01-18-12 stock market trends & observations

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Stock Market Update – 01/18/12Pos ted January 18, 2012 by Bob

Categories: DA ILY UPDA TE

WHAT ’S HAPPENING?

For the moment I’m kinda in a “quiet” period and remain in an “overall”

uptrend theme. When I get excited about an important change in market

direction, a lot of blog updates usually take place. Presently , there are

some divergences showing in the 60 minute and daily charts. Also the

Stock Market Trends & Observations

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wave count appears to be maturing. All of this could be early warning

signs of a correction into late January (see cy cles update in the next

section). The expectation is the correction will be a point to add to

holdings or resume speculative positions.

The following is the 60 minute indexes found on page 10 of my charts.

Notice some of the indicators have divergences where prices are

trending higher and the indicators are making lower highs.

Categories

DAILY UPDATE (74)

EDSON GOULD (21)

GLOSSARY (1)

SELL/BUY ACTION UPDATE(15)

WEEKLY UPDATE (19)

WORDS OF WISDOM (8)

Recent Posts

Stock Market Update– 01/18/12


Edson Gould’s 1979 Forecast(Dec 1978)

Edson Gould’s 1978 Forecast(Dec 1977)


Archives

January 2012 (2)

December 2011 (11)

November 2011 (17)

October 2011 (19)

September 2011 (17)

August 2011 (32)

July 2011 (17)

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June 2011 (10)

January 2012

M T W T F S S

« Dec

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9 10 11 12 13 14 15

16 17 18 19 20 21 22

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30 31

Wall Street Quotes

“The essence of investmentmanagement is themanagement of risks, not themanagement of returns. Well-managed portfolios start withthis precept.”Benjamin Graham

The time of maximumpessimism is the best time tobuy and the time of maximumoptimism is the best time tosell.John Templeton

Buy on the cannons,sell on the trumpets.Old French Proverb

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Rule #1: Never lose money.Rule #2: Never forget rule #1Warren Buffett

The four most dangerouswords in investing are"This time it's different".John Templeton

"This time it's different" wasprevalent during the bubbleof 2000. In 1929 it was called"New Economics".Bob

History always repeats, onlythe details change.Edson Gould

If you have trouble imagininga 20% loss in the stockmarket, you shouldn't be instocks.John (Jack) Bogle

Stock are bought onexpectations, not facts.Gerald Loeb

Emotions are your worstenemy in the stock market.Don Hays

P/E ratio - The percentage ofinvestors wetting their pantsas the market keeps





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crashing.Anonymous

Herd MentalityMen, it has been well said,think in herds; it will be seenthat they go mad in herds,while they only recover theirsenses slowly, and one byone.Extraordinary PopularDelusions and the Madness ofCrowds

Herd MentalityCases such as Tulipomania in1624--when Tulip bulbstraded at a higher price thangold--suggest the existenceof what I would dub"Mackay's Law of MassAction:" when it comes to theeffect of social behavior onthe intelligence of individuals,1+1 is often less than 2, andsometimes considerably lessthan 0.Extraordinary PopularDelusions and the Madness ofCrowds

I made money by selling toosoon.Bernard Baruch

If all you have is a hammer,





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everything looks like a nail.Bernard Baruch

The main purpose of thestock market is to make foolsof as many people aspossible.Bernard Baruch

The hardest part of a bullmarket is staying on.

A bubble is a bull market inwhich you don't have aposition.

A buy and hold strategy is ashort term trade that wentwrong.

October, this is one of thepeculiarly dangerous monthsto speculate in stocks. Theothers are July, January,September, April, November,May, June, December, Augustand February.Mark Twain

Economists have predicted 14of the last 3 recessions.

Market Correction - The dayafter you buy stocks.

In 2008 stocks were a goodbuy . . . . . Goodbye





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Mercedes, goodbye yacht,goodbye vacation home,goodbye . . .

Markets can remain irrationallonger than you can remainsolvent.John Maynard Keynes

Money talks, but all mine eversays is "goodbye"

Don't gamble. Take all of yoursavings and buy some goodstock and hold it until it goesup, then sell it. If it don't goup, don't buy it.Will Rogers

Return of principal is moreimportant than the return onprincipal.

Hope is your worst enemy inthe market.

Don't catch a falling knife.

Spend at least as much timeresearching a stock as youwould choosing a refrigerator.Peter Lynch

When you realize that youare riding a dead horse thebest strategy is to dismount.Sioux Indian Proverb





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Don’t ever make the mistakeof telling the market it iswrong.James Dines

Wall Street never changes,the pockets change, thesuckers change, the stockschange, but Wall Street neverchanges, because humannature never changes.Jesse Livermore

Let Wall Street have anightmare and the wholecountry has to help get themback in bed againWill Rogers

Bulls makes money, bearsmakes money, pigs getslaughtered.My Grandfather

Never buy a stock that won'tgo up in a bull market. Neversell a stock that won't godown in a bear market.

Wall Street is a street with ariver at one end and agraveyard at the other.

Never check stock prices on aFriday, it could spoil yourweekend.





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Nobody is more bearish thana sold-out bull.

The public is right during thetrends but wrong at bothends.Humphrey Neill

Those who can, do.Those who can’t, teach.Those who can’t teach, workfor the government.

Never sell a dull market short.

“I