BUY SIGNAL TODAY – Part Two – 08/29/11 © ™

WAVE COUNTS SIMPLIFIED

  • There are 3 peaks (or valleys) to a completed wave count. A significant reversal takes place after a completed wave count of 3 peaks (or valleys).   Often times it’s as simple as counting 3 bumps on a chart . . . Other times, not so easy.
  • Each step must stay confined to a channel.  Laying a pen or pencil on the chart will help you visualize the channel.
  • The 3 steps that make up a completed wave count will also be confined to a relatively larger channel.
  • When the market breaks a channel (regardless of size), that step (or wave) has been terminated and the market has begun a counter-trend move.
  • If you believe that wave counting is voodoo, please read along for awhile and reserve judgment until later.
  • Reading the glossary helps a great deal in the understanding of this blog.
  • Glossary Link

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

  • Short Term
  • Uptrend
  • August 9, 2011 To Present
  • Step 2 Up Is Underway (wave count extensions are likely)
  • Last Action Status – Bought Again Today (8/29/11)

Hurriedly written, so I hope I don’t have any goofy mistakes in tonight’s update.

Today was a very good day and it was also a 90+% up day (up volume was 97% of today’s total volume).  That is really good news to have a breakout occur on a 90% up day as it shows there was real conviction behind the breakout.

Best case scenario is that we have begun large step 3 up.  If this is true, the market will rise to at least the highs of May 2nd.  We will have to wait and see how that works out.  If the market disappoints this week as it did last week, I may move to protect profits, but for now I am content to let things run until the flashing red light is shining.

For peace of mind I have raised my stops to the halfway point on today’s gains.  For example the SP 500 was up 33 points today and haflway is about 16 points down.  That works out to be about the top of the first step up today, which is about 1200 on the SP 500 index.

Regarding 90% days, the following paper was the winner of the prestigious 2002 Charles H. Dow Award.  Each year the Market Technicians Association, in alliance with Dow Jones and Company, presents an award for excellence in the field of Technical Analysis.  The recipient of that award in 2002 was Paul Desmond, President of Lowry Research Corporation.  I believe Lowry’s is the oldest advisory service on Wall Street, founded in 1938 and it is VERY good (costly buy good).

IDENTIFYING BEAR MARKET BOTTOMS AND NEW BULL MARKETS by Paul F. Desmond

At the moment (9:15 PM EDT) the SP 500 futures are slightly correcting today’s rally.  45 minutes ago they made a new high for the day and were up 1.75.  Presently they are down 75 cents.  I expected the after hours trading to correct today’s rally and that should still happen.  I would like to see the correction finished before tomorrow’s open so the rally can continue with an opening thrust.  Significant back to back gains is good market action.

First chart is the SP 500 futures since the bottom on August 19th

08-29-11 SP 500 FUTURES 13 MINUTE BARS

Second chart is the SP 500 futures since the bottom last Friday, August 26th

08-29-11 SP 500 FUTURES 3 MINUTE BARS

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