01-03-12 Stock Market Trends & Observations

Stock Market Trends & Observations
Stock Market Update 01/03/12

P os ted J anuary 3 , 2 0 1 2 by Bob Categories: D A I L Y U P D A T E
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WHAT S HAPPENING? From Jeffrey Sauts column today : As for the technicals, by my w ork w e experienced another Dow Theory buy signal last w eek w hen both the DJIA (INDU/1 221 7 .56) and the DJTA (TRAN/501 9.69) bettered their October 201 1 closing reaction
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DJTA (TRAN/501 9.69) bettered their October 201 1 closing reaction highs. This w eek w e may see another positive occurrence called a golden cross, that is if the DJIAs 50-day moving average (@1 1 934.29) crosses above its 200-DMA (@1 1 946.57 ). That said, the NY SE McClellan Oscillator is short-term overbought and the stock markets internal energy has not yet been fully recharged. Accordingly, after the equity markets pop their collective corks w ith an early January upside blow off, it w ould not surprise me to see a pullback attempt. One thing is for sure, the volatility remains legion, for as the eagle-eyed folks at the Bespoke Investment Group w rite:
Categories
DAILY UPDATE (73) EDSON GOULD (21) GLOSSARY (1) SELL/BUY ACTION UPDATE (15) WEEKLY UPDATE (19) WORDS OF WISDOM (8)
Recent Posts
Stock Market Update 01/03/12 Edson Goulds 1979 Forecast (Dec 1978) Edson Goulds 1978 Forecast (Dec 1977) Stock Market Update 12/28/11 Undercut Low Stock Market Update 12/20/11
Throughout 201 1 , w e made numerous mentions of the record number of all or nothing days in the stock market. We define an all or nothing day as one w here the daily net Advance/Decline reading for the S&P 500 is greater than +/- 400. Up until recently, these types of days w ere relatively rare and there w ere some periods w here more than a year w ent by w ithout any all or nothing days. In the last few years, how ever, w e have seen an explosion of occurrences, culminating w ith this years record reading of 7 0 days! To put that number in perspective, from 1 990 through 2004, there w ere only 67 all or nothing days!
Archives
January 2012 (1) December 2011 (11) November 2011 (17) October 2011 (19) September 2011 (17) August 2011 (32) July 2011 (17)
Such a volatile environment clearly calls for risk management and w ith these thoughts w e w ish you a healthy and prosperous new year. The call for this week: Since the day after Thanksgiving I have stuck w ith the strategy that the Santa Claus rally had begun. On November 25th the SPX w as changing hands around 1 1 58. We are now 1 00 points
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higher. Consequently, I w ould not chase the dragon right here since I anticipate that an upside blow off is due Thats the the way I see the market too and usually Jeffrey and I dont disagree. Cy cles point to some ty pe of bottom later in the month (see charts page 1 4, #7 1 .95 and #7 1 .96). If the correction lasts late into the month, it could be deeper than anticipated. Today (Jan 3) we are getting a new y ears blast off in the market av erages and when this is spent, we should begin the correction that Jeffrey mentioned. The surge could be a one day hurray or it could last all week. The market was pulling back quickly late in the day and that might point to a one day upside wonder. Usually the January corrections hav e carried into mid-January (or later) and I wouldnt ex pect any thing different this time. CY CLES The chart below is from Hurst Signals an interesting cy cle serv ice based on the work of J.M. Hurst, More info at HURST SIGNALS This serv ice (on occasion) can define future dates for possible market turns. Its the big cy cles that are most interesting.
July 2011 (17) June 2011 (10)
January 2012 M T W T F 2 9 3 4 5 6 S S 1 7 8 10 11 12 13 14 15
16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Dec
Wall Street Quotes

The essence of investment management is the management of risks, not the management of returns. Wellmanaged portfolios start with this precept. Benjamin Graham
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The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell. John Templeton Buy on the cannons, sell on the trumpets. Old French Proverb Rule #1: Never lose money. Rule #2: Never forget rule #1 Warren Buffett The four most dangerous words in investing are "This time it's different". John Templeton "This time it's different" was prevalent during the bubble of 2000. In 1929 it was called "New Economics". Bob History always repeats, only the details change. Edson Gould If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks. John (Jack) Bogle
0 1 -0 3 -1 2 HURST CY CLES
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Stock are bought on expectations, not facts. Gerald Loeb Emotions are your worst enemy in the stock market. Don Hays P/E ratio - The percentage of investors wetting their pants as the market keeps crashing. Anonymous
0 1 -0 3 -1 2 HURST CY CLES-2
As y ou can see by the abov e chart we are heading for a low during January that will be much less significant than the October 4, 201 1 low. The October low was a 51 month cy cle low, while the January cy cle is a 1 6 week cy cle low (green circle and line in the abov e chart). According to JM Hursts principle of sy nchronicity , cy cles are phased so as to cause simultaneous troughs for all cy cles of shorter duration than the cy cle in question. All cy cles less than the 1 6 week cy cle will bottom at the same time as the 1 6 week cy cle meaning they will all hav e a common trough date. PRINCIPLES OF HURST S CY CLIC T HEORY The Principle of Commonality All equity (or forex or commodity ) price mov ements hav e many elements in common (in other words similar classes of tradable instruments hav e price mov ements with much in common)
Herd Mentality Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one. Extraordinary Popular Delusions and the Madness of Crowds Herd Mentality Cases such as Tulipomania in 1624--when Tulip bulbs traded at a higher price than gold--suggest the existence of what I would dub "Mackay's Law of Mass Action:" when it comes to the effect of social behavior on the intelligence of individuals, 1+1 is often less than 2, and sometimes considerably less pdfcrowd.com
The Principle of Cy clicality Price mov ements consist of a combination of specific wav es and therefore ex hibit cy clic characteristics. The Principle of Summation Price wav es which combine to produce the price mov ement do so by a process of simple addition. The Principle of Harmonicity The wav elengths of neighbouring wav es in the collection of cy cles contributing to price mov ement are related by a small integer v alue. The Principle of Sy nchronicity Wav es in price mov ement are phased so as to cause simultaneous troughs wherev er possible The Principle of Proportionality Wav es in price mov ement hav e an amplitude that is proportional to their wav elength. The Principle of Nominality A specific, nominal collection of harmonically related wav es is common to all price mov ements. The Principle of V ariation The prev ious four principles represent strong tendencies, from which v ariation is to be ex pected. Further information about Hursts Cy clic Principles can be found here. Lotsa good Hurst info here. SCARY CHART CLICK ON CHART S T O ENLARGE
sometimes considerably less than 0. Extraordinary Popular Delusions and the Madness of Crowds I made money by selling too soon. Bernard Baruch If all you have is a hammer, everything looks like a nail. Bernard Baruch The main purpose of the stock market is to make fools of as many people as possible. Bernard Baruch The hardest part of a bull market is staying on. A bubble is a bull market in which you don't have a position. A buy and hold strategy is a short term trade that went wrong. October, this is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, June, December, August
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and February. Mark Twain Economists have predicted 14 of the last 3 recessions. Market Correction - The day after you buy stocks. In 2008 stocks were a good buy . . . . . Goodbye Mercedes, goodbye yacht, goodbye vacation home, goodbye . . . Markets can remain irrational longer than you can remain solvent. John Maynard Keynes Money talks, but all mine ever says is "goodbye" Don't gamble. Take all of your savings and buy some good stock and hold it until it goes up, then sell it. If it don't go up, don't buy it. Will Rogers Return of principal is more important than the return on principal. Hope is your worst enemy in the market.
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Don't catch a falling knife.

0 1 -0 3 -1 2 DJ IND DA ILY
Now thats one scary chart (the red wav e count). This is just one of those what if things that bother me from time to time (all the time actually ). It could gain credibility if the correction running into later January becomes a lot wilder than anticipated. Ill be keeping an ey e on this possibility in the day s ahead. Incidentally , I alway s hav e a scary chart that I can pull out and show whenev er the mood strikes. Thank y ou for the 21 ,37 3 hits to my chart link last month. The activ ity on my charts dropped dramatically begining on December 1 7 th. It seems a LOT of people took off for a v acation during the holiday s. If activ ity had not dropped off during this period, I would hav e had ov er 31 ,000 hits for the month (av eraging ov er 1 ,000 hits per day earlier). Regardless, 21 ,37 3 hits ranked among the highest at stockcharts.com Interestingly , a significant number of these hits came around 3 AM to 5 AM EST, which coincides with trading in Europe beginning around 3 AM. It seems that there are two possibilities for location for these hits, Europe and the east coast of the USA. 24 hour world-wide trading has forced a lot of traders to adjust their life cy cle patterns, which could allow for east coast v iewing. MAY BE T HIS WILL HAPPEN? In the abov e chart notice how nicely the Andrews Pitchforks hav e contained the market mov es. We hav e broken to the upside from the
Spend at least as much time researching a stock as you would choosing a refrigerator. Peter Lynch When you realize that you are riding a dead horse the best strategy is to dismount. Sioux Indian Proverb Dont ever make the mistake of telling the market it is wrong. James Dines Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes. Jesse Livermore Let Wall Street have a nightmare and the whole country has to help get them back in bed again Will Rogers Bulls makes money, bears makes money, pigs get slaughtered. My Grandfather Never buy a stock that won't
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downward sloping pitchfork and the uptrend pitchfork is performing nicely . Presently the market is on one of the lesser lines (dotted) and should stay below that line. If we were to break that line to the upside, we should mov e to the upper line and slow the adv ance. The central line should restrict any downward mov ement in the market (as long as all is OK). Partial profit taking can be entertained if y ou got in quickly after the false mov e to the downside on December 1 5th. Meantime we will stay with an ov erall uptrend theme.
go up in a bull market. Never sell a stock that won't go down in a bear market. Wall Street is a street with a river at one end and a graveyard at the other. Never check stock prices on a Friday, it could spoil your weekend. Nobody is more bearish than a sold-out bull. The public is right during the trends but wrong at both ends. Humphrey Neill Those who can, do. Those who cant, teach. Those who cant teach, work for the government. Never sell a dull market short. I sell euphoria and buy panic. The way he determines that is to wait until prices start gapping in the charts. Gapping on the upside is euphoria, while gapping on the downside is panic. Jimmy Rogers courtesy of Jeff Saut
************************************************************************************ CHART S MY CHART LINK (updated constantly ) These are my personal charts and my play ground for doodling trend lines, wav e counts and other ideas. I draw the trend lines and wav e counts on a daily basis (sometimes more often). Y ou can find these doodles from 1 minute to monthly charts. Y ou will find the best trend lines and wav e counts on charts with longer time frames. This giv es perspectiv e to the lines and counts. Perspectiv e was a fav orite of Edson Gould. I usually restrict my trend lines and wav e counts to the first three charts on each page, TSX, DJI & COMPQ. The other charts on the page are usually for confirmation of the trend and wav e structure. Page 1 Buy /Sell Signals
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Page 2 Index es With 1 Minute Bars Page 3 Index es With 5 Minute Bars Page 4 Index es With 1 5 Minute Bars Page 5 Index es With 30 Minute Bars Page 6 Index es With 60 Minute Bars Page 7 Index es With Daily Bars Page 8 Index es With Weekly Bars (since 1 981 ) Page 9 Index es With Monthly Bars (since 1 981 ) Page 1 0 Index es With 60 Minute Bars, Candlestick Page 1 1 Index es With Daily Bars, Candlesticks Page 1 2 Index es With Weekly Bars, Candlestick Pages 1 3 through 1 4 are shorter term indicators. The indicators are used to simply look for some ty pe of leading action before a turn or confirm ing action of the wav e count. Page 1 3 is a lookev ery day indicator page. The other indicator pages are less frequently v isited. Page 1 5 Hurst FLD Projections Page 1 6 Indicators, Long Term Page 1 7 International Index es Page 1 8 through 30 are sector ETFs. They represent most of the activ e sector ETFs and are alway s a good hunting ground when looking for something that is breaking in a new direction. Page 31 through 45 are growth stocks with indicators (new). These are stocks that hav e been in an uptrend. One qualification is that they must not be sev erely damaged in a bear market so they cant rise to significant new highs in the following bull market. The growth stocks show daily market action for the last 3 y ears and weekly prices since 1 992. This giv es a good perspectiv e of how they hav e behav ed in the immediate past (daily charts) and
Saut "Cut your losses and let your profits run." Don't marry a stock. Every stock must be sold. Often times WHEN you take a position can be more important than WHAT you take a position in. "If Santa fails to call the bears will roam on Broad and Wall!"
About T his Blog

