Today Is More Of The Same – 08/02/11 © ™

  • The worst case scenario is that I have miscounted the steps and we have begun another bear market.  This is certainly possible but it is not my favored viewpoint.
  • One scenario is that the head and shoulders formation is valid and a significant decline is ahead.  I have thought for some time that this viewpoint had too large of a following and was not likely to be fulfilled.  As Joe Granville liked to say, “If it’s obvious, it’s obviously wrong”.  It would be very frustrating for the bears to see a decline break the neckline of the head and shoulders and then churn in the area of the neckline.  We’ll have to wait and see how that works out.
  • Jeff Saut is a favorite of mine and he warns against being overly bearish.  In this Monday’s comments he said, “While last February felt like an upside crescendo, the current environment feels more like the end of a decline rather than the start of another leg down”.  Although this doesn’t mesh with my outlook it isn’t to be overlooked.
  • Today is more of the same, no rally and the Dow is down 155 points at 1:42 PM EDT.  More mini-waterfall action.  I’m writing these comment a couple of hours before the close.

I have stated previously that I believed this correction should last awhile.  My reasoning for an extended correction is based on history.  It’s normal for the decline following the second step up to be deeper and longer lasting than the correction that followed the first step up.

In the first chart you can see the correction following the first step up lasted 2 1/3 months and was about 13 percent deep (May to July 2010).  The expectation is for the second step to exceed both of these figures.  Presently the correction is beginning it’s fourth month in the Dow Industrials (longer than that in other indexes).

  • Dow Jones Industrials Daily Chart

In the next chart (DJ Industrials) you can see a rather unorthodox labeling for the decline (red numbers).  This will make sense when you compare this chart with the next chart (TSX Composite Index).  The second chart (TSX) shows a decline that began in March 2011 while the first chart (DJ Ind) began its decline in May 2011.  The expectation is that these charts will line up perfectly on the bottom with a completed wave count.

I often use other indexes to guide me in my interpretation of the SP 500.  Sometimes an index like the financials or the semiconductors will lead the market up or down.  In the case of the bank index, it peaked in May 2010, so that shows the banks are still in a bad place after the 2008 fiasco.  The semiconductors peaked in February 2011 and have to date been a reliable leading indicator.

  • Dow Jones Industrials 60 Minute Chart

  • TSX Composite Index 60 Minute Chart

08-02-11 TSX COMPOSITE INDEX 60 MIN

You can see in both chart that the rate of decline has accelerated recently.  If this were to keep it, it could lead to a waterfall climactic ending.  This would be similar to the decline from April to July 2010.  The waterfall took place in May and the subsequent bottoms were basing moves that built a foundation for the following up move.

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See my charts (updated constantly)

  • The link above has charts that are updated constantly during market trading.  They do not lag market trading and are current at all times.
  • My lines and counts may not be up to date as they may lag the blog’s interpretations.  An email to me would prod me to update.
  • I think you will find these charts very useful as they cover time frames from minutes to decades.  The final section of these charts consists of growth stocks.
  • The growth stocks show daily and weekly market action.  Their respective time frames are 3 and 12 years.  This gives a good perspective to the past and how these stocks behaved during good or bad times.
  • Page 1 – Indicators (shorter time frames)
  • Page 2 – Indexes With 1 Minute Bars
  • Page 3 – Indexes With 5 Minute Bars
  • Page 4 – Indexes With 15  Minute Bars
  • Page 5 – Indexes With 30 Minute Bars
  • Page 6 – Indexes With 60 Minute Bars
  • Page 7 – Indexes With Daily Bars
  • Page 8 – Indexes With Weekly Bars
  • Page 9 – Indexes With Monthly Bars
  • Page 10 to Page 11 – Indicators (longer time frames)
  • Page 12 to End – Growth Stocks (daily and weekly time frames)

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