TIMER DIGEST’S (P.O. BOX 1688, Greenwich, CT. 06836/ 203-629-3503)

 #9 LONG TERM STOCK MARKET TIMER FOR THE YEAR 2003.
#4 GOLD MARKET TIMER FOR THE YEAR 2003.
#8 STOCK MARKET TIMER FOR THE FIVE-YEAR PERIOD OF 12/31/98- 12/31/03.
#6 STOCK MARKET TIMER FOR THREE-YEAR PERIOD OF 12/29/00- 12/31/03.
#4 STOCK MARKET TIMER FOR THREE-YEAR PERIOD OF 12/31/99- 12/31/02.
#5 STOCK MARKET TIMER FOR THREE-YEAR PERIOD OF 12/31/98- 12/31/01.
#4 STOCK MARKET TIMER FOR THE YEAR 2001.
#7 STOCK MARKET TIMER FOR THE YEAR 2000.
#5 BOND MARKET TIMER FOR THREE-YEAR PERIOD OF 12/31/99- 12/31/02.

WAVE (E) DOWN UNFOLDING

The chart above illustrates how perfectly the Dow has declined from our turning point high back in February. At that time, we declared wave (D) up in the Dow as complete. Since that high, the first wave down of minor degree broke down in absolute textbook fashion. Five wave patterns to the downside followed by three waves up. Note the extension in minute wave three. At every degree, from minor to minuette, we can easily count five waves down. Each fourth wave holds below the low of the previous first wave low, fulfilling the guidelines of Elliott Wave. It doesn’t get any prettier than this, folks.

The market has been a bit choppy since that first wave low of minor degree on 3/24/04. As you can see, we label this second wave counter trend bounce as complete at the 4/27 high. From that high, the market appears to once again decline in five wave patterns. This of course, is the initial stage of wave three down

Recall from the March issue that we expected the Dow to retreat, if for no other reason than to at least fill in the gaps that remained from its most recent gains.

“…As the market has moved up over the last week, it has left some gaps to be filled. At a minimum, the market will need to come back and fill these gaps. I can’t imagine three breakaway gaps in a new upward run.”

Of course, the market once again has accommodated our forecast. At this point in time, the Dow has filled two of those three gaps. The one remaining gap lies just above the 10,000 level. Again, at the very least, we expect the market to come back and fill this last gap.

Keep in mind however, that this is a third wave. In the near term, we can expect this third wave to accelerate to the downside. Now, note the gaps to the downside in the hourly chart above. Notice how the tide has changed. The market went from gaps to the upside to gaps to the downside. This can only mean that wave two is complete, and as wave three accelerates to the downside, the previous gaps will be filled as new gaps are formed. These gaps to the downside are acceleration gaps and should not be filled in the near term. They could quite possibly remain unfilled in the intermediate term as well as this third wave gains momentum. Soon we shall see the Dow once again below 10,000.

FIBONACCI TIME SPIRAL

I’d like to revisit our Fibonacci time spiral briefly. Once again, the spiral that has called the turning point highs since 1999 has served us well. Of course, I felt extreme confidence that it would come through once more with the wave (D) high in February. Now comes the critical point of the entire bear market. To be quite honest, with all our success at calling the highs, we have not enjoyed that same jubilation at the lows. After studying the Fibonacci ratios and trying every possible combination from the August 1999 high, we had to think outside of the box. What we came up with was displayed in the January 2, 2004 report. We compared the number of days from the actual all time high (1/14/00) to the lows of waves (A) and (C). In this case, there were 618 (minus 2) days between the all time high and the wave (A) low, and 1,000 to the wave (C) low. Of course, these numbers are exact Fibonacci ratios themselves! From that point, we projected the wave (E) low to naturally occur 1,618 days from the high. That date is June 19, 2004.

Wave Relationships from 1/14/00 high

Fibonacci Target Actual Turn Date
Plus 618 days = 09/23/01 wave (A) low 09/21/01 (margin of error 2 days)
Plus 1,000 days = 10/10/02 wave (C) low 10/10/02 (direct hit)
Plus 1,618 days = 06/19/04 wave (E) low?

As you know, we expect wave (E) down to decline in a five-wave pattern to end the bear market. Waves one and two appear complete. At this point, from the wave (D) high in February, it is quite possible for this decline to bottom in five waves at or near our target date.

Before we all become giddy like third grade school girls over this possibility, I want to make one point. Once I identified the orthodox high on 8/24/99, I had confidence that the market would turn on our Fibonacci turning point highs. As April 14, 2000 approached, I eagerly anticipated a turn to the downside. As the NASDAQ topped and tumbled to the downside on that exact date, I felt a growing confidence in this sequence because I had been here before. It was much like the spiral back in 1996. That Fibonacci sequence enabled us to call the turning point highs up to the spring of 1998. Now, it was happening all over again. And, once again, just like before, the market paid its respect to these spirals. With each turning point – the Labor Day weekend of 9/4/00 and subsequently the March 2002 high, I came to expect the market to reverse itself. I had supreme confidence now. That is why there was no doubt in my mind that the market would top in wave (D) near our February turn date. Now, in the spring of 2004, I have witnessed the fibonacci spiral sequence call seven different turning point high dates covering two different major moves to the upside (one in a bull market, one in a bear market) spanning a total of more than six years. And all these dates were hit with a margin of error of just a few days – some within the exact day! It still ceases to amaze me.