Observations of Stock Market Trends uses several proprietary technical indicators discovered by the author. The object of this blog is to notify you (preferably in advance) of the important tops and bottoms in the stock market. We know that's impossible, but nevertheless, it's attempted in this blog. "Observations of Stock Market Trends" is published on an irregular schedule but a daily update is likely when we are near a stock market inflection point.
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how they behav ed during good and bad times (weekly charts). Page 46 Junk Pile WAVE COUNT S SIMPLIFIED My w ave counts are not Elliott Wave! Its different, simple and functions w ithout a maze of exclusions. T here are 3 peaks (or v alley s) to a com pleted wav e count. A rev ersal of trend takes place after a completed wav e count. Often times its as simple as counting 3 bumps (or dips) on a chart . . . Other times, not so easy . In a downtrend the same rules apply ex cept y ou are counting 3 dips instead of 3 bumps. Each group of 3 steps m ust stay confined to a channel. Lay ing a pen or pencil on the chart will help y ou v isualize the channel. As the trend progresses, all of the steps that make up a larger trend will also be confined to a larger channel. Sometimes the channel is not rev ealed until the surge phase has ended. When the m arket breaks a channel (regardless of the perceived wav e count), the current step has been term inated. (Make sure y our channel was correctly drawn before calling a termination). The correction following the second step is larger than the correction that followed the first step. Obv iously the correction following the third step is a rev ersal. A single wav e m ay sub-div ide into another 3 wav es. I will call this an ex tension. When this happens (1 ) the trend is still intact, (2) the channel will widened and (3) instead of a total of
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The content on this blog is meant to be entertaining information and should not be construed as investment advice. No statement by the blog's author should be interpreted as a recommendation to buy or sell any security, financial instrument, or to participate in a trading or investment strategy. Any investment decision by anyone that results in losses or gains based on information from this blog is not the responsibility of the blog's author. The blog's author will make statements about certain pdfcrowd.com
3 steps, there will be 5 steps. Sometimes I will use the terms step and wav e interchangeably . Reading the glossary helps in the understanding of this blog. There are many other important facts in the glossary . Glossary Link ABBREVIAT IONS DJI = Dow Jones Industrials DJT = Dow Jones Transportations SPX = SP 500 ES = SP 500 Futures COMPQ = Nasdaq Composite Index TSX = Toronto Stock Ex change (Canadian blue chips) SOX = Semiconductors TXX = Technology
statements about certain investment vehicles and strategies, but It's simply the author expressing his opinion, or action, regarding his own investments. These opinions are never to be construed as investment advice.
About Me
With 55 years of studying and investing in the stock market, I am sharing these experiences and knowledge by writing a stock market blog. This blog relies on several unique and proprietary indicators. I have been correct at some of the biggest market turns in the last 40 years. I was short for most of 1973-1974, reversed course and became a buyer during the week before Christmas 1974. I was also short for most of the first half of 1982 but became a buyer on August 4, 1982. This was five days before the August 9, 1982 blast off on the historic bull market run of the 1980s and 1990s. In 1999 I began tolling the bell pdfcrowd.com
************************************************************************************ Long T erm UP Uptrend Mar 2009 T o Present Step 2 Up (of 3) Com pleted Has Step 3 Up Begun ??? From the bottom in March 2009 Large step one up ended in May 201 0 Large step two up ended in May 201 1 . Significant break abov e the May 201 1 highs should signal that Step 3 up is official
on the stock market knowing that the end was near (no one listened). In March 2003, prior to the beginning of the Iraq war I became very bullish when it was obvious that there was not one good reason to own stocks (contrary opinion) and we had also achieved a double bottom. Shortly after the October 2007 peak I became a seller and bear. Days prior to the March 2009 bottom, I bought stocks in anticipation of a very good rally that turned into a bull run. In the later stages of the FebruaryMay 2011 topping process, I began warning of an important market correction. Since then my record is in this blog. To illustrate how things don't go perfectly for any analyst (such is life). My key indicator began changing in character during 1987 and led to some large losses based on excessive leverage and incorrect market interpretations. When I had enough, I bailed out of the market on October 6, 1987,
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just days before the 1987 crash. But I had been severely damaged before the 1 2 -2 8 -1 1 LONG T ERM crash. It took me several years to begin a recovery and ************************************************************************************ in my key restore my faith indicator with a modified Very Long T erm DOWN interpretation. Since then, using the new method, the Downtrend key indicator has worked Jan 2000 T o Present correctly.
Step 2 Down (of 3) Com pleted Currently In Rally Phase From Step 2 Down
One man was responsible for my education, Edson Gould, the greatest technician that
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the greatest technician that ever lived. After reading many of the books on stock market technical analysis, I found that all of these methods had high failure rates. I searched for a formula that worked consistently and in 1973 I subscribed to Edson Gould's "Findings & Forecasts". Here I struck gold with the master technician of the 20th century. Extending his methods I discovered several indicators that I use today. If you find my observations of interest please add your email address to the section, "Email Subscription".
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1 2 -2 8 -1 1 V ERY LONG T ERM
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VERY LONG T ERM COMMENT S We hav e 3 possibilities for the future. We hav e entered a v ery wide swinging m arket (m egaphone form ation) sim ilar to that of 1966 to 197 4. During that era we had three bear markets with two interv ening
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bull market rallies. Each bear market had a lower low than the prev ious bear. The interv ening bull market rallies saw new all time highs before the nex t bear market began. We also hav e formed a huge head and shoulders formation since 1 998. If this formation is v alid, the downside measurement calls for a bottom around Dow Jones Industrials 1 ,000. We began a long term bull market in March 2009. Each subsequent min-bear market will result in higher lows than the prior major low. I fav or the m egaphone form ation as the m ost likely scenario. Since 2000 we hav e had two bear markets, 2000 to 2003 and 2007 to 2009. Like 1 966 to 1 97 4, the recov ery from the first bear market saw a new all time high (2007 peak). Its possible that we may ex perience another all time high during the present recov ery period. This would support the megaphone formation. A failure to make new highs would support the head and shoulders argument. In both formations the conclusion of the present recov ery would call for a third and final bear market. An estimated time for the conclusion of the final bear market is approx imately 201 8. The lesser downside target of both formations is the megaphone formation as it likely calls for a bottom 1 ,000 to 2,000 points below the 2009 low, which would be around Dow 5,000. In the head and shoulders formation the measurement calls for a bottom around Dow Jones Industrials 1 ,000. This is almost an unimaginable ev ent regarding the possible fundamentals to create this scenario. If this did happen, ev ery thing that could go wrong would hav e to go wrong.
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The reasons range from the absurd to the absurdly absurd. This scenario is so dark that it doesnt seem possible but nev ertheless, the head and shoulders formation is there and will be waiting until we pierce the alltime highs of October 2007 . Remember these are simply possible scenarios and are not embedded in fact. Whatev er the outcome, it nev er hurts to be a little cautious with some of y our money . But in the worst case scenario, ev ery thing that we take for granted as being safe . . . . would not be safe. This is something to nev er forget in the ev ent things go v ery badly . Hopefully we will nev er hav e to think about worst case scenarios other than to hav e a good laugh at them presently . ************************************************************************************ EDSON GOULD Edson Gould, Prem ier Stock Market Strategist Edson Gould had a profound influence on the dev elopment of my techniques and indicators. Prior to me subscribing to his adv isory serv ice, I was just one of the crowd. After 40 y ears I still hav e many of the publications from his adv isory serv ice, Findings & Forecasts. Fearing the loss of these hard copy reports I hav e recently scanned and created pdf files of these reports. Now I hav e hard copies and computerized v ersions of the reports. I hav e used a technique of his that I found in an obscure reference in one of his reports. It was only mentioned once and nev er again. I believ e that he used this tool ex tensiv ely and nev er told the world its importance. Prior to my finding this tool, I had been
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try ing unsuccessfully to find a different way to chart the market. When I read about his technique I knew instantly that this was ex actly what I had been seeking. I hav e charted this method back to 1 939 and found it to be v ery useful. There is no mention of it in the reports that I posted below as I hav e deleted any reference to it. Its a super secret indicator and Id hav e to kill y ou if I told y ou about it. Edson Gould was truly a legend in his own time. Its too bad that today most people hav e forgotten or nev er heard of him or his discov eries. Below y ou will find only the first page of these reports. A teaser is what y ou might call it. The rest of the reports are av ailable upon request. This is a man that deserv es to be remembered throughout technical analy sis market history . T he following are links to Edson Gould reports. My Most Im portant Discov ery by Edson Gould It was also my most important discov ery , for it ex plained the irrational v olatility of markets that had my stified me in my early y ears. During those early y ears I found nothing worked in predicting these irrational market swings. But the fog lifted after reading this report and I began to understand how to begin predicting the market. Edson Gould Profile by MT A Edson Gould Concepts by William Scheinm an Decade Cy cle by Edson Gould Decade Cy cle Update by Ned Dav is Swing Principle by Edson Gould
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A measuring indicator Utilities by Edson Gould A forecasting indicator Div idends by Edson Gould Bonds by Edson Gould Speed Lines by Edson Gould Sentim eter by Edson Gould With companies failing to pay div idends commensurate with their earnings, this indicator has failed. As the market climate continues to deteriorate in the coming y ears, I would ex pect div idends to return to their former lev els and this indicator will once again become useful. Prior to the late 1 990s, it had 1 00 y ears of success. Bottom s by Edson Gould This was written and directed at the upcoming bottom in 1 97 4 but it applies to all major bottoms. T hree Steps by Edson Gould Where do y ou think my three steps principle came from? Straight from this report although I modified the concept through the y ears. Edson Goulds 197 4 Forecast Goulds 1 97 4 forecast kept me bearish and short throughout 1 97 4 until the week before Christmas 1 97 4, during which I began making long term purchases. After that it was ride the bull phases that transpired from 1 97 5 to 1 982. 1 982 to 2000 was the greatest bull market of all time. Edson Goulds 197 5 Forecast Edson Goulds 197 6 Forecast Edson Goulds 197 7 Forecast
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Edson Goulds Fiv e Y ear Forecast 197 7 to 1982 This was a remarkable forecast in 1 97 7 , where the Dow Industrials had nev er been higher than 1 ,000. NO ONE predicted a rise of this magnitude in 1 97 7 . Most were waiting for a resumption of the bear market. As part of the 1 97 7 to 1 982 forecast: On Wednesday August 4, 1 982 I went long the market for the first time in months. By Friday , August 6 I was worried that I had made a mistake as I was deep in the red (I was long the Kansas City Stock Market Contracts). The Kansas City Stock Market Contract was the first of the stock index contracts (February 1 982). It was based on the V alue Line Arithmetic Index , margin requirement were quite low, and it had a multiplier of 1 00 times the V alue Line Arithmetic Index , which meant the lev erage was v ery high. On Friday (Aug 6), my wife and I went to dinner and I told her my tale of woe and whether I should sell my long positions. I ex plained that my key indicator had rev ersed and continued higher on Thursday and Friday but the market had continued lower. Since the key indicator was usually correct, we decided to stick it out for a few day s more (I was crazy in those day s). My key indicator w as mentioned by Gould only once in his market letters. If y ou didnt catch its importance, too bad, because he only gav e y ou a peek. Prior to Gould writing about this indicator I had been looking for one that had similar characteristics without success. Thus when Gould wrote about it, I recognized instantly that I had struck gold. I hav e modified this indicator slightly and researched it back to 1 939. This was a lot of work as it was before computers and online data (remember when Barrons was av ailable only on paper, still is for the distant past). Meanwhile on Monday August 9, 1 982 the market took off like a rocket and nev er looked back. I
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sky rocketed out of the red and had a big profit. In August 1 982 the only people that were bullish were Edson Gould, Robert Prechter and my self (probably a couple of others but I didnt know them). Ev ery one else was ex tremely bearish. It was a perfect ex ample of crowd behav ior. Sign Of T he Bull by Edson Gould ************************************************************************************ T RANSACT ION SIGNALS All actionable signals are only for short term time frames. These signals are not designed for intermediate or long term time frames BUT . . . . . After a short term buy signal, long term tax status can be achiev ed by a continuation of the upward trend, which causes short term actions to morph into long term holdings. See more details in the glossary under Tax es, Futures Contracts and Money Management. Glossary Link T RANSACT ION RECORD In this blog a warning of an impending bottom (or top) is often issued well in adv ance of the formal buy or sell date. This allows thoughtful consideration prior to a formal action signal. To get a sense of how this works, y ou should read a few day s prior to a formal buy /sell signal. I often buy /sell in my personal account based on the early warnings.
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based on the early warnings. The transaction record near stock market bottoms will show that I am v ery skittish and usually remain so until the new direction is well underway . Qualified buy signal giv en from Decem ber 5th to Decem ber 20th, 2011 Buy signal in October 2011 was nev er issued due to a SERIOUS fam ily illness SELL SEPT EMBER 9, 2011 BUY AUGUST 30, 2011 SELL AUGUST 30, 2011 Stopped out, re-bought quickly BUY AUGUST 29, 2011 SELL AUGUST 25, 2011 BUY AUGUST 23, 2011 SELL AUGUST 1, 2011 BUY JUNE 23, 2011 ************************************************************************************ MISCELANEOUS There are useful items throughout this blog. For instance, the Wall Street Quotes can be v ery instructiv e. So make sure and look all through the blog.
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Edson Goulds 1979 Forecast (Dec 1978)

