Stock-Market-Observations

MARKET MESSAGES 

5/09/13 . . . 

Here are a couple of wave counts.  One count places us in an extended 5 and the other has us in a 4.  It kinda doesn’t make a lot of difference because this market is the energizer bunny, it keeps going and going and going . . .

The first chart has a reliable channel that SPX has been crawling up since last November 2012.  A parallel line to the lowest line has defined the upper part of the channel.  Each time SPX touches this upper limit line, it has held the advance in check.

Naturally if we are in step 4, we will have a correction and then another significant step upward.  But I place no more faith in this count over the 5 count.  It’s over when it’s over, just hang on and never become euphoric.  Euphoria will definitely cloud your judgement.

05-09-13 SPX DAILY – 1

05-09-13 SPX DAILY – 2

3rd STEP

I’ve been meaning to write about how 3rd step can be an entire move unto itself.  To some degree we may see that happening currently.

There have been historical examples where the 3rd step was the primary move.  This can take place on a small scale (a few days) or a large scale lasting years.  When this happens, 1st and 2nd steps are opening acts for the main event (step 3).  The most exaggerated example of this was from 1974 to 2000.

Beginning in 1974 larger steps 1 and 2 were meaningless after the bear market bottom in 1974.  Naturally I didn’t know that at the time, but in retrospect, steps 1 and 2 were more bottoming action than upward action.  In real-time, they seemed like recovery moves from the 3 bear markets of 1966 to 1974.

After 1974, we had 8 years to form step 1 and step 2 and then step 3 broke out in August 1982 and ran to 2000.  Step 3 dwarfed the prior two steps in duration and scale.  Step 3 kept sub-dividing to such an extent that it was useless to attempt a count.  Only the price bubble defined the end stages of step 3.

Step 1 ended in 1976 at 1009.31 and step 2 ended in 1981 at 1020.32 (see chart below – click on it to enlarge).  Then step 3 exploded upward in August 1982 and didn’t stop until 2000.

Just an observation about how 3rd steps can surprise you to their duration and scale.  The current 3rd step began in late 2011 and still continues.  It will be over when it quits and not until then.  I have no idea where or when that will happen.

Dow Jones Industrials From 1960

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This entry was posted on May 9, 2013 at 11:58 AM and is filed under UPDATE, WAVE COUNT. 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.