Stock-Market-Observations

UPDATE FOLLOWS THE BREAK

WAVE COUNTS SIMPLIFIED

• The wave counts aren’t Elliott Wave!  It’s different, simple and usually works.
• 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 vallyes 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.  (Make sure your channel was correct before calling a termination).
  
• A single wave may sub-divide into another 3 waves.  I will 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.  (Seeing an example in 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.
• Reading the glossary helps in the understanding of this blog.
• Glossary Link

ABBREVIATIONS

• DJI = Dow Jones Industrials
• DJT = Dow Jones Transportations
• SPX = SP 500
• ES = SP 500 Futures
• COMPQ = Nasdaq Composite Index
• TSX = Toronto Stock Exchange (Canadian blue chips)
• SOX = Semiconductors
• XLY = Consumer

CHARTS

• MY CHART LINK (updated constantly)

• The above link has my charts, which are constantly updated during market trading.  The indexes don’t lag current market trading.
• I usually update the charts daily (or more often) with wave counts and trend lines.  These charts are the roadmap to your tactics.
• Page 1 – Indexes With 1 Minute Bars
• Page 2 – Indexes With 5 Minute Bars
• Page 3 – Indexes With 15  Minute Bars
• Page 4 – Indexes With 30 Minute Bars
• Page 5 – Indexes With 60 Minute Bars
• Page 6 – Indexes With Daily Bars (candlesticks – last 13 months)
• Page 7 – Indexes With Daily Bars (since November 2008)
• Page 8 – Indexes With Weekly Bars
• Page 9 – Indexes With Monthly Bars
• Pages 10 through 13 are indicators.  The indicators are used to simply look for some type of leading action before a turn or confirming action of the wave count.
• Beginning on page 14 are growth stocks.  These are stocks that have 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 of 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

We have retraced 50% (Fibonacci ratio number) of the decline since the May peak.

The market is overbought and a correction could begin at any time, but . . . .

When you are in a continuing bull phase the market becomes overbought and stays that way for weeks or months before a correction takes place.

I’m not saying that we are in a bull phase but one should always be alert to a significant change in trend.  It’s certainly true that we finished 3 steps down since the May peak (see charts, page 5 or 6).

Another stab at the bottom is likely and that could be the right shoulder of a possible reverse head and shoulders.  The measurement on this H&S is at least to the May 2011 highs.

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This entry was posted on October 16, 2011 at 12:17 PM and is filed under SELL - BUY, UPDATE. You can subscribe via RSS 2.0 feed to this post's comments. You can comment below, or link to this permanent URL from your own site.