P os ted D ec ember 2 9 , 2 0 1 1 by Bob Categories: E D SO N G O U L D
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Edson Gou ld's 1 9 7 9 For eca st - Pa g e 2
I was a subscriber to Edson Goulds Findings & Forecast from 1 97 4 to 1 97 9. Impressed by the quality of information, I kept Goulds special reports, y early forecasts and important portions of his semimonthly market letters. Hav ing nev er written a book, Edson Goulds stock market memoirs are contained in his market letters and special reports. Searching the internet Iv e found a couple of his reports and none of his market letters. Ex cept for the postings here, its certainly possible that Goulds stock market observ ations hav e been lost. Some may say that these publications are old and not relev ant. I would suggest those believ ers read One Way Pockets. This little stock market gem was written in 1 91 7 and contains a wealth of important information. One Way Pockets certainly prov es how human behav ior doesnt change. I wish I had found this book when I was beginning my stock market education, but believ ing that nothing of genuine importance could come from the distant past, I restricted my reading to current publications. A condensed v ersion of One Way Pockets is posted on this blog. Gould believ ed that the stock market was mov ed by the emotions of the crowd, fear, panic and greed. Those emotions combined with the
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pendulum of swinging from one emotional ex treme to the other formed the foundation of Goulds predictions. Crowd behav ior in the stock market is a timeless factor that will nev er change. The ultimate book on crowd behav ior is Mem oirs of ex traordinary popular delusions and the m adness of crowds by Charles Mackay (1 852). It is av ailable for free from Google Books (click on the link abov e). Because of the timelessness of crowd behav ior y ou will find that Goulds indicators still function v ery well in predicting the stock market. Recently I scanned Edson Goulds y early forecasts and many of his market letters. There remains a significant number of pages and subjects that hav e not been scanned. To receiv e this report (pdf format), please complete the following form.
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Edson Goulds 1978 Forecast (Dec 1977)

P os ted D ec ember 2 9 , 2 0 1 1 by Bob Categories: E D SO N G O U L D
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Edson Gou ld's 1 9 7 8 For eca st - Pa g e 2
I was a subscriber to Edson Goulds Findings & Forecast from 1 97 4 to

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1 97 9. Impressed by the quality of information, I kept Goulds special reports, y early forecasts and important portions of his semimonthly market letters. Hav ing nev er written a book, Edson Goulds stock market memoirs are contained in his market letters and special reports. Searching the internet Iv e found a couple of his reports and none of his market letters. Ex cept for the postings here, its certainly possible that Goulds stock market observ ations hav e been lost. Some may say that these publications are old and not relev ant. I would suggest those believ ers read One Way Pockets. This little stock market gem was written in 1 91 7 and contains a wealth of important information. One Way Pockets certainly prov es how human behav ior doesnt change. I wish I had found this book when I was beginning my stock market education, but believ ing that nothing of genuine importance could come from the distant past, I restricted my reading to current publications. A condensed v ersion of One Way Pockets is posted on this blog. Gould believ ed that the stock market was mov ed by the emotions of the crowd, fear, panic and greed. Those emotions combined with the pendulum of swinging from one emotional ex treme to the other formed the foundation of Goulds predictions. Crowd behav ior in the stock market is a timeless factor that will nev er change. The ultimate book on crowd behav ior is Mem oirs of ex traordinary popular delusions and the m adness of crowds by Charles Mackay (1 852). It is av ailable for free from Google Books (click on the link abov e).
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Because of the timelessness of crowd behav ior y ou will find that Goulds indicators still function v ery well in predicting the stock market. Recently I scanned Edson Goulds y early forecasts and many of his market letters. There remains a significant number of pages and subjects that hav e not been scanned. To receiv e this report (pdf format), please complete the following form.
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P os ted D ec ember 2 8 , 2 0 1 1 by Bob Categories: D A I L Y U P D A T E
SEASONALITY from Mike Burke Average returns for the coming w eek (1 2/26 to 1 2/30) have been positive by all measures and stronger during the 3rd year of the Presidential Cycle than other years. Next year is the 4th year of the Presidential Cycle and, on average, second (a distant second) to the 3rd year in average returns. Since 1 964 the OTC has been up 7 5% of the time in the 4th year of the Presidential Cycle w ith an average gain of 7 .6% . The best 4th year for the OTC w as 1 980 (+33.7 % ), the w orst 2008 (-40.5% ) follow ed by 2000 (-39.3% ).
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OTC is Ov er The Counter, which is now known as NASDAQ. If nex t y ear is going to be a distant second to the 3rd y ear of a Presidential Cy cle, were going to hav e some problems. This y ear (201 1 ) the SP500 is ev en to slightly down . . . and this was supposed to be a good y ear??? CY CLES The diamonds on the lower part of the chart signify cy cle lows. On October 4, 201 1 there were numerous diamonds stacked on that date. This was a cy cle low of significance. The chart below is from Hurst Signals a fee based serv ice at http://hurstsignals.com /order-now/ CLICK ON CHART S T O ENLARGE
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1 2 -2 8 -1 1 Hu r st Cy cles
The nex t cy cle low of importance (but not on the degree of October 4) is in late January 201 2. Following that, the nex t cy cle low of importance is in May 201 2. The cy cle low in May is of unusual interest to me because I hav e another chart that has shown something happening around May 201 2 (nex t chart).
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1 2 -2 8 -1 1 DJ In du st r ia ls W eek ly Ba r
The abov e chart is a Fibonacci time relationship to significant highs and lows in the past (page 8 of my charts). We hav e two different cy cles producing a common date around May 201 2 (red v ertical line). I think this bears close watching to see what dev elops. WHAT NOW?
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1 2 -2 8 -1 1 DJI 5 Min
We hav e begun a correction and if all is well, it should finish soon and resume the uptrend. A tip off that the correction was coming was in the following chart. This chart can be found on page 1 of my charts.
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1 2 -2 8 -1 1 In t er est Ra t es V s St ock s 1 5 Min u t e
Notice how interest rates began declining on December 23. This was the tip-off that a market decline should follow. Since 1 998s Asian currency crisis, interest rates hav e mov ed in lock step with the stock market. Prev iously they mov ed in opposite directions (inv erted chart). The degree of interest rate mov ement doesnt necessarily correspond to the stock market but the direction is the important factor. I would certainly look for a bottoming in interest rates before thinking we hav e a solid bottom in stocks. The following chart say s we hav e finished 3 steps up in the rally concluded on Tuesday . If the correction finds support on any of the Fibonacci lines we should remain in good shape. Currently we hav e found support at the 50% lev el but a v iolation of the 61 .8% lev el would not be constructiv e. Today was a 95% down day and possibly it was climactic. We would definitely not want to string back to back 90% down day s together. That would mean run quickly to the nearest ex it.
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1 2 -2 8 -1 1 T SX 1 5 Min
REAL ESTATE Heres an updated chart to giv e y ou nightmares. And y ou thought y our house v alue had bottomed??? Not according to Robert Shiller. This indicates another 25% decline in home prices by 201 8 (my date).
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1 2 -2 8 -1 1 Ca se Sh iller Rea l Est a t e V a lu es
************************************************************************************ CHART S MY CHART LINK (updated constantly ) These are my personal charts and my play ground for doodling trend lines, wav e counts and other ideas. I draw the trend lines and wav e counts on a daily basis (sometimes more often). Y ou can find these doodles from 1 minute to monthly charts.
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monthly charts. Y ou will find the best trend lines and wav e counts on charts with longer time frames. This giv es perspectiv e to the lines and counts. Perspectiv e was a fav orite of Edson Gould. I usually restrict my trend lines and wav e counts to the first three charts on each page, TSX, DJI & COMPQ. The other charts on the page are usually for confirmation of the trend and wav e structure. Page 1 Buy /Sell Signals Page 2 Index es With 1 Minute Bars Page 3 Index es With 5 Minute Bars Page 4 Index es With 1 5 Minute Bars Page 5 Index es With 30 Minute Bars Page 6 Index es With 60 Minute Bars Page 7 Index es With Daily Bars Page 8 Index es With Weekly Bars (since 1 981 ) Page 9 Index es With Monthly Bars (since 1 981 ) Page 1 0 Index es With 60 Minute Bars, Candlestick Page 1 1 Index es With Daily Bars, Candlesticks Page 1 2 Index es With Weekly Bars, Candlestick Pages 1 3 through 1 4 are shorter term indicators. The indicators are used to simply look for some ty pe of leading action before a turn or confirm ing action of the wav e count. Page 1 3 is a lookev ery day indicator page. The other indicator pages are less frequently v isited. Page 1 5 Hurst FLD Projections Page 1 6 Indicators, Long Term Page 1 7 International Index es Page 1 8 through 30 are sector ETFs. They represent most of the
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activ e sector ETFs and are alway s a good hunting ground when looking for something that is breaking in a new direction. Page 31 through 43 are growth stocks. These are stocks that hav e risen in price since 1 990. One qualification is that they must not be sev erely damaged in a bear market so they cant rise to significant new highs in the following bull market. The growth stocks show daily market action for the last 3 y ears and weekly prices since 1 990. This giv es a good perspectiv e of how they hav e behav ed in the immediate past (daily charts) and how they behav ed during good and bad times (weekly charts). Page 44 Junk Pile WAVE COUNT S SIMPLIFIED My w ave counts are not Elliott Wave! Its different, simple and functions w ithout a maze of exclusions. T here are 3 peaks (or v alley s) to a com pleted wav e count. A rev ersal of trend takes place after a completed wav e count. Often times its as simple as counting 3 bumps (or dips) on a chart . . . Other times, not so easy . In a downtrend the same rules apply ex cept y ou are counting 3 dips instead of 3 bumps. Each group of 3 steps m ust stay confined to a channel. Lay ing a pen or pencil on the chart will help y ou v isualize the channel. As the trend progresses, all of the steps that make up a larger trend will also be confined to a larger channel. Sometimes the channel is not rev ealed until the surge phase has ended. When the m arket breaks a channel (regardless of the
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perceived wav e count), the current step has been term inated. (Make sure y our channel was correctly drawn before calling a termination). The correction following the second step is larger than the correction that followed the first step. Obv iously the correction following the third step is a rev ersal. A single wav e m ay sub-div ide into another 3 wav es. I will call this an ex tension. When this happens (1 ) the trend is still intact, (2) the channel will widened and (3) instead of a total of 3 steps, there will be 5 steps. Sometimes I will use the terms step and wav e interchangeably . Reading the glossary helps in the understanding of this blog. There are many other important facts in the glossary . Glossary Link ABBREVIAT IONS DJI = Dow Jones Industrials DJT = Dow Jones Transportations SPX = SP 500 ES = SP 500 Futures COMPQ = Nasdaq Composite Index TSX = Toronto Stock Ex change (Canadian blue chips) SOX = Semiconductors TXX = Technology ************************************************************************************ Long T erm UP Uptrend
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Mar 2009 T o Present Step 2 Up (of 3) Com pleted Has Step 3 Up Begun ??? From the bottom in March 2009 Large step one up ended in May 201 0 Large step two up ended in May 201 1 . Significant break abov e the May 201 1 highs should signal that Step 3 up is official
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1 2 -2 8 -1 1 LONG T ERM
************************************************************************************ Very Long T erm DOWN Downtrend Jan 2000 T o Present Step 2 Down (of 3) Com pleted Currently In Rally Phase From Step 2 Down
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1 2 -2 8 -1 1 V ERY LONG T ERM
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based on the early warnings. The transaction record near stock market bottoms will show that I am v ery skittish and usually remain so until the new direction is well underway . Qualified buy signal giv en from Decem ber 5th to Decem ber 20th, 2011 Buy signal in October 2011 was nev er issued due to a SERIOUS fam ily illness SELL SEPT EMBER 9, 2011 BUY AUGUST 30, 2011 SELL AUGUST 30, 2011 Stopped out, re-bought quickly BUY AUGUST 29, 2011 SELL AUGUST 25, 2011 BUY AUGUST 23, 2011 SELL AUGUST 1, 2011 BUY JUNE 23, 2011 ************************************************************************************ MISCELANEOUS There are useful items throughout this blog. For instance, the Wall Street Quotes can be v ery instructiv e. So make sure and look all through the blog.
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Undercut Low Stock Market Update 12/20/11

