It’s Gonna End With A Loud Bang – 08/04/11 © ™

Tomorrow morning (8:30 AM EDT) the monthly employment report is released.  I have no reason to think the employment report will be good reading given the economic slowdown in recent weeks.  That raises the possibility of more of the same tomorrow.  But sometimes we have a whipsaw reaction to this report.  After the initial reaction, look for the market to bounce in the opposite direction.  We’ll be on watch for that action but if the report is really bad the market could keep on falling with high volume in climactic type action.  We’ll wait and see how things work out tomorrow.

Today was a bad day.  The Dow Industrials fell over 500 points and the NASDAQ fell over 100 points.  It was about a 5% correction for the day.  Those are pretty substantial numbers and verify that we are in an intermediate term correction.

Today we had a Dow Theory Sell Signal.  The chart below shows the Industrials and Transports making new lows below the March 2011 lows.  The theory verifies that we are in an intermediate to long term correction.  After the peak in October 2007, the market had a Dow Theory sell signal on November 21, 2007.  That turned out to be very good advice at that time.

08-04-11 DOW THEORY

The headline “Gonna End With A Loud Bang” is reference to the likelihood of this market correction ending with a climax of some type.  That means a big decline on lots of volume.  Today actually qualifies as a climax but the market was accelerating to the downside at the close.  Usually a midday reversal takes place during a climax but that didn’t happen today.  Tomorrow morning we have another chance for a climax because of a bad employment report.  We’ll see.

The first chart  is the Dow Industrials (60 minute bars) and gives perspective to what has happened in recent days.  Yup, that’s a crash.  The wave count shows that we are likely in step 2 . . . . of larger step 2.  That means that we have further to go before we have a bottom.

Bottom fishing can be hazardous to your health so don’t be tempted unless you are very nimble.

08-04-11 DJ INDUSTRIALS 60 MINUTE BARS

The next chart is a daily bar chart for the Toronto Stock Exchange and it shows an ALTERNATE count to the February peak.  It’s labeled as a completed 3 waves instead of the nominal 2 waves that I have shown before.  It’s a secondary wave count possibility since March 2009.

08-04-11 TORONTO STOCK EXCHANGE DAILY BARS

The next chart is the DJ Industrials daily bar chart with my primary wave count of 2 steps to the May peak.

08-04-11 DJ INDUSTRIALS DAILY BARS

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