Did I Miss The Boat??? – 08/11/11 © ™

  • Short Term
  • July 7, 2011 – Present
  • Step 2 Down Completed – Verified
  • Step 3 Down Completed Unverified
  • Action Status – Sold August 1, 2011
  • Buy Signal Coming
  • Read the glossary for explanations and tactics.

Today was a 90% up day.  That makes two 90% up days out of the last three.  Numerous 90% up days clustered near a low can be indicative of a completed bottom.  If we have one or two more 90% up days soon, that could convince me that the bottom is in and there will be no significant retracement.  Currently I have not bought yet as I’m waiting for another bottom (3rd step).  We’ll wait and see how that tactic works.

Continuing with the thought that the downtrend is not complete, the following chart is the semiconductors and it illustrates the breaking of the downtrend channel.  If the market were to turn down immediately, it would raise the possibility that we are sub-stepping the downtrend.  Since the market was so deeply oversold, it seems likely that we will rally for a week or so to relieve the oversold condition.  A rally lasting a week or so would leave no doubt that step 2 down is finished.

08-11-11 SEMICONDUCTORS 15 MINUTE BARS

Here’s one of those “what if” scenarios.  The following chart shows the possibility that the downtrend is finished because a 3 count is completed.

08-11-11 TSX DAILY BARS

And then the next chart shows the wave count as incomplete.

08-11-11 NYA DAILY BARS

Which chart is right?  They both might be right.  Here’s how.  The first chart could have a second low higher than this week’s low while the second chart could have a second bottom close to (or lower than) this week’s low.  If commodities do well on this rally that would create a situation where the first chart would not have a lower low.  This is true because the first chart is Canadian blue chips and Canada’s economy has a bias towards commodity exports.  The second chart is the New York Stock Exchange Index and it has a heavy weighting towards financial companies.  We all know that the financials have been taken to the woodshed.  A secondary bottom would be expected in such a weak sector.

We’ll wait and see how it comes out but we certainly have the ingredients of a completed decline.  If true, it’s kinda late to buy the Tuesday bottom so I will wait for the next bottom.  What if the next bottom never comes???  That’s possible because a renewed bull move may give no opportunity for late comers.  Regardless, I think some type of secondary bottom is likely due to the violent nature of the downtrend.  If I’m wrong there will be time to get on board at a different stop.

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