P os ted D ec ember 2 0 , 2 0 1 1 by Bob Categories: D A I L Y U P D A T E , SE L L /BU Y A C T I O N U P D A T E
DAILY UPDAT E FOLLOWS T HE BREAK CHART S MY CHART LINK (updated constantly ) These are my personal charts and my play ground for doodling trend lines, wav e counts and other ideas. I draw the trend lines and wav e counts on a daily basis (sometimes more often). Y ou can find these doodles from 1 minute to monthly charts. Y ou will find the best trend lines and wav e counts on charts with longer time frames. This giv es perspectiv e to the lines and counts. Perspectiv e was a fav orite of Edson Gould. I restrict my trend lines and wav e counts to only a few charts, TSX, DJI, SOX, COMPQ & TXX. The other charts on the page are usually for confirmation of the trend and wav e structure.
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Page 1 Buy /Sell Signals Page 2 Index es With 1 Minute Bars Page 3 Index es With 5 Minute Bars Page 4 Index es With 1 5 Minute Bars Page 5 Index es With 30 Minute Bars Page 6 Index es With 60 Minute Bars Page 7 Index es With Daily Bars Page 8 Index es With Weekly Bars (since 1 981 ) Page 9 Index es With Monthly Bars (since 1 981 ) Page 1 0 Index es With 60 Minute Bars, Candlestick Page 1 1 Index es With Daily Bars, Candlesticks Page 1 2 Index es With Weekly Bars, Candlestick Pages 1 3 through 1 4 are shorter term indicators. The indicators are used to simply look for some ty pe of leading action before a turn or confirm ing action of the wav e count. Page 1 3 is a lookev ery day indicator page. The other indicator pages are less frequently v isited. Page 1 5 Hurst FLD Indicator Page 1 6 Indicators, Long Term Page 1 7 International Index es Page 1 8 through 30 are sector ETFs. They represent most of the activ e sector ETFs and are alway s a good hunting ground when looking for something that is breaking in a new direction. Page 31 through 43 are growth stocks. These are stocks that hav e risen in price since 1 990. One qualification is that they must not be sev erely damaged in a bear market so they cant rise to significant new highs in the following bull market. The growth stocks show daily market action for the last 3 y ears
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and weekly prices since 1 990. This giv es a good perspectiv e of how they hav e behav ed in the immediate past (daily charts) and how they behav ed during good and bad times (weekly charts). Page 44 Junk Pile WAVE COUNT S SIMPLIFIED My w ave counts are not Elliott Wave! Its different, simple and functions w ithout a maze of exclusions. T here are 3 peaks (or v alley s) to a com pleted wav e count. A rev ersal of trend takes place after a completed wav e count. Often times its as simple as counting 3 bumps (or dips) on a chart . . . Other times, not so easy . In a downtrend the same rules apply ex cept y ou are counting 3 dips instead of 3 bumps. Each group of 3 steps m ust stay confined to a channel. Lay ing a pen or pencil on the chart will help y ou v isualize the channel. As the trend progresses, all of the steps that make up a larger trend will also be confined to a larger channel. Sometimes the channel is not rev ealed until the surge phase has ended. When the m arket breaks a channel (regardless of the perceived wav e count), the current step has been term inated. (Make sure y our channel was correctly drawn before calling a termination). The correction following the second step is larger than the correction that followed the first step. Obv iously the correction following the third step is a rev ersal. A single wav e m ay sub-div ide into another 3 wav es. I will
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call this an ex tension. When this happens (1 ) the trend is still intact, (2) the channel will widened and (3) instead of a total of 3 steps, there will be 5 steps. Sometimes I will use the terms step and wav e interchangeably . Reading the glossary helps in the understanding of this blog. There are many other important facts in the glossary . Glossary Link ABBREVIAT IONS DJI = Dow Jones Industrials DJT = Dow Jones Transportations SPX = SP 500 ES = SP 500 Futures COMPQ = Nasdaq Composite Index TSX = Toronto Stock Ex change (Canadian blue chips) SOX = Semiconductors TXX = Technology ************************************************************************************ DAILY UPDAT E CLICK ON CHART S T O ENLARGE Monday was an undercut low just like October 4th An undercut low is one that makes a new low, rev erses immediately surging away from the bottom. Now that is v ery irritating, y esterday s low was a false mov e and today we hav e the breakaway mov e that I anticipated. V ery , v ery irritating.
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The market does whatev er it can to confound its participants and it did that to me. Its another case of being correct but also being wrong at the same time. I cant tell y ou how many times that has happened to me ov er the y ears, wrong but right. So Ill quit cry ing about it and get on the right side of the market. Dow Industrials are up 31 7 at the moment.
1 2 /2 0 /1 1 DJI 1 5 MIN
************************************************************************************ Long T erm UP Uptrend Mar 2009 T o Present

