Stock Market Trends – Weekly Update 07/16/11 © ™

  • Very Long Term
  • Jan 2000 – Present
  •  Step 2 Of 3 Down Completed, Rally Phase Underway
  • Action Status – Follow Long Term Strategy

DJ INDUSTRIALS VERY LONG TERM (07-16-11)

  • Long Term
  • Mar 2009 – Present
  •  Step 2 Of 3 Up Underway
  • Action Status – HoldNo Change

DJ INDUSTRIALS LONG TERM (07-16-11)

  • Intermediate Term
  • July 2010 – Present
  • Large Step 2 Is Almost Complete
  • Action Status – HoldNo Change

DJ INDUSTRIALS INTERMEDIATE TERM (07-11-11)

  • Short Term
  • June 15, 2011 – Present
  • Step 2 Up Completed
  • Action Status – Holding Short Term BuyNo Change

DJ INDUSTRIALS SHORT TERM (07-16-11)

SHORT TERM – UPDATE

A decline below the June 15 lows would trigger a sell signal.

The market may be forming a bottom as it has stopped on one of the Fibonacci lines that I posted earlier.  This Fibonacci line was the first stopping point and indicates a decline that is confined and not out of control.  The market kinda threw a curve this week with that little downward surge late in the day on July 12.  That makes the count cloudy (as usual).  It’s not clear whether we have entered 3rd step down or 4th step.  If we are in 3rd step, the market should rally with strength very soon.  If we are in 4th step, we will have a smaller rally and then decline into the 5th step.  From that point a larger rally would begin.

07-16-11 DJ INDUSTRIALS 5 MINUTE BARS

All of this should be part of a rally that began on June 16.  The current rally appears to have completed 2 steps up and 3rd step “should” be forthcoming.   I have seen on occasion where the 3rd step is explosive and the entire movement takes place within 3rd step.  That’s the good news.  The bad news is it could be a weak rally attempt back to the May 2 highs and the market will make a significant decline from these highs.

07-16-11 DJ INDUSTRIALS 30 MINUTE BARS

The best short term scenario

  • A bottom occurred on June 15 and we are in a rally phase that should return to the May 2nd peak.  After that we will see if the market has the power to punch through for significant new highs.

The worst short term scenario

  • The market is in a false rally and the market will turn down without significant new highs.

INTERMEDIATE TERM – NO UPDATE

The rally that began in early July 2010 is long in the tooth and showing its age (12 months).  The market internals have been losing momentum and show that the market has been in a lengthy “topping” phase.  This topping can continue for months.

If the June 15 rally fails to make significant new highs, the market will have signaled a declining phase marking the end of large step two up.

A decline below the June 15 lows would trigger an intermediate term  sell signal .

The best intermediate term scenario

  • The market has resumed the rally in large step two that began in July 2010.

The worse intermediate term scenario

  • The decline since May 2nd is the first step down in a larger 3 step decline.  If true, this would call for a lengthy decline lasting many months.

LONG TERM – NO UPDATE

From the bottom in  March 2009: large step one up ended in May 2010; large step two up may still be in force.

I might issue a long term sell signal if I believe that large step 2 up from March 2009 has concluded.  This would be due to the possibility that a step might have occurred prior to March 2009 (Nov 2008 to Jan 2009).  If a long term sell is issued and a resumption of the bull market began after a significant decline, a new buy signal would be issued.  A 3rd step should be of sufficient length to achieve long term status again.

The best long term scenario
  • The bull market since March 2009 is not complete and higher highs are ahead.

The worst long term scenario

  • We have begun  a significant correction following the second large step up .

An even worse long term scenario

  • We have begun a bear market

VERY LONG TERM – NO UPDATE

We have entered a very wide swinging market (megaphone formation) similar to that of 1966 to 1974. During that era we had three bear markets with two intervening bull market rallies.  Each bear market had a lower low than the previous bear.  The intervening bull market rallies saw new all time highs before the next bear market began.

Since 2000 we have had two bear markets, 2000 to 2003 and 2007 to 2009. Like 1966 to 1974, the recovery from the first  bear market saw a new all time high (2007 peak). It is possible that we may experience another all time high during the present recovery period.  At the conclusion of the present recovery we will have the third and final bear market. An estimated time for the conclusion of the final bear market is approximately 2018.

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  • Glossary is in the sidebar category, Huh???.  This is important reading if you have trouble understanding this blog.
  • For methodology, see the category Indicators.

************************************************************************************

HUH??? – UPDATE

Step 1 Correction

The correction following step 1 is usually brief and shallow.

Step 2 Correction

  • It’s normal for the correction following step 2 to be deeper and longer than any correction that preceded step 2.  In the bull rally from 2003 to 2007, the step 2 correction lasted almost one year, Jan 2004 to Jan 2005.

Step 3 Correction

  • The correction following step 3 will correct the entire 3 step rally (or decline).  A correction of 38% to 62% is not unusual.  The steps are cumulative and steps built upon other steps forming larger steps will correct in a similar and proportional manner.

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