Daily Stock Market Update – 09/07/11 © ™

DAILY UPDATE FOLLOWS THE BREAK

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WAVE COUNTS SIMPLIFIED

  • 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)

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CLICK ON CHARTS TO ENLARGE

  • Short Term
  • Uptrend Still Intact
  • August 9, 2011 To Present
  • Multiple Bottoms Dating From August 9th
  • Last Action Status – Buy Signal On August 29th
  • Renewed Buy Signal On September 6th

Obviously today was a fun day for the bulls.  The market advanced all day showing good strength and closed on the high for the day.  The chart below shows the wave count and a possible channel.  We’ll have to wait a few days to see if this channel is going to work.  The narrow channel will obviously fail and is simply to show the current step.

After another buy signal yesterday morning, we’re going to sit tight and wait for the market to unfold on the upside.  A small correction is possible after an advance tomorrow morning.  If the correction doesn’t materialize, or is much smaller than anticipated, that would be good news indicating a subdividing wave.

09-07-11 DJI 5 MIN BARS

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