So you can imagine my resolve that the market would indeed top. Now that you have a feel for my level of confidence in the fibonacci sequence in calling the tops, you can imagine I move forward with at a little trepidation as we await the oncoming bottom. Because the spiral I am using for this low is not like the one used for the high. Unlike the other spiral, it has not stood the test of time. To date, it is unproven, except for the wave (A) low. And it is outside of the box, to say the least. So I must openly admit that I do not have the same level of confidence that the market will bottom in wave (E) on June 19, 2004, as I did that the top of wave (D) would occur in February of 2002. But with that being said, each day as this wave pattern from the February high unfolds, the case for a June 19, 2004 low gains more and more credibility. At least the framework has been set. And up to this point, the market has set itself up beautifully in terms of wave pattern and price for what we anticipate to actually occur. From this point forward, a strong decline in wave three down is exactly what is needed to move this potential bottom date from possibility to probability. Of course, we will watch and wait with great anticipation.

How will we know if we are correct? At what point is the wave count negated? Thankfully, we have our Elliott wave patterns to guide us. In the near term, we remain bearish against the most recent high of 10,537 registered on 4/27. This price represents the second wave high. While a move above this price will not negate the wave count, it will cause serious damage to the prospect of a June 19, 2004 bottom. To the downside, a move below the first wave low of 10,007 will be the first indication that our wave count is correct. We know that the possibility of a panic/spike low existed fifty-five fibonacci days after the most recent (2/19/04) high. Of course, that did not materialize. The next potential day for a panic/spike low is a fibonacci eight-nine days from that high. That date is May 18, 2004. This date could possibly mark the end of wave three down. From there, the market could rebound in wave four up, only to fall to new all time lows at the end of the bear market in wave five down on June 19, 2004.

BOND MARKET

As the April 26 email alert stated, it is safe to say that the highs of early March represent the entire second wave retracement (see chart above). We remain bearish against those highs (116-11 in the June contract). It would take a move above 116-11 to negate our wave count. The bond market is in a third wave down. We had mentioned this before, but now is the time when the bond market does not move in the opposite direction of the stock market. Both are in a third wave decline. They shall fall in unison. This third wave should prove quite devastating. Recall that the first wave began from the highs of last summer (high in prices, low in rates). That first wave roughly removed some eighteen points off the bond market. That, my friends, is more than just a trim. The third wave will gain a common 1.618 relationship to the first wave at 86-14. That move will push interest rates up to prices they haven’t seen since January of 2000 (more than 6.75%).

Remember, in the first wave, it took only two months (from June to August) for the bond market to lose some eighteen plus points! And that was a first wave! Third waves are quick and powerful. Proof of such can be found with the rather large spike down on April 2nd (see chart above). We will remain short the bond market as this third wave decline continues to gain momentum. This is a bear market, so any surprises should be to the downside.

GOLD MARKET

We moved to a short position in the gold market with the April 26 email alert. And not a moment too soon, I might add. This is it - one of the few times in history when everything falls in value at the same time. Of course, stocks have been in a bear market now for almost five full years. Gold, on the other hand, just ended a decades long bear market in a prolonged fourth wave that began in 1980. In the big picture, gold is in a bull market. Wave five up will surpass the third wave high of $850 registered in 1980. This fifth wave up is going to take years to play out. Within this bull market, there will be pullbacks. As reported in the April 26 email alert, the most recent move up satisfied the minimum requirement for wave five. Now, the market must correct the advances of the previous five waves up. The move below the February 2003 highs of $385 indicates that this correction is of a large degree. Remember, it took gold some three plus years to move up from the $280 level to the most recent highs near $433. The correction of that rise is underway. A fibonacci .618 retracement of this rise gives us a target price of $339.70 for gold. Remain short.

Positions for rating services:

The “positions for rating services” below are assumed positions taken for rating services such as Timer Digest to rate our newsletter and rank us against other market timing newsletters. While the Elliott wave patterns and fibonacci ratios have implications regarding the overall direction and turning points in the markets, a reader is not justified

in inferring that any trading advice is given. Woodson Wave Report, LLC does not offer specific trading recommendations.

Long-term counts are found on weekly and/or monthly charts and generally cover a time period of years to decades.

Intermediate-term counts are found on daily and/or weekly charts and generally cover a time period of weeks to years.

Short-term counts are found on daily and/or hourly charts and generally cover a time period of days to hours.

Dow:

Long term: Remain short expecting wave (E) down to new lows.
Intermediate term: Remain short expecting wave (E) down to new lows
Short term: Remain short against the wave 2 high of 10,537. Prepare for wave 3 down.

NASDAQ:

Long term: Remain short expecting wave (E) down to new lows
Intermediate term: Remain short expecting wave (E) down to new lows
Short term: Remain short.

S&P 500:

Long term: Remain short expecting wave (E) down to new lows.
Intermediate term: Remain short expecting wave (E) down to new lows
Short term: Remain short.

Bonds: Remain short.

Gold: Remain short.