Daily Stock Market Update – 09/13/11 © ™

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); NYSE = New York Stock Exchange; SOX = Semiconductors

CHARTS

MY CHART LINK (updated constantly)

  • This link has my charts, which are always current and constantly updated during market trading.  They don’t lag market trading by 15 minutes which is true of many charts.
  • There are 9 pages of index charts.  Each page consists of (1) the same stock market indexes, and (2) the same time frame.  The time represented by each vertical bar is the same on each page but increases in length on each succeeding page.  The vertical bars on the 9 pages ranges from 1 minute to 1 month.
  • The final pages of these charts consists of growth stocks.  These are stocks that have constantly risen in price since 1990.  One qualification is that they must not be severely damaged in a bear market so they can’t rise to significant new highs in the following bull market.
  • The growth stocks show daily market action for the last 3 years and weekly prices since 1990.  This gives a good perspective to how they have behaved in the immediate past (daily charts) and how they behaved during good and bad times (weekly charts).

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DAILY UPDATE

CLICK ON CHARTS TO ENLARGE

  • Short Term
  • Trend Is Undetermined
  • August 9, 2011 To Present
  • Multiple Bottoms Dating From August 9th
  • Support Or Resistance Break Will Confirm Uptrend Or Downtrend
  • Last Action Status – Sell Signal On September 9th
  • Tactical Change – Take Profits On Day Following Surge (conditional)

I’m still on the sidelines waiting for the market to give me a clear message.  An encouraging situation is the performance of the semiconductors (SOX).  This sector continues to outperform the market and has looked good since August 9th.  As I have said before, the SOX will frequently have a change in trend before the overall market.  See charts below.

09-13-11 SOX 30 MINUTE BARS

If you compare the SPX to the SOX above you can see the latest difference in trend strength.

09-13-11 SPX 30 MINUTE BARS

The SOX currently have higher highs and that’s what I’m want to see happen in the SP 500.  Until we have clarity on higher highs or a clear 3 step down in the SP 500, I’m on the sidelines.

The latest bottom in the SP 500 didn’t have a clear wave count and that kept me on the sidelines at yesterday’s reversal.  Because I’m on the sidelines, I may not update this blog until I have something of interest to contribute.  We’ll see how that goes as it seems that I have problems sitting quietly and saying nothing.

Here is an interesting chart on the household incomes in America broken down by quintile (20% segment).

09-13-11 Household Incomes, Mean, Real

For several decades it has been a firm belief of mine that America’s middle class is disappearing.  It’s also my belief that a strong middle class made this country great and this chart shows that our middle class is in trouble.

Looking at the above chart (data courtesy of the Census Bureau), you can see how the bottom 40% of household incomes have made little or no headway in wages since 1965.  The middle 20% has made some headway but has lost ground and is back to 1989 income levels.  Those 3 quntiles makes up 60% of our total population, say it again, that’s 60% of our total population.  They have to be dishearten by their lack of progress.  Another interesting feature of this chart is that all income quintiles including the top 5% of household incomes have seen lower incomes since the beginning of the 2000 bear market.  In an economy that is 70% consumer oriented, that’s not good and certainly not good for the future if the trend continues.

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