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Step 2 Up (of 3) Com pleted Has Step 3 Up Begun ??? From the bottom in March 2009 Large step one up ended in May 201 0 Large step two up ended in May 201 1 . Significant break abov e the May 201 1 highs should signal that Step 3 up is official
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1 2 /1 8 /1 1 LONG T ERM
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1 2 /1 8 /1 1 V ERY LONG T ERM
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based on the early warnings. The transaction record near stock market bottoms will show that I am v ery skittish and usually remain so until the new direction is well underway . Buy signal in October 2011 was nev er issued due to a SERIOUS fam ily illness SELL SEPT EMBER 9, 2011 BUY AUGUST 30, 2011 SELL AUGUST 30, 2011 Stopped out, re-bought quickly BUY AUGUST 29, 2011 SELL AUGUST 25, 2011 BUY AUGUST 23, 2011 SELL AUGUST 1, 2011 BUY JUNE 23, 2011 ************************************************************************************ MISCELANEOUS There are useful items throughout this blog. For instance, the Wall Street Quotes can be v ery instructiv e. So make sure and look all through the blog.
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DAILY UPDAT E FOLLOWS T HE BREAK CHART S MY CHART LINK (updated constantly ) These are my personal charts and my play ground for doodling trend lines, wav e counts and other ideas. I draw the trend lines and wav e counts on a daily basis (sometimes more often). Y ou can find these doodles from 1 minute to monthly charts. Y ou will find the best trend lines and wav e counts on charts with longer time frames. This giv es perspectiv e to the lines and counts. Perspectiv e was a fav orite of Edson Gould. I restrict my trend lines and wav e counts to only a few charts, TSX, DJI, SOX, COMPQ & TXX. The other charts on the page are usually for confirmation of the trend and wav e structure. Page 1 Buy /Sell Signals
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Page 2 Index es With 1 Minute Bars Page 3 Index es With 5 Minute Bars Page 4 Index es With 1 5 Minute Bars Page 5 Index es With 30 Minute Bars Page 6 Index es With 60 Minute Bars Page 7 Index es With Daily Bars (plus some indicators) Page 8 Index es With Daily Bars (candlesticks last 1 3 months) Page 9 Index es With Daily Bars (since Nov ember 2008) Page 1 0 Index es With Weekly Bars (Candlesticks and Indicators, last 4 Y ears) Page 1 1 Index es With Weekly Bars (since 1 981 ) Page 1 2 Index es With Monthly Bars (since 1 981 ) Pages 1 3 through 1 6 are indicators. The indicators are used to simply look for some ty pe of leading action before a turn or confirm ing action of the wav e count. Page 1 3 is a lookev ery day indicator page. The other indicator pages are less frequently v isited. Page 1 7 through 29 are sector ETFs. They represent most of the activ e sector ETFs and are alway s a good hunting ground when looking for something that is breaking in a new direction. Page 30 through 42 are growth stocks. These are stocks that hav e risen in price since 1 990. One qualification is that they must not be sev erely damaged in a bear market so they cant rise to significant new highs in the following bull market. The growth stocks show daily market action for the last 3 y ears and weekly prices since 1 990. This giv es a good perspectiv e of how they hav e behav ed in the immediate past (daily charts) and how they behav ed during good and bad times (weekly charts).
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WAVE COUNT S SIMPLIFIED My w ave counts are not Elliott Wave! Its different, simple and functions w ithout a maze of exclusions. T here are 3 peaks (or v alley s) to a com pleted wav e count. A rev ersal of trend takes place after a completed wav e count. Often times its as simple as counting 3 bumps (or dips) on a chart . . . Other times, not so easy . In a downtrend the same rules apply ex cept y ou are counting 3 dips instead of 3 bumps. Each group of 3 steps m ust stay confined to a channel. Lay ing a pen or pencil on the chart will help y ou v isualize the channel. As the trend progresses, all of the steps that make up a larger trend will also be confined to a larger channel. Sometimes the channel is not rev ealed until the surge phase has ended. When the m arket breaks a channel (regardless of the perceived wav e count), the current step has been term inated. (Make sure y our channel was correctly drawn before calling a termination). The correction following the second step is larger than the correction that followed the first step. Obv iously the correction following the third step is a rev ersal. A single wav e m ay sub-div ide into another 3 wav es. I will call this an ex tension. When this happens (1 ) the trend is still intact, (2) the channel will widened and (3) instead of a total of 3 steps, there will be 5 steps. Sometimes I will use the terms step and wav e interchangeably . Reading the glossary helps in the understanding of this blog.
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There are many other important facts in the glossary . Glossary Link ABBREVIAT IONS DJI = Dow Jones Industrials DJT = Dow Jones Transportations SPX = SP 500 ES = SP 500 Futures COMPQ = Nasdaq Composite Index TSX = Toronto Stock Ex change (Canadian blue chips) SOX = Semiconductors TXX = Technology ************************************************************************************ DAILY UPDAT E CLICK ON CHART S T O ENLARGE If Santa fails to call the bears will roam on Broad and Wall As Iv e said before this is a seasonally strong time of the y ear. It doesnt paint a good picture to hav e the bears in control during December. The breakdown of Thursday and Friday s indecisiv e candlesticks show that we hav e more downside ahead. Ahead Ill be looking for div ergent market action coupled with a completed wav e count. Thankfully I didnt hav e a full-on buy signal and was operating under a qualified buy . The safe action would hav e been to wait for the breakout rally . This is a good ex ample that bottom picking is dangerous and stops
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are important to av oid damage. The cy cle charts below show a bottom coming in late January . The first chart can be seen on page 1 4 of my charts. Of course the January bottom could just be a stop off point to ev en lower prices. Well see when were in the neighborhood of that time zone. The second chart is from Terry Laundry and is av ailable to subscribers and clients. I will publish a more comprehensiv e cy cle chart in the near future.
1 2 /1 9 /1 1 Cy cles
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1 2 /1 9 /1 1 Cy cles by T er r y La u n dr y
************************************************************************************ Long T erm UP Uptrend Mar 2009 T o Present Step 2 Up (of 3) Com pleted Has Step 3 Up Begun ??? From the bottom in March 2009 Large step one up ended in May 201 0 Large step two up ended in May 201 1 . Significant break abov e the May 201 1 highs should signal that Step 3 up is official
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1 2 /1 8 /1 1 LONG T ERM
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P os ted D ec ember 1 8 , 2 0 1 1 by Bob Categories: WE E KL Y U P D A T E
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There are many other important facts in the glossary . Glossary Link ABBREVIAT IONS DJI = Dow Jones Industrials DJT = Dow Jones Transportations SPX = SP 500 ES = SP 500 Futures COMPQ = Nasdaq Composite Index TSX = Toronto Stock Ex change (Canadian blue chips) SOX = Semiconductors TXX = Technology ************************************************************************************ DAILY UPDAT E CLICK ON CHART S T O ENLARGE Seasonally , the nex t two weeks hav e been among the strongest of the y ear. That fact combined with the indecision showing on the daily candlestick chart for the SPX continues to work in the markets fav or for a rally . In the first chart, notice the last 2 candlesticks. These two are called an inv erted hammer and when it occurs in a downtrend, it reflects indecision on the part of the bears. It often precedes a rally . A break abov e or below the range of Thursday and Friday s limits would decide which direction y ou should go. I ex pect upward mov ement. I was not stopped out on Friday so well see what happens beginning on
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Sunday afternoon. As I was telling a good friend, I usually set my stops below a prev ious important bottom (or top). This bottom (top) must hold in order that we hav e higher highs (or lower lows). Thats why I wasnt stopped out on Friday , the prior bottom hasnt been touched. We are still operating under the qualified buy guidelines.
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1 2 /1 8 /1 1 SPX Ca n dlest ick s Da ily
The second chart is one that I had not been familiar with before. Its the Aruoba-Diebold-Scotti business conditions index and the Philly Fed keeps track of this indicator of business activ ity . The Aruoba-Diebold-Scotti business conditions index is designed to track real business conditions at high frequency . Its underly ing (seasonally adjusted) economic indicators (weekly initial jobless claims; monthly pay roll employ ment, industrial production, personal income less transfer pay ments, manufacturing and trade sales; and quarterly real GDP) blend high- and low-frequency information and stock and flow data. The ADS index is updated as data on the index s underly ing components are released. The av erage v alue of the ADS index is zero. Progressiv ely bigger positiv e v alues indicate progressiv ely better-than-av erage conditions, whereas progressiv ely more negativ e v alues indicate progressiv ely worse-thanav erage conditions. The ADS index may be used to compare business conditions at different times. A v alue of -3.0, for ex ample, would indicate business conditions significantly worse than at any time in either the 1 990-91 or the 2001 recession, during which the ADS index nev er dropped below -2.0. If y ou look at the ADS index closely y ou will see how in real-time, it mirrors the direction of the economy . As the most recent ex ample shows in August of 2007 the index dropped into recessionary territory ev en as the mainstream media continued to bleat about a soft landingscenario. The economy soon turned dramatically south in 2008 as the financial crisis took hold.
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Then, as the markets were hitting lows in March of 2009, the gov ernment scrambled to keep the economy from sliding off into the aby ss with massiv e stimulus injections, the ADS index bottomed and turned up. It wasnt until December of 2008 that the National Bureau of Economic Research stated that the recession had officially started in December of 2007 fairly close to the time that the ADS index indicated. The NBER later announced the recession ended in June of 2009 just two months after the ADS smoothed index had bottomed and turned up. That leads us to today . That specific recov ery . which started in April of 2009, has now peaked and turned down. The most recent peak also coincides with the peaks of post 2001 -2002 recession recov ery . One interesting data point here in reference to the econom y of the entire 21st century is that the econom ic strength has been substantially weaker than that of the past. T his is ev en with the m assiv e am ounts of stim ulus, liquidity , credit and housing bubble. In the past econom ic recov eries, the post recession generally reached well into positiv e readings before the nex t decline. In the past two cy cles (since 2000) the index has barely risen half of norm al ex pansion v alue. That coincides with my v iew that a multi-step correction began in 2000 and continues onward to possibly 201 8.
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1 2 /1 8 /1 1 A DS Econ om y Sin ce 2 0 0 0
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1 2 /1 8 /1 1 A DS Econ om y Sin ce 1 9 6 0
************************************************************************************ Long T erm UP Uptrend Mar 2009 T o Present Step 2 Up (of 3) Com pleted Has Step 3 Up Begun ??? From the bottom in March 2009 Large step one up ended in May 201 0
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Large step two up ended in May 201 1 . Significant break abov e the May 201 1 highs should signal that Step 3 up is official
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1 2 /1 8 /1 1 LONG T ERM
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Qualified Buy . . . Again 12/15/11

