The TRIANGLE that is forming will be the resolution between the economic factors affecting the US economy and the impact on it by the IRAQI WAR. These are complex issues for the market to sort out. Since greatest impact on the TRIANGLE is the IRAQI war, I have named the pattern "THE IRAQI WAR TRIANGLE". The larger ruling patterns remain BEARISH and thus the TRIANGLE is expected to resolve itself into the negative. However, if two upper magenta lines are taken then there is an excellent base to move the market higher. There is BEARISHNESS in the market that could easily start to unwind and result in a larger corrective up move. Some will read the TRIPLE BOTTOM as a positive HEAD and SHOULDERS reversal with a substantial upward measurement. It really does not matter much what the pattern is, an up move from a TRIPLE LOW on volume commitment and high momentum will have all the requirements for a substantial break. As it now stands there is a high momentum up move from the third low of a TRIPLE BOTTOM that has so far failed to take the high out. The high momentum suggests BULLISHNESS. The RULING LARGER PATTERN suggests BEARISHNESS. Thus at present price action is contradictions. Until proved otherwise the BEARISH view will be taken as the likely outcome until proven otherwise.

This is an expanded view of the IRAQI WAR TRIANGLE. The difficulty is the speed of the "E" wave. If it was slower than the previous wave, the outcome could be more predictable. However, the move did stop at 0. 809 of the [D] move, which is a typical retracement within a TRIANGLE. Added to that is that the price action recoiled from that position the next day endorsing the 0.809 ratio. Since then, a possible HEAD and SHOULDERS has formed on the [E] wave top. The SHOULDER bifurcation point has formed on the 61. 8% retracement line all adding that this may be the possible end of the [E] wave. If so, price action should break the NECKLINE on Monday shortly after open. Because of the speed of the [E] wave, there are doubts that the high has formed and is in. Thus, the pattern quickly changes, if the high of the HEAD of the HEAD SHOULDERS is taken out. If that is the case, a much more positive outcome is likely.

I am no war tactician. It does seem to me that the war action is swinging to the positive side for U. S. It is interesting that the HEAD and SHOULDERS has formed and is about to break south as conditions may be improving. Most likely, shortly after open we will know the answer. I suspect the S& P will do the opposite thing that everybody expects a head south while the war tactics improves. Maybe the positive war outcome has already been discounted.

The NECKLINE of the HEAD and SHOULDERS is clear. A break south is expected. The bifurcation point is unclear but may be at 0.809 of the first segment and a possibility at 0.707. Both are typical conclusion of a failed one for one ZIGZAG pattern.

CONCLUSION

• There is a good possibility that the S& P will break south on Monday below the neckline as the conditions in U. S. effort in IRAQ improves. This would typical. Remove a negative "wall of worry" instead of being bullish for the market becomes paradoxically bearish.
• The larger degrees remain bearish. A break above the upper containing magenta lines would be required to change that.
• The difficulty of interpretation comes from the speed of the [E] wave. Like the "C" wave in a FLAT, they can be very fast due to short covering. This makes them difficult to interpret for action is giving both positive and negative signals. However, being aware of potential contradictory position gives the possibility of quick adoptive trading action.
• The preferred position is that the S& P comes off on Monday and continues as the war conditions in IRAQ improve and come to a conclusion.

Zoran Gayer

5 April 2003