Stock Market Trends – Weekly Update 08/13/11 © ™

  • Short Term Buy Signal Is On The Horizon
  • Very Long Term
  • Jan 2000 – Present
  •  Step 2 Down Completed

08-13-11 VERY LONG TERM

  • Long Term
  • Mar 2009 – Present
  • Step 2 Up Completed

    08-13-11 LONG TERM

  • Intermediate Term
  • February 2011 – Present
  • Step 3 Down Underway Unverified Count

  • Short Term
  • July 7, 2011 – Present
  • Step 2 Down Completed – Verified
  • Step 3 Down Completed Unverified
  • Current Action Status – Sold August 1, 2011
  • Buy Signal On The Horizon

08-13-11 SHORT TERM

  • ALL future actionable signals (buy or sell) are ONLY for short term time frames.
  • This concept is important to understanding my investment philosophy.
  • Long term tax status  is achieved by a continuation of the upward trend, which causes short term to morph into long term.
  • See more details in the glossary under “money management” on how to invest short term and achieve long term status.
  • Glossary Link
  • Please See The Glossary For Explanations Of Terms & Methodology (particularly money management).

COMMENTS

We will sit and wait awhile for the next bottom that could mark the end of the decline.  This could present a SIGNIFICANT buying opportunity.

There is the possibility that we have completed 3rd step down but I think not.  Regardless we should have a bottoming type decline that will give us an opportunity to buy this market.

The flip side is that the next step down could be another viscous decline.  Since we aren’t in the market, we will sit on the sidelines and wait for things to unfold with no damage done.  The banks are still showing a reluctance to rally and that supports the theory that another step down is forthcoming.

The problems in Europe are not going away.  It probably boils down to when have American stocks discounted the future of Europe’s problems.  China is showing signs of giving up on the inflation fight and increasing the flow of money.   This could offset the European disaster to some extent.

It appears that the rally, which began on Tuesday has completed 2 steps up (see the daily JNK and FTSE charts).  There were signs late Friday that a consolidation was beginning.  So far this consolidation appears to be shallow.  A decline followed by another step up could possibly finish this rally.  But the irrational nature of the bottom is such that we could have completed 3 steps up.

After a significant decline we have bottoming type action.  In 2008-2009, it was the November 2008 bottom and March 2009 bottom.  This is what I expect to see, a primary and secondary bottom.  The secondary bottom can be higher or lower than the primary.

If we have completed the decline since February 2011 and we are not in a 5 step decline, this bottom could mark the beginning of large step 3 up.  If true this is a buying opportunity of intermediate term significance (that’s an unusual statement for me).  The 3rd up leg could last another year or it could turn out to be a dud and nothing more than topping action.  You never know the answer to these questions so you plop your money down and wait for things to go in your direction.  This business is one of limiting risk and that is exactly what I try to do.

Everyone should understand history and the rotating currency problems that were an integral part of the depression.  One book that shows a lot of detail of each year during the 1920s and 1930s is Martin Armstrong’s, The Greatest Bull Market In History.  You can read it at this link or also download the book in pdf form but it will cost you an uploaded document or money.  Email me for more info.  There are lots of depression books that you can Google but you want to pay attention to the currency crisis and the depression.

CYCLES

This is a reprint of comments from last week.

Here is something a little different.  It shows the predicted cycles for the SP 500.  When the semi-circles touch bottom, that’s the end of a cycle.  As you can see there are several cycles that are bottoming presently and that’s good news.  If this is valid, it means that we are at or near the bottom from the standpoint of time.  Cycle theory says that longer term cycles have more relevance over shorter cycles.  So you want to look at the bigger semi-circles for relevance.

You can also see there is a significant cycle bottoming in December 2011.  Also there are cycles bottoming March to June 2012.  Again if this is valid, it means there will be a significant bottom of some type somewhere in that time frame.  I’ll have to remember to revisit this cycle chart at a later date.  This chart is constantly changing as it responds to the actual movements of the market.

SHORT TERM

We are operating under a sell signal.

The best short term scenario

  • We have ended step 3 down and a rally has begun.

The worst short term scenario

  • Step 3 is not complete and another vicious leg down is still to come.

INTERMEDIATE TERM

The rally that began in July 2010 is over.  The peak of that rally was May 2011 although some indexes peaked in February 2011.  We are likely in step 3 down, which MAY be drawing to an early close.

There is also the possibility that we may be in a 5 step correction, which would mean there are several more large steps still in our future.  That would not be good news.

LONG TERM

From the bottom in  March 2009

  • Large step one up ended in May 2010
  • Large step two up ended in May 2011.
  • There is an outside possibility that we have had 3 steps up instead of 2.
The best long term scenario
  • The bull market is still intact.

The worst long term scenario

  • We may have begun a bear market

VERY LONG TERM

We have 3 possibilities for the future.

  • 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.
  • We have formed a huge head and shoulders formation since 1998.  If this formation is valid, the downside measurement calls for a bottom around Dow Jones Industrials 1,000.  Life on earth will have ended as we know it.
  • Neither of the above are valid and the future of America is bright.  This is a version of “Never sell America short”.  I firmly believe that we will work our way through our problems but that doesn’t mean there isn’t going to be some rough to very rough patches.

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’s possible that we may experience another all time high during the present recovery period.  This would support the megaphone formation.  A failure to make new highs would support the head and shoulders argument.  In both formations the conclusion of the present recovery would call for the third and final bear market. An estimated time for the conclusion of the final bear market is approximately 2018.

The lesser downside of both formations is the megaphone formation as it likely calls for a bottom 1,000 to 2,000 points below the 2009 low, which would be around Dow 5,000.

In the head and shoulders formation the measurement calls for a bottom around Dow Jones Industrials 1,000.  This is almost an unimaginable event and I have a hard time grasping it as I try to visualize the fundamentals involved.  If this did happen, everything that could go wrong would have to go wrong.  Reasons range from the absurd to the absurd.  This scenario is so dark that it doesn’t seem possible but nevertheless, the head and shoulders formation is there and will be waiting until we pierce the all-time highs of October 2007.

Remember these are simply possible scenarios and are not embedded in fact or forecast.  Whatever the outcome, it never hurts to be a little cautious with some of your money.  But in the worst case scenario, everything that we take for granted as being safe . . . .  would not be safe.

Hopefully we will never have to think about worst case scenarios other than to have a good laugh at them presently.

TOP OF PAGE

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

  • The link above has charts that are updated constantly during market trading.  They do not lag market trading and are current.
  • Send me an email or leave a comment if the lines or counts don’t look correct or match the blog.
  • 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 some of growth stocks that have good structure to their charts.  My favorite chart formation is one that declines and stops at the top of a previous topping area.  This reflects good accumulation and a controlled correction.
  • The growth stocks show daily market action for the last 3 years and also weekly moves since 1990.  This gives a perspective to what has happened in the past and how this stock 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 (shorter)
  • Page 8 – Indexes With Daily Bars (longer)
  • Page 9 – Indexes With Weekly Bars
  • Page 10 – Indexes With Monthly Bars
  • Page 11 to Page 12 – Indicators (longer time frames)
  • Page 13 to End – Growth Stocks (daily and weekly time frames)

TOP OF PAGE

All Rights Reserved  © ™

Advertisements
Explore posts in the same categories: IN DEPTH

Leave A Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s


%d bloggers like this: