BUY SIGNAL (almost) – 08/23/11 © ™

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  • Short Term
  • July 2011 To Present
  • Step 3 Down – Finished –  Unverified
  • Current Action Status – Buy Signal Soon

Although I bought SP Futures yesterday morning and have a very comfortable profit today (almost 20 points), I’m not issuing a formal buy signal until we break above the congestion zone in the chart below.  This congestion zone is the only barrier that lies between us and the upside.

The first chart shows the congestion zone and the multiple bottoms made over the last 4 trading days.  A significant break above the red line will be a buy signal.

As I write this (11:00 AM PDT), the market is experiencing a small correction.

08-23-11 SP500 FUTURES 10 MINUTE BARS

If you have been following my blog you have realized that I thought that we were in the area of a bottom.  I believe this to be more true today than yesterday but I will error on the side on being conservative regarding the actual buy signal.

If the buy signal is issued:

  • This will be the end of step 3 of step 3.  Even if there is a steps 4 and 5 down, there should be a very good rally at this point.  If this is the end of the downward correction that began in February 2011, this could mark the beginning of large step 3 up counting from March 2009.  If this is true, the risk reward ratio is tilted very high toward reward.

The next chart shows the wave count dating from February 2011.  Step 1 and 2 were sideways and step 3 was a definite hair raising plunge.  As stated previously the sentiment is grossly overdone and from such extremes arise big rallies.

08-23-11 NASDAQ 120 MINUTE BARS

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