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There are many other important facts in the glossary . Glossary Link ABBREVIAT IONS DJI = Dow Jones Industrials DJT = Dow Jones Transportations SPX = SP 500 ES = SP 500 Futures COMPQ = Nasdaq Composite Index TSX = Toronto Stock Ex change (Canadian blue chips) SOX = Semiconductors TXX = Technology ************************************************************************************ DAILY UPDAT E CLICK ON CHART S T O ENLARGE A buy point could arriv e tomorrow (Friday ), so be alert. If we open strong (check the futures before the open), that would be a good sign that a possible bottom is in. This again is a qualified buy where y ou will let the market tell y ou that the decline is ov er. This allows y ou better safety in ex ecuting y our buy order. Make sure and put a close stop following y our buy . If the market doesnt mov e up or down with any authority on Friday , it will indicate that we need a little more time to finish this correction (day s not weeks). If so, the qualified buy remains in effect as long as we dont take out the step 3 low (see chart below). Another new low will probably indicate a 5 step down.
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This would be a short term transaction. We hav e to wait and see the character of the rally and see if it has legs. Short term doesnt mean a couple of day s of rally . It should be sev eral weeks in duration, hopefully it will turn into step 2 up (see chart below). Step one was Nov ember 28 to December 7 . The SP 500 is at an important support lev el (SP500 1 21 2). We are also at the 50% retracement lev el for the Nov 28 to Dec 7 rally , plus the 38% retracement of the October rally . If the SP500 1 21 2 lev el doesnt hold and the market plunges tomorrow, the buy signal will be canceled and the picture becomes shaky . Looking at the chart below y ou can see that we hav e finished 3 steps down. So far the market has been plunging in one of the strongest periods of the y ear. Of course we can thank Europe for putting coal in our stocking this y ear. Im not particularly happy to see the semiconductors (SOX) weaker than most other index es. That doesnt send a good message but should they rev erse and fall in line it would be OK. Meanwhile, the transportation stocks hav e been making a good mov e upward and thats good news. The one cav eat would be that we are in a 5 step down instead of 3. One must be v ery careful of that possibility should y ou buy . I know I will be on guard with close stops to protect my inv estment. Stops are y our best friend and use them wisely so y ou can sleep well.
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1 2 /1 5 /1 1 DJI 1 5 MIN
************************************************************************************ EDSON GOULD Edson Gould, Prem ier Stock Market Strategist Edson Gould had a profound influence on the dev elopment of my techniques and indicators. Prior to me subscribing to his adv isory serv ice, I was just one of the crowd. After 40 y ears I still hav e many of the publications from his adv isory serv ice, Findings & Forecasts. Fearing the loss of these hard copy reports I hav e recently scanned and created pdf files of these reports. Now I hav e hard copies and computerized v ersions of the reports. I hav e used a technique of his that I found in an obscure reference
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in one of his reports. It was only mentioned once and nev er again. I believ e that he used this tool ex tensiv ely and nev er told the world its importance. Prior to my finding this tool, I had been try ing unsuccessfully to find a different way to chart the market. When I read about his technique I knew instantly that this was ex actly what I had been seeking. I hav e charted this method back to 1 939 and found it to be v ery useful. There is no mention of it in the reports that I posted below as I hav e deleted any reference to it. Its a super secret indicator and Id hav e to kill y ou if I told y ou about it. Edson Gould was truly a legend in his own time. Its too bad that today most people hav e forgotten or nev er heard of him or his discov eries. Below y ou will find only the first page of these reports. A teaser is what y ou might call it. The rest of the reports are av ailable upon request. This is a man that deserv es to be remembered throughout technical analy sis market history . T he following are links to Edson Gould reports. My Most Im portant Discov ery by Edson Gould It was also my most important discov ery , for it ex plained the irrational v olatility of markets that had my stified me in my early y ears. During those early y ears I found nothing worked in predicting these irrational market swings. But the fog lifted after reading this report and I began to understand how to begin predicting the market. Edson Gould Profile by MT A Edson Gould Concepts by William Scheinm an Decade Cy cle by Edson Gould
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Decade Cy cle Update by Ned Dav is Swing Principle by Edson Gould A measuring indicator Utilities by Edson Gould A forecasting indicator Div idends by Edson Gould Bonds by Edson Gould Speed Lines by Edson Gould Sentim eter by Edson Gould With companies failing to pay div idends commensurate with their earnings, this indicator has failed. As the market climate continues to deteriorate in the coming y ears, I would ex pect div idends to return to their former lev els and this indicator will once again become useful. Prior to the late 1 990s, it had 1 00 y ears of success. Bottom s by Edson Gould This was written and directed at the upcoming bottom in 1 97 4 but it applies to all major bottoms. T hree Steps by Edson Gould Where do y ou think my three steps principle came from? Straight from this report although I modified the concept through the y ears. Edson Goulds 197 4 Forecast Goulds 1 97 4 forecast kept me bearish and short throughout 1 97 4 until the week before Christmas 1 97 4, during which I began making long term purchases. After that it was ride the bull phases that transpired from 1 97 5 to 1 982. 1 982 to 2000 was the greatest bull market of all time.
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Edson Goulds 197 5 Forecast Edson Goulds 197 6 Forecast Edson Goulds 197 7 Forecast Edson Goulds Fiv e Y ear Forecast 197 7 to 1982 This was a remarkable forecast in 1 97 7 , where the Dow Industrials had nev er been higher than 1 ,000. NO ONE predicted a rise of this magnitude in 1 97 7 . Most were waiting for a resumption of the bear market. As part of the 1 97 7 to 1 982 forecast: On Wednesday August 4, 1 982 I went long the market for the first time in months. By Friday , August 6 I was worried that I had made a mistake as I was deep in the red (I was long the Kansas City Stock Market Contracts). The Kansas City Stock Market Contract was the first of the stock index contracts (February 1 982). It was based on the V alue Line Arithmetic Index , margin requirement were quite low, and it had a multiplier of 1 00 times the V alue Line Arithmetic Index , which meant the lev erage was v ery high. On Friday (Aug 6), my wife and I went to dinner and I told her my tale of woe and whether I should sell my long positions. I ex plained that my key indicator had rev ersed and continued higher on Thursday and Friday but the market had continued lower. Since the key indicator was usually correct, we decided to stick it out for a few day s more (I was crazy in those day s). My key indicator w as mentioned by Gould only once in his market letters. If y ou didnt catch its importance, too bad, because he only gav e y ou a peek. Prior to Gould writing about this indicator I had been looking for one that had similar characteristics without success. Thus when Gould wrote about it, I recognized instantly that I had struck gold. I hav e modified this indicator slightly and researched it back to 1 939. This was a lot of work as it was before computers
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and online data (remember when Barrons was av ailable only on paper, still is for the distant past). Meanwhile on Monday August 9, 1 982 the market took off like a rocket and nev er looked back. I sky rocketed out of the red and had a big profit. In August 1 982 the only people that were bullish were Edson Gould, Robert Prechter and my self (probably a couple of others but I didnt know them). Ev ery one else was ex tremely bearish. It was a perfect ex ample of crowd behav ior. Sign Of T he Bull by Edson Gould ************************************************************************************ T RANSACT ION SIGNALS All actionable signals are only for short term time frames. These signals are not designed for intermediate or long term time frames BUT . . . . . After a short term buy signal, long term tax status can be achiev ed by a continuation of the upward trend, which causes short term actions to morph into long term holdings. See more details in the glossary under Tax es, Futures Contracts and Money Management. Glossary Link T RANSACT ION RECORD In this blog a warning of an impending bottom (or top) is often issued well in adv ance of the formal buy or sell date. This allows thoughtful consideration prior to a formal action signal. To get a
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thoughtful consideration prior to a formal action signal. To get a sense of how this works, y ou should read a few day s prior to a formal buy /sell signal. I often buy /sell in my personal account based on the early warnings. The transaction record near stock market bottoms will show that I am v ery skittish and usually remain so until the new direction is well underway . Buy signal in October 2011 was nev er issued due to a SERIOUS fam ily illness SELL SEPT EMBER 9, 2011 BUY AUGUST 30, 2011 SELL AUGUST 30, 2011 Stopped out, re-bought quickly BUY AUGUST 29, 2011 SELL AUGUST 25, 2011 BUY AUGUST 23, 2011 SELL AUGUST 1, 2011 BUY JUNE 23, 2011 ************************************************************************************ Long T erm UP Uptrend Mar 2009 T o Present Step 2 Up (of 3) Com pleted Has Step 3 Up Begun ??? From the bottom in March 2009 Large step one up ended in May 201 0 Large step two up ended in May 201 1 . Significant break abov e the May 201 1 highs should signal that Step 3 up is official
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1 2 -0 3 -1 1 Lon g T er m
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1 2 -0 3 -1 1 V er y Lon g T er m
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The reasons range from the absurd to the absurdly absurd. This scenario is so dark that it doesnt seem possible but nev ertheless, the head and shoulders formation is there and will be waiting until we pierce the alltime highs of October 2007 . Remember these are simply possible scenarios and are not embedded in fact. Whatev er the outcome, it nev er hurts to be a little cautious with some of y our money . But in the worst case scenario, ev ery thing that we take for granted as being safe . . . . would not be safe. This is something to nev er forget in the ev ent things go v ery badly . Hopefully we will nev er hav e to think about worst case scenarios other than to hav e a good laugh at them presently . ************************************************************************************ MISCELANEOUS There are useful items throughout this blog. For instance, the Wall Street Quotes can be v ery instructiv e. So make sure and look all through the blog.
Stock Market Update (Qualified Buy Mode) 12/12/11

