Tuesday, August 12, 2008

August 12, 2008; Nothing New After Today

Nothing new to really add from my earlier post. I'm not at all convinced that wave 3 of (3) has started. 72% of total volume on the NYSE was to the downside today, which was pretty bearish, but decliners outpaced advancers only 1.9:1, which is nothing stellar. A wave 3 of (3) down should consist of over 90% of NYSE volume being to the downside, and decliners outpacing advancers by at least 3:1 for the majority of the wave down. This just looks like a correction before another test of the highs.

However I don't think this little downward correction is over. Today's decline formed a bearish engulfing candlestick on the daily chart (see top chart, circled area). Also, yesterday's decline late in the trading day formed a large wick at the top of the candlestick (see arrow on top chart). Both of these are bearish candlestick formations suggesting further losses tomorrow. Also, it appears this current correction is unfolding in wave C right now and it's not quite complete (see bottom 5 minute chart where it needs to fall to a new low in a wave 5 to complete C and then resume the rally). So I expect further weakness tomorrow before any short term bottom forms and the rally resumes.

This is all short term analysis and speculation on my part. It just seems the trend is still up for now. But eventually it will roll over in a huge decline in wave 3 of (3).


Anonymous said...

If you remember sometime back we were talking about all this on another place. At the time I said I thought that wave 2 would stretch out to late August or September BEFORE the wave 3 decline began. I know I was in the minority then as far as EW practitioners go but it seemed logical. First off everyone got very bearish real fast. Also, remember September-October are usually the weakest months seasonally. So, it seemed fitting to drive everyone nuts throughout the summer doldrums, get the bulls roaring again, and then lower the boom in it's appropriate seasonal time frame. It's not to say it can't happen tomorrow BUT, as you said it's setting up for perhaps one more new high BEFORE we get going down for real with no looking back. I for one do not want to lose site of the opportunity before us. Back in '02 the Dow fell to 7,000 and things were no where near as bad as they are now. So at a minimum I can see 7,000 real fast. I have a big note on my desk reminding me NOT to loose site of the big picture. I don't mind playing the counter trend rally BUT I will be short for a LONG run down once we begin wave 3. GL, Diver

Todd S said...

Yes, I do remember you saying that, and I think I doubted you. Sounds like you might be right on track though. I'm glad you wrote this because you're whole comment comes down to keeping the bigger picture in mind. Oftentimes the first piece of analysis and conclusion you have is the best and correct one. Somehow, I tend to fidget and over-analyze things as time goes on and I sometimes lose sight of that bigger picture. I'll even look back at old posts in forums and find out I was right on the money a month ago, but somehow I didn't profit from the move at present times because I lost sight of that bigger picture and didn't act on it.

As for right now, all that's in my sights is that wave 3 of (3) down. I don't want to get too cute with getting long right now, just my view, because the risk of the rug getting pulled out from under me is way to great, and the two tops I erroneously called the past couple weeks, I'm now in deep enough to where I'm just willing to hang on as long as no EWP rules are violated.

GL to you as well, Diver! I feel like Russell Crowe in the movie "Gladiator" when their cavalry is racing towards the barbarians and he keeps yelling, "Hold the line!!! Hold the line!!!" Well that's what I've been telling myself the past month.