Daily Stock Market Update – 09/01/11 © ™

  • DAILY UPDATE FOLLOWS THE EXPLANATIONS

WAVE COUNTS SIMPLIFIED

  • There are 3 peaks to a completed wave count. A reversal of trend takes place after a completed wave count of 3 peaks.   Often times it’s as simple as counting 3 bumps on a chart . . . Other times, not so easy.
  • In a downtrend the same rules apply except you are counting 3 valleys instead of 3 peaks.
  • Each step must stay confined to a channel.  Laying a pen or pencil on the chart will help you visualize the channel.
  • As the trend progresses, all of the steps that make up the overall current trend will also be confined to a channel.
  • When the market breaks a channel (regardless of the perceived wave count), the current step has been terminated.
  • A single wave may sub-divide into another 3 waves.  I will also call this an extension.  When this happens (1) the trend is still intact, (2) the channel has widened and (3) instead of a total of 3 steps, there will have 5 steps.  (The charts will help you understand this concept.)
  • Sometimes I will use the terms step and wave interchangeably, but usually a wave is considered to be larger than a step.
  • Wave Counts In Charts – Numbers of the same color represent steps within the same wave.  For instance, red 1, red 2 and red 3 are steps within the same wave.  Different colored numbers represent steps in totally separate waves.  For instance, a red 1 occurs in one wave while a blue 1 occurs in a totally separate wave (refer to charts for examples).
  • Reading the glossary helps a great deal in the understanding of this blog.
  • Glossary Link

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CLICK ON CHARTS TO ENLARGE

  • Short Term
  • Uptrend
  • August 19, 2011 To Present
  • Step 2 Is Finished
  • Last Action Status – Buy Signal On 8/29/11

09-01-11 INDEXES 30 MIN BARS

We finished step 2 up and are still correcting.  The monthly employment data comes out early tomorrow and the expectation is that it will not be good.  With the bad news the futures will probably sink further before the open.  I might look for a bottom late in the day on Friday but it all depends on the count.  Usually the correction following step 2 is larger and longer than the correction following step 1.  Presently it looks about the same size as the step 1 correction.

In the first chart are lines outlining the expected channel with the dotted line representing an approximate extreme.  The dotted line is about 200 Dow points below today’s close.  The dotted line also marks the approximate highs of step 1 around the 11,250 level.

Best case scenario is that we will begin step 3 up soon.  Worst case scenario is that we are about to retest the bottom again.

I had expressed thoughts yesterday that a retest seemed a possibility.  A few other people that I follow are thinking along the same lines.

Terry Laundry has a small T (uptrend) that’s good until September 14.  After that he thinks we will retest the bottom.  Although it’s not engraved in stone, I have no problems with this scenario.

Jeff Saut also believes that we will retest the bottom.  He also believes the high and low for the year are in, May 2nd – high and August 9th – low.  He expects to finish the year near the top of the range.

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