Stock-Market-Observations

• Short Term
• July 7, 2011 to Present
• Step 3 Down Underway 
• Present Status – Sold August 1, 2011
  
• Action Status – Possible Buy Signal On The Horizon

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Current scenarios:

• Small wave count scenarios
• Possibility: From the decline that began last Wednesday (08/17/11), we have completed only step 1 of 3 steps down.  Lower lows later today (Friday) will validate this count.
• Possibility: We have completed step 3 since last Wednesday, which means the count is complete and a rally is due.  Lower lows creating another step down will negate this possibility.

• Medium wave count scenarios
• We are in step 3 down counting since July 7th.
• Completion of this step signals a rally

• Longer wave count scenarios
• We are in step 3 down counting since February 2011
• Completion of this step signals a rally

• There exists the possibility that we have entered a bear market and the primary wave count indicator should be channels instead of counting peaks and valleys.  If we are in a bear market, there is much more damage ahead of us.  It’s for this reason that we use stops on all purchases made close to a bottom.  “Stops” keep losses within reasonable parameters.  “Cut your losses and let your profits run.”

Currently we are watching for an explosive rally (with volume).  When this happens we will “likely” have a buy signal.  Sometimes things don’t fall into place and we never get the proper signal.  Be aware and don’t jump too early.  Anticipation can be costly.

We can possibly look for the beginning of a rally to begin in the last hour of trading today (Friday).  Sometimes next week’s rally begins very late on Friday.  On the flip side, extreme weakness going into the close on Friday could indicate more weakness early next week.  It seems most traders are afraid to hold a position over the weekend.

It might be better if the market were to wander around in the area of the bottom for awhile before taking off.  While doing this, we would like to see the market shrug off bad news and continue wandering in the bottom area.  This would be very similar action to the June bottom.  That bottom should have been bought with stops just under the final lows.  Similar action should be met with similar tactics.

08-19-11 DJ INDUSTRIALS 5 MINUTE BARS

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This entry was posted on August 19, 2011 at 11:28 AM 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.