Stock Market Trends – Weekly Update 08/20/11 © ™

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  • Very Long Term
  • Jan 2000 To Present
  •  Step 2 Down Completed

08-19-11 VERY LONG TERM

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

08-19-11 LONG TERM

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

08-19-11 INTERMEDIATE TERM

08-19-11 INTERMEDIATE TERM-2

  • Short Term
  • July 2011 To Present
  • Step 3 Down Underway
  • Current Action Status – Sold August 1, 2011
  • Anticipated Action Status – Buy Signal Possible In Near Future

08-19-11 SHORT TERM

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  • All actionable signals (buy or sell) are only for short term time frames.  These signals are not designed for intermediate or long term time frames but . . . . .
  • After a short term buy signal, long term tax status  is achieved by a continuation of the upward trend, which causes short term to morph into long term.  
  • Short term buy signals and long term status can be illustrated by: “A buy and hold strategy is a short term trade that went very, very, right”.
  • See more details in the glossary under “money management” on how to invest short term and achieve long term status.
  • Please See The Glossary For Explanations Of Terms & Methodology (particularly money management).

COMMENTS

Since Step 3 is sub-stepping, that means the short term wave count will likely bottom below step 2.  Previously I had held out the hope for a higher low for step 3 but that is vanishing.

The problems in Europe are having serious repercussions for our stock market and in turn this is influencing our banks and possibly some large hedge funds.

Below is a wave count for the banks that has a bearish interpretation.  This count has much more to come on the downside.  I had originally held out hope for a final bottom on the last decline but we have penetrated that low creating another step down.  If we were to turn up very soon without anymore damage, I could count this as first step up instead of another leg down.  That count doesn’t appear likely.  If the banks are in a long term decline, the rest of the market is also in long term trouble.

08-20-11 BANKS DAILY BARS

Here are a couple of Wall Street Journal articles about the mood of investors.  This reminds me of the Wall Street adage, “The public is right during the trends but wrong at both ends”. – Humphrey Neill

Below is a chart of the Canadian stock market with trend lines and speed lines.  The lowest speed line drawn is coincident with the lowest trend line and could be a stopping point in an intermediate term decline.  This point is approximately another 10% below current levels.

SPEEDLINES & TRENDLINES – 08-20-11 TSX DAILY BARS

SHORT TERM

We are operating under a sell signal with a possible buy signal on the horizon.  In addition, a Dow Theory sell signal was issued on August 4, 2011.

If the upcoming buy signal fails, we are going to be in for a hard(er) time.

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 in its later stages.  On the flip side we may have an extended wave count decline, which means 5 steps down instead of 3.

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 since March 2009 instead of 2.  See chart below for possible alternate wave count

ALTERNATE WAVE COUNT – 08-20-11 TSX DAILY BARS

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.

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  • This link has charts that are updated constantly during market trading.  They do not lag market trading and are up to the minute.
  • 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 growth stocks.  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 prices since 1990.  This gives a perspective to what has happened in the past and how this stock behaved during good and 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)

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