Stock-Market-Observations

• 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

• If you don’t believe in the validity of my methods, stick around and read it until you have seen a bottom and a top call.  I think you might be surprised at the accuracy.  This letter is likely better than anything you may be using or paying big bucks.  I didn’t spend 55 years spining my wheels trying to predict the system, I achieved.

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We had a small correction today.  Whether this is the beginning of the 3rd step down is difficult to say.  The upward count since last Tuesday’s bottom is muddled but it would not be surprising to see more rally.  After saying that, there is no need for more rally as step 2 is now well defined and the oversold condition has been eliminated.  The tactic remains to watch for the 3rd step down.

The first chart below show the current wave count with a completed step 2 down counting from late June.  A “3” is sitting out in the future with the expectation that another step down will occur.  It is anticipated that step 3 will be a bottoming type step and should give an excellent buying opportunity.  Step 3 could be a higher or lower low than the step 2 bottom.

With the conclusion of this decline dating from May 2, 2011, there is the potential for the beginning of large step 3 up!!!  That won’t be chump change if correct.

At the moment we must stay alert for a buy signal as I could be jumping on board quickly.  There will also be a tight stop in case the buy signal is wrong (see the glossary for Stops if you don’t understand the term).  This will allow me to be stopped out with a small loss.  In the “Wall Street Quotes” section there is an adage that says, “A buy and hold strategy is a short term trade that went wrong”.  This simply means you need to recognize when a trade is bad and get out!  Who knows how long or deep a continued decline may go.  We must guard against a 5 step decline, which would call for a much more extensive decline.

Another decline that featured a rout to the downside “could” nullify the buy signal.  It would largely depend on where the rout stopped.  A significant penetration to the downside with a wave count that was extending would certainly negate a future buy.

08-17-11 DJ INDUSTRIALS DAILY BARS

The next chart shows the Russell 2000 with Fibonacci trend lines.  It shows a couple of good bounces off the lines.

08-15-11 RUT DAILY BARS

The next chart shows the banking sector with several bounces off the Fibonacci lines plus a wave count of 5.

08-15-11 RUT DAILY BARS

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This entry was posted on August 17, 2011 at 3:17 PM and is filed under UPDATE. You can subscribe via RSS 2.0 feed to this post's comments. You can comment below, or link to this permanent URL from your own site.