The analysis then favors the long side on any decline below 113.77 for a possible move to new annual highs in the 135 area (possibly higher). Trade which moves below 110 would negate the near term bullish case and force us to stand aside (not advice). Should we see a small degree impulsive wave up from the 113.77 lows, we will highlight it in a note as that would be the first indication that the one month correction may be complete and new highs are in the offing. Our original note on the OSX, published 7/20, stated our long term target for this index: 170-185 area in and around the end of Q2:05. That remains our top view for now and the current price pattern and technical indicators we watch are confirming that long term analysis.

No positions in stocks mentioned.

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