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DAILY UPDAT E FOLLOWS T HE BREAK CHART S MY CHART LINK (updated constantly ) These are my personal charts and my play ground for doodling trend lines, wav e counts and other ideas. I draw the trend lines and wav e counts on a daily basis (sometimes more often). Y ou can find these doodles from 1 minute to monthly charts. Y ou will find the best trend lines and wav e counts on charts with longer time frames. This giv es perspectiv e to the lines and counts. Perspectiv e was a fav orite of Edson Gould. I restrict my trend lines and wav e counts to only a few charts, TSX, DJI, SOX, COMPQ & TXX. The other charts on the page are usually for confirmation of the trend and wav e structure. Page 1 Buy /Sell Signals Page 2 Index es With 1 Minute Bars Page 3 Index es With 5 Minute Bars Page 4 Index es With 1 5 Minute Bars Page 5 Index es With 30 Minute Bars Page 6 Index es With 60 Minute Bars Page 7 Index es With Daily Bars (plus some indicators) Page 8 Index es With Daily Bars (candlesticks last 1 3 months) Page 9 Index es With Daily Bars (since Nov ember 2008) Page 1 0 Index es With Weekly Bars (Candlesticks and Indicators,
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last 4 Y ears) Page 1 1 Index es With Weekly Bars (since 1 981 ) Page 1 2 Index es With Monthly Bars (since 1 981 ) Pages 1 3 through 1 6 are indicators. The indicators are used to simply look for some ty pe of leading action before a turn or confirm ing action of the wav e count. Page 1 3 is a lookev ery day indicator page. The other indicator pages are less frequently v isited. Page 1 7 through 29 are sector ETFs. They represent most of the activ e sector ETFs and are alway s a good hunting ground when looking for something that is breaking in a new direction. Page 30 through 42 are growth stocks. These are stocks that hav e risen in price since 1 990. One qualification is that they must not be sev erely damaged in a bear market so they cant rise to significant new highs in the following bull market. The growth stocks show daily market action for the last 3 y ears and weekly prices since 1 990. This giv es a good perspectiv e of how they hav e behav ed in the immediate past (daily charts) and how they behav ed during good and bad times (weekly charts). WAVE COUNT S SIMPLIFIED My w ave counts are not Elliott Wave! Its different, simple and functions w ithout a maze of exclusions. T here are 3 peaks (or v alley s) to a com pleted wav e count. A rev ersal of trend takes place after a completed wav e count. Often times its as simple as counting 3 bumps (or dips) on a chart . . . Other times, not so easy . In a downtrend the same rules apply ex cept y ou are counting 3
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dips instead of 3 bumps. Each group of 3 steps m ust stay confined to a channel. Lay ing a pen or pencil on the chart will help y ou v isualize the channel. As the trend progresses, all of the steps that make up a larger trend will also be confined to a larger channel. Sometimes the channel is not rev ealed until the surge phase has ended. When the m arket breaks a channel (regardless of the perceived wav e count), the current step has been term inated. (Make sure y our channel was correctly drawn before calling a termination). The correction following the second step is larger than the correction that followed the first step. Obv iously the correction following the third step is a rev ersal. A single wav e m ay sub-div ide into another 3 wav es. I will call this an ex tension. When this happens (1 ) the trend is still intact, (2) the channel will widened and (3) instead of a total of 3 steps, there will be 5 steps. Sometimes I will use the terms step and wav e interchangeably . Reading the glossary helps in the understanding of this blog. There are many other important facts in the glossary . Glossary Link ABBREVIAT IONS DJI = Dow Jones Industrials DJT = Dow Jones Transportations SPX = SP 500 ES = SP 500 Futures COMPQ = Nasdaq Composite Index
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TSX = Toronto Stock Ex change (Canadian blue chips) SOX = Semiconductors TXX = Technology ************************************************************************************ DAILY UPDAT E CLICK ON CHART S T O ENLARGE Last time I said we had a qualified buy on corrections. A correction began almost immediately but at the present it is still too early to buy . We had a 3 wav e down ending last Thursday . Watching the rally and first correction after the 3 count has not produced an env ironment to safely buy stocks. After a smart Friday rally we broke Thursday s lows and are obv iously in a 5 wav e down. In other words its too early to buy the market. So be cautious but we are still in the qualified buy mode. The FED meets this week and they could prov ide the ammunition for the upside. Watch for the announcement on Tuesday 2:1 5 EST. The market is alway s v olatile after the announcement.
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1 2 /1 2 /1 1 T SX 1 5 MIN
************************************************************************************ EDSON GOULD Edson Gould, Prem ier Stock Market Strategist Edson Gould had a profound influence on the dev elopment of my techniques and indicators. Prior to me subscribing to his adv isory serv ice, I was just one of the crowd. After 40 y ears I still hav e many of the publications from his adv isory serv ice, Findings & Forecasts. Fearing the loss of these hard copy reports I hav e recently scanned and created pdf files of these reports. Now I hav e hard copies and computerized v ersions of the reports. I hav e used a technique of his that I found in an obscure reference in one of his reports. It was only mentioned once and nev er again. I believ e that he used this tool ex tensiv ely and nev er told the world its importance. Prior to my finding this tool, I had been try ing unsuccessfully to find a different way to chart the market.
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When I read about his technique I knew instantly that this was ex actly what I had been seeking. I hav e charted this method back to 1 939 and found it to be v ery useful. There is no mention of it in the reports that I posted below as I hav e deleted any reference to it. Its a super secret indicator and Id hav e to kill y ou if I told y ou about it. Edson Gould was truly a legend in his own time. Its too bad that today most people hav e forgotten or nev er heard of him or his discov eries. Below y ou will find only the first page of these reports. A teaser is what y ou might call it. The rest of the reports are av ailable upon request. This is a man that deserv es to be remembered throughout technical analy sis market history . T he following are links to Edson Gould reports. My Most Im portant Discov ery by Edson Gould It was also my most important discov ery , for it ex plained the irrational v olatility of markets that had my stified me in my early y ears. During those early y ears I found nothing worked in predicting these irrational market swings. But the fog lifted after reading this report and I began to understand how to begin predicting the market. Edson Gould Profile by MT A Edson Gould Concepts by William Scheinm an Decade Cy cle by Edson Gould Decade Cy cle Update by Ned Dav is Swing Principle by Edson Gould A measuring indicator
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Utilities by Edson Gould A forecasting indicator Div idends by Edson Gould Bonds by Edson Gould Speed Lines by Edson Gould Sentim eter by Edson Gould With companies failing to pay div idends commensurate with their earnings, this indicator has failed. As the market climate continues to deteriorate in the coming y ears, I would ex pect div idends to return to their former lev els and this indicator will once again become useful. Prior to the late 1 990s, it had 1 00 y ears of success. Bottom s by Edson Gould This was written and directed at the upcoming bottom in 1 97 4 but it applies to all major bottoms. T hree Steps by Edson Gould Where do y ou think my three steps principle came from? Straight from this report although I modified the concept through the y ears. Edson Goulds 197 4 Forecast Goulds 1 97 4 forecast kept me bearish and short throughout 1 97 4 until the week before Christmas 1 97 4, during which I began making long term purchases. After that it was ride the bull phases that transpired from 1 97 5 to 1 982. 1 982 to 2000 was the greatest bull market of all time. Edson Goulds 197 5 Forecast Edson Goulds 197 6 Forecast Edson Goulds 197 7 Forecast Edson Goulds Fiv e Y ear Forecast 197 7 to 1982
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This was a remarkable forecast in 1 97 7 , where the Dow Industrials had nev er been higher than 1 ,000. NO ONE predicted a rise of this magnitude in 1 97 7 . Most were waiting for a resumption of the bear market. As part of the 1 97 7 to 1 982 forecast: On Wednesday August 4, 1 982 I went long the market for the first time in months. By Friday , August 6 I was worried that I had made a mistake as I was deep in the red (I was long the Kansas City Stock Market Contracts). The Kansas City Stock Market Contract was the first of the stock index contracts (February 1 982). It was based on the V alue Line Arithmetic Index , margin requirement were quite low, and it had a multiplier of 1 00 times the V alue Line Arithmetic Index , which meant the lev erage was v ery high. On Friday (Aug 6), my wife and I went to dinner and I told her my tale of woe and whether I should sell my long positions. I ex plained that my key indicator had rev ersed and continued higher on Thursday and Friday but the market had continued lower. Since the key indicator was usually correct, we decided to stick it out for a few day s more (I was crazy in those day s). My key indicator w as mentioned by Gould only once in his market letters. If y ou didnt catch its importance, too bad, because he only gav e y ou a peek. Prior to Gould writing about this indicator I had been looking for one that had similar characteristics without success. Thus when Gould wrote about it, I recognized instantly that I had struck gold. I hav e modified this indicator slightly and researched it back to 1 939. This was a lot of work as it was before computers and online data (remember when Barrons was av ailable only on paper, still is for the distant past). Meanwhile on Monday August 9, 1 982 the market took off like a rocket and nev er looked back. I sky rocketed out of the red and had a big profit. In August 1 982
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the only people that were bullish were Edson Gould, Robert Prechter and my self (probably a couple of others but I didnt know them). Ev ery one else was ex tremely bearish. It was a perfect ex ample of crowd behav ior. Sign Of T he Bull by Edson Gould ************************************************************************************ T RANSACT ION SIGNALS All actionable signals are only for short term time frames. These signals are not designed for intermediate or long term time frames BUT . . . . . After a short term buy signal, long term tax status can be achiev ed by a continuation of the upward trend, which causes short term actions to morph into long term holdings. See more details in the glossary under Tax es, Futures Contracts and Money Management. Glossary Link T RANSACT ION RECORD In this blog a warning of an impending bottom (or top) is often issued well in adv ance of the formal buy or sell date. This allows thoughtful consideration prior to a formal action signal. To get a sense of how this works, y ou should read a few day s prior to a formal buy /sell signal. I often buy /sell in my personal account based on the early warnings. The transaction record near stock market bottoms will show that I
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The transaction record near stock market bottoms will show that I am v ery skittish and usually remain so until the new direction is well underway . Buy signal in October 2011 was nev er issued due to a SERIOUS fam ily illness SELL SEPT EMBER 9, 2011 BUY AUGUST 30, 2011 SELL AUGUST 30, 2011 Stopped out, re-bought quickly BUY AUGUST 29, 2011 SELL AUGUST 25, 2011 BUY AUGUST 23, 2011 SELL AUGUST 1, 2011 BUY JUNE 23, 2011 ************************************************************************************ Long T erm UP Uptrend Mar 2009 T o Present Step 2 Up (of 3) Com pleted Has Step 3 Up Begun ??? From the bottom in March 2009 Large step one up ended in May 201 0 Large step two up ended in May 201 1 . Significant break abov e the May 201 1 highs should signal that Step 3 up is official
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1 2 -0 3 -1 1 Lon g T er m
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1 2 -0 3 -1 1 V er y Lon g T er m
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VERY LONG T ERM COMMENT S We hav e 3 possibilities for the future. We hav e entered a v ery wide swinging m arket (m egaphone form ation) sim ilar to that of 1966 to 197 4. During that era we had three bear markets with two interv ening bull market rallies. Each bear market had a lower low than the prev ious bear. The interv ening bull market rallies saw new all time highs before the nex t bear market began. We also hav e formed a huge head and shoulders formation since 1 998. If this formation is v alid, the downside measurement calls for a bottom around Dow Jones Industrials 1 ,000. We began a long term bull market in March 2009. Each subsequent min-bear market will result in higher lows than the prior major low. I fav or the m egaphone form ation as the m ost likely scenario. Since 2000 we hav e had two bear markets, 2000 to 2003 and 2007 to 2009. Like 1 966 to 1 97 4, the recov ery from the first bear market saw a new all time high (2007 peak). Its possible that we may ex perience another all time high during the present recov ery period. This would support the megaphone formation. A failure to make new highs would support the head and shoulders argument. In both formations the conclusion of the present recov ery would call for a third and final bear market. An estimated time for the conclusion of the final bear market is approx imately 201 8.
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The lesser downside target of both formations is the megaphone formation as it likely calls for a bottom 1 ,000 to 2,000 points below the 2009 low, which would be around Dow 5,000. In the head and shoulders formation the measurement calls for a bottom around Dow Jones Industrials 1 ,000. This is almost an unimaginable ev ent regarding the possible fundamentals to create this scenario. If this did happen, ev ery thing that could go wrong would hav e to go wrong. The reasons range from the absurd to the absurdly absurd. This scenario is so dark that it doesnt seem possible but nev ertheless, the head and shoulders formation is there and will be waiting until we pierce the alltime highs of October 2007 . Remember these are simply possible scenarios and are not embedded in fact. Whatev er the outcome, it nev er hurts to be a little cautious with some of y our money . But in the worst case scenario, ev ery thing that we take for granted as being safe . . . . would not be safe. This is something to nev er forget in the ev ent things go v ery badly . Hopefully we will nev er hav e to think about worst case scenarios other than to hav e a good laugh at them presently . ************************************************************************************ MISCELANEOUS There are useful items throughout this blog. For instance, the Wall Street Quotes can be v ery instructiv e. So make sure and look all through the blog.
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Stock Market Update (Qualified Buy) 12/05/11

