Renewed Buy Signal – 09/06/11 © ™




  • There are 3 peaks to a completed wave count. A reversal of trend takes place after a completed wave count.   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 larger 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 be 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
  • Abbreviations – DJI = Dow Jones Industrials; SPX = SP 500; ES = SP 500 Futures; COMPQ = Nasdaq Composite Index; TNX = Toronto Stock Exchange (blue chips)



  • Short Term
  • Uptrend Still Intact
  • August 9, 2011 To Present
  • Double Bottom Possible With August 9th
  • Last Action Status – Buy Signal On 8/29/11
  • Renewed Buy Signal OK

The stock market found support this morning and began to rally.  The market stopped its decline at the Fibonacci 61.8% retracement of the rise from August 9th to the recent high.  Whether this is the last bottom we will have to wait and see. When it becomes obvious that the market has made a successful retest of the August 9th low, it should take off to the upside with good strength.

As I write this the market is down about 100 Dow points after being down 310 points at the opening.  We would have a strong one day reversal if we can close positive for the day.  We will wait and see about that.



Today I found an interesting chart regarding the service industry versus manufacturing.  This info should come as no surprise but I like to see it laid out in a graph especially when the chart begins prior to WWII.  The following chart and facts are from Doug Short.


During WWII, manufacturing employment rose dramatically, but it began returning to its pre-war pattern after the war ended. Thereafter, manufacturing employment has had a complex history with a peak in the late 1970s and a secular decline thereafter. Here are some observations about manufacturing and services over the past seven plus decades:

  • Manufacturing is far more sensitive to the business cycle. Compare, for example, the relative behavior of manufacturing and services relative to the recession bars.
  • Growth in services began accelerating in the 1960s and accelerated at an increasing rate after the double-dip recession in the early 1980.
  • Manufacturing accelerated at a slower pace in the 1960s and then oscillated around a flat line in sync with the four recessions from 1970 to 1982.
  • Manufacturing employment peaked in June 1979. It never recovered from the double dip recession of 1980-1982.
  • The spring of 1998 was the an interim high for manufacturing jobs, but with the recession of 2001 began a 35% decline in jobs from the 1998 peak to the trough (so far) in December 2009. Manufacturing has essentially flatlined over the past 21 months.
  • Services industry employment began leveling off with the onset of the 2001 recession. Growth began accelerating again in 2004, but the rate of growth was well below what we saw in the 1980s and 1990s.
  • Services employment hit its all-time peak in January 2008, the second month of the Great Recession. Services employment is slowly improving, but it remains about 2.6% below the 2008 peak.
  • In 1939 the services to manufacturing employment ratio was 2.1:1. Today it is 9.6-to-1.

Here is another interesting chart.  It shows the relationship of gold to the Swiss Franc.  When the franc hits the limit of its upper red line, gold begins to trend downward.  What makes this interesting is that the Swiss government began selling francs today trying to drive the price of the franc down.  It was successful as the franc fell about 8 cents versus the euro (that’s a HUGE one day drop).

Gold Vs. Swiss Franc

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