P os ted D ec ember 5 , 2 0 1 1 by Bob Categories: D A I L Y U P D A T E , SE L L /BU Y A C T I O N U P D A T E
DAILY UPDAT E FOLLOWS T HE BREAK CHART S MY CHART LINK (updated constantly ) This link is to my personal charts and is open to the public. Its my play ground for doodling trend lines, wav e counts and other ideas. I draw the trend lines and wav e counts on a daily basis (sometimes more often). When a market mov e has been going in one direction for a lengthy period of time, y ou will find the best trend lines and wav e counts on charts with longer time frames. This giv es perspectiv e to the lines and counts. Perspectiv e was a fav orite of Edson Gould. I restrict my trend lines and wav e counts to only a few charts, TSX, DJI, SOX and COMPQ. The other charts on the page are usually for confirmation of the trend and wav e structure. Page 1 Buy /Sell Signals Page 2 Index es With 1 Minute Bars Page 3 Index es With 5 Minute Bars
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Page 4 Index es With 1 5 Minute Bars Page 5 Index es With 30 Minute Bars Page 6 Index es With 60 Minute Bars Page 7 Index es With Daily Bars (plus some indicators) Page 8 Index es With Daily Bars (candlesticks last 1 3 months) Page 9 Index es With Daily Bars (since Nov ember 2008) Page 1 0 Index es With Weekly Bars (Candlesticks and Indicators, last 4 Y ears) Page 1 1 Index es With Weekly Bars (since 1 981 ) Page 1 2 Index es With Monthly Bars (since 1 981 ) Pages 1 3 through 1 6 are indicators. The indicators are used to simply look for some ty pe of leading action before a turn or confirm ing action of the wav e count. Page 1 3 is a look ev ery day indicator page. The other indicator pages are less frequently v isited. Page 1 7 through 29 are sector ETFs. They represent most of the activ e sector ETFs and are alway s a good bet when looking for something that is breaking in a new direction. Page 30 through 42 are growth stocks. These are stocks that hav e risen in price since 1 990. One qualification is that they must not be sev erely damaged in a bear market so they cant rise to significant new highs in the following bull market. The growth stocks show daily market action for the last 3 y ears and weekly prices since 1 990. This giv es a good perspectiv e of how they hav e behav ed in the immediate past (daily charts) and how they behav ed during good and bad times (weekly charts). WAVE COUNT S SIMPLIFIED My w ave counts are not Elliott Wave! Its different, simple and
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functions w ithout a maze of exclusions. T here are 3 peaks (or v alley s) to a com pleted wav e count. A rev ersal of trend takes place after a completed wav e count. Often times its as simple as counting 3 bumps (or dips) on a chart . . . Other times, not so easy . In a downtrend the same rules apply ex cept y ou are counting 3 dips instead of 3 bumps. Each group of 3 steps m ust stay confined to a channel. Lay ing a pen or pencil on the chart will help y ou v isualize the channel. As the trend progresses, all of the steps that make up a larger trend will also be confined to a larger channel. When the m arket breaks a channel (regardless of the perceived wav e count), the current step has been term inated. (Make sure y our channel was correctly drawn before calling a termination). The correction following the second step is larger than the correction that followed the first step. Obv iously the correction following the third step is a rev ersal. A single wav e m ay sub-div ide into another 3 wav es. I will call this an ex tension. When this happens (1 ) the trend is still intact, (2) the channel will widened and (3) instead of a total of 3 steps, there will be 5 steps. Sometimes I will use the terms step and wav e interchangeably . Reading the glossary helps in the understanding of this blog. There are many other important facts in the glossary . Glossary Link ABBREVIAT IONS
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DJI = Dow Jones Industrials DJT = Dow Jones Transportations SPX = SP 500 ES = SP 500 Futures COMPQ = Nasdaq Composite Index TSX = Toronto Stock Ex change (Canadian blue chips) SOX = Semiconductors XLY = Consumer ************************************************************************************ DAILY UPDAT E CLICK ON CHART S T O ENLAGE Earlier I said: Aggressive nuts can go short on Sunday in the S&P futures w ith a close stop at Fridays high. Of course if the futures open up strong on Sunday, that w ill end any thought of a short. The futures opened strong on Sunday and there was no short sale. Higher prices to the end of the month (and bey ond) seem reasonable. T hat m eans one should be buy ing on corrections and holding these positions. We may hav e no more than 3 day s to the downside if we hav e embarked on a buy ing stampede. If we hav e more than 3 day s to the downside that could indicate that we are not in a buy ing stampede. Since the Nov ember 28th ex plosion to the upside there has been a lot of
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white candlesticks. Three strong consecutiv e white candlesticks is called, 3 white soldiers and is usually a v alid buy ing opportunity .
Three White Soldiers: A bullish reversal pattern consisting of three consecutive long w hite bodies. Each should open w ithin the previous body and the close should be near the high of the day. Im also seeing an interesting chart formation taking place and I will show it after the nex t correction (wanna make sure Im right about this first). Its 2 steps down instead of 3. This ty pe of action if it continues indicates v ery strong buy ing. I call it the cant wait to buy formation because instead of a completed 3 step to the downside, we only get 2. It rarely takes place and only during v ery strong impulses to the upside. Im watching to see if it continues or was just a flash phenomena. The economic news today was poor but the market rallied on news from Europe regarding a new EU treaty . It could mean a smaller stronger EU in the future. Since the FEDs action are driv ing the market, Art Cashin had an interesting remark today :
A Possible Trigger For The Sw ap Rescue There is a new theory circulating in Wall Street w atering holes about w hat may have caused the Fed and other central banks to suddenly unite in cutting the cost of dollars in Europe. The move shocked the markets and sent equity prices soaring.
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The move puzzled traders and pundits alike. It did nothing to solve or even temper the European sovereign debt problem. It did not shore up Italy or Spain or Greece. Similar moves in the past w ere reactions to market shocks like the fall of Lehman- yet there w as no visible trauma to trigger this move. A few pundits speculated that the Fed saw a European bank about to collapse and rushed to the rescue. But no one could explain how the rescue w orked. The new thesis in the w atering holes seems to tie up the loose ends. It has to do w ith our old friends, the U.S. money market funds. Y ou w ill recall that the money funds got caught holding Lehman preferred w hen it collapsed. That led to a freeze in the commercial paper market and almost brought the U.S. economy to its knees. The new theory says that several U.S. money market funds have short term loans out to European banks. That paper is said to be coming due in graduated amounts over the next 40 to 50 days. It must be repaid in dollars. So, the thesis goes, the Fed saw imminent danger and rushed to make sure plenty of dollars w ere available and at a cheaper rate. The peanuts and pilsner crow d think the pressure point may have been in France.
Jeff Saut remarked today : This w eeks aforementioned duo of events w ill be follow ed by
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next w eeks Fed confab. Parsing recent comments from various Fed Governors suggests there is the potential for a QE2 type of announcement from the December 1 3th FOMC gathering. To w it, Fed Governor Y ellen recently said, The Fed continues to provide highly accommodative monetary conditions to foster a stronger economic recovery in a context of price stability. She further opined, The scope remains to provide additional accommodation through enhanced guidance on the path of the federal funds rate or through additional purchases of longer term financial assets. While Janet Y ellen is considered a dove on policy, history show s Fed members choose their w ords extremely carefully. The inference is that she w ould not be using such language unless something w as afoot. Other Fed members have been uttering similar thoughts. Accordingly, I think there is the potential for a trifecta of positive announcements over the next tw o w eeks, w hich might have positive ramifications for the equity markets, especially w ith so many folks under-invested. ************************************************************************************ EDSON GOULD Edson Gould, Prem ier Stock Market Strategist Edson Gould had a profound influence on the dev elopment of my techniques and indicators. Prior to me subscribing to his adv isory serv ice, I was just one of the crowd. After 40 y ears I still hav e many of the publications from his adv isory serv ice, Findings & Forecasts. Fearing the loss of these hard copy reports I hav e recently created pdf files of these reports. Now I hav e hard copies and computerized v ersions of the reports.
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I hav e used a technique of his that I found in an obscure reference in one of his reports. It was only mentioned once and nev er again. I believ e that he used this tool ex tensiv ely and nev er told the world its importance. Prior to my finding this tool, I had been try ing unsuccessfully to find a different way to chart the market. When I read about his technique I knew instantly that this was ex actly what I had been seeking. I hav e charted this method back to 1 939 and found it to be v ery useful. There is no mention of it in the reports that I posted below as I hav e deleted any reference to it. Its a super secret indicator and Id hav e to kill y ou if I told y ou about it. This man was truly a legend in his own time. Its too bad that today most people hav e forgotten or nev er heard of him or his discov eries. Because of this I hav e created pdf files of the best of his adv ice from the 1 97 0s. Below y ou will find only the first page of these reports. A teaser is what y ou might call it. The rest of the reports are av ailable upon request. This is a man that deserv es to be remembered throughout technical analy sis market history . T he following are links to Edson Gould reports. My Most Im portant Discov ery by Edson Gould It was also my most important discov ery , for it ex plained the irrational v olatility of markets that had my stified me in my early y ears. During those early y ears I found nothing worked in predicting these irrational market swings. But the fog lifted after reading this report and I began to understand how to begin predicting the market. Edson Gould Profile by MT A Edson Gould Concepts by William Scheinm an
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Decade Cy cle by Edson Gould Decade Cy cle Update by Ned Dav is Swing Principle by Edson Gould A measuring indicator Utilities by Edson Gould A forecasting indicator Div idends by Edson Gould Bonds by Edson Gould Speed Lines by Edson Gould Sentim eter by Edson Gould With companies failing to pay div idends commensurate with their earnings, this indicator has failed. As the market climate continues to deteriorate through the coming y ears, I would ex pect div idends to return to their former lev els and this indicator will once more become useful. Prior to the late 1 990s, it had 1 00 y ears of success. Bottom s by Edson Gould This was written and directed at the upcoming bottom in 1 97 4 but it applies to all major bottoms. T hree Steps by Edson Gould Where do y ou think my three steps principle came from??? Straight from this report although I modified the concept through the y ears. Edson Goulds 197 4 Forecast Goulds 1 97 4 forecast kept me bearish and short throughout 1 97 4 until the week before Christmas 1 97 4, during which I began making long term purchases. After that it was ride the bull phases
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that transpired from 1 97 5 to 1 982. Edson Goulds 197 5 Forecast Edson Goulds 197 6 Forecast Edson Goulds 197 7 Forecast Edson Goulds Fiv e Y ear Forecast 197 7 to 1982 This was a remarkable forecast in 1 97 7 , where the Dow Industrials had nev er been higher than 1 ,000. NO ONE predicted a rise of this magnitude in 1 97 7 . Most were waiting for a resumption of the bear market. As part of the 1 97 7 to 1 982 forecast: On Wednesday August 4, 1 982 I went long the market for the first time in months. By Friday , August 6 I was worried that I had made a mistake as I was deep in the hole (I was long the Kansas City Stock Market Contracts). The Kansas City Stock Market Contract was the first of the stock index contracts (February 1 982). It was based on the V alue Line Arithmetic Index , margin requirement were quite low, and it had a multiplier of 1 00 times the V alue Line Arithmetic Index , which meant the lev erage was v ery high. On Friday (Aug 6) I took my wife to dinner and told her my tale of woe and whether I should sell my long positions. I ex plained that my key indicator had rev ersed and continued higher on Thursday and Friday but the market had continued lower. Since the key indicator was usually correct, we decided to stick it out for a few day s more (I was crazy in those day s). My key indicator w as mentioned by Gould only once in his market letters. If y ou didnt catch its importance, too bad, because he only gav e y ou a peek. Prior to Gould writing about this indicator I had been looking for one that had similar characteristics without success. Thus when Gould wrote about it, I recognized instantly that I had struck gold. I hav e modified this indicator slightly and researched it back to
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1 939. This was a lot of work as it was before computers and online data (remember when Barrons was av ailable only on paper, still is for the distant past). Meanwhile on Monday August 9, 1 982 the market took off like a rocket and nev er looked back. I sky rocketed out of the hole and had a big profit. In August 1 982 the only people that were bullish were Edson Gould, Robert Prechter and my self (probably a couple of others but I didnt know them). Ev ery one else was ex tremely bearish. It was a perfect ex ample of crowd behav ior. Sign Of T he Bull by Edson Gould ************************************************************************************ T RANSACT ION SIGNALS ALL ACTIONABLE SIGNALS (buy or sell) ARE ONLY FOR SHORT TERM TIME FRAMES. These signals are not designed for intermediate or long term time frames BUT . . . . . After a short term buy signal, long term tax status can be achiev ed by a continuation of the upward trend, which causes short term actions to morph into long term holdings. See more details in the glossary under Tax es, Futures Contracts and Money Management. Glossary Link T RANSACT ION RECORD In this blog a warning of an impending bottom (or top) is often issued well in adv ance of the formal buy or sell date. This allows
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issued well in adv ance of the formal buy or sell date. This allows thoughtful consideration prior to a formal action signal. To get a sense of how this works, y ou should read a few day s prior to a formal buy /sell signal. I often buy /sell in my personal account based on the early warnings. The transaction record near stock market bottoms will show that I am v ery skittish and usually remain so until the new direction is well underway . Buy signal in October 2011 was nev er issued due to a SERIOUS fam ily illness SELL SEPT EMBER 9, 2011 BUY AUGUST 30, 2011 SELL AUGUST 30, 2011 Stopped out, re-bought quickly BUY AUGUST 29, 2011 SELL AUGUST 25, 2011 BUY AUGUST 23, 2011 SELL AUGUST 1, 2011 BUY JUNE 23, 2011 ************************************************************************************ Long T erm UP Uptrend Mar 2009 T o Present Step 2 Up (of 3) Com pleted Has Step 3 Up Begun ??? From the bottom in March 2009 Large step one up ended in May 201 0 Large step two up ended in May 201 1 . Significant break abov e the May 201 1 highs should signal that Step
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3 up is official
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1 2 -0 3 -1 1 Lon g T er m
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1 2 -0 3 -1 1 V er y Lon g T er m
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The reasons range from the absurd to the absurdly absurd. This scenario is so dark that it doesnt seem possible but nev ertheless, the head and shoulders formation is there and will be waiting until we pierce the alltime highs of October 2007 . Remember these are simply possible scenarios and are not embedded in fact. Whatev er the outcome, it nev er hurts to be a little cautious with some of y our money . But in the worst case scenario, ev ery thing that we take for granted as being safe . . . . would not be safe. This is something to nev er forget in the ev ent things go v ery badly . Hopefully we will nev er hav e to think about worst case scenarios other than to hav e a good laugh at them presently . ************************************************************************************ MISCELANEOUS There are useful items throughout this blog. For instance, the Wall Street Quotes can be v ery instructiv e. So make sure and look all through the blog.
O lde r Entrie s
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Blog at W ordPre ss.com . The m e : Sapphire by Michae l Martine .
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01-03-12 Stock Market Trends &amp; Observations

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Stock Market Trends & Observations

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Don't catch a falling knife.

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Edson Goulds 1979 Forecast (Dec 1978)

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Edson Gou ld's 1 9 7 9 For eca st - Pa g e 2

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Edson Goulds 1978 Forecast (Dec 1977)

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Edson Gou ld's 1 9 7 8 For eca st - Pa g e 2

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Stock Market Update 12/28/11

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1 2 -2 8 -1 1 In t er est Ra t es V s St ock s 1 5 Min u t e

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1 2 -2 8 -1 1 Ca se Sh iller Rea l Est a t e V a lu es

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Undercut Low Stock Market Update 12/20/11

************************************************************************************ Long T erm UP Uptrend Mar 2009 T o Present

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01-03-12 Stock Market Trends & Observations

01-03-12 Stock Market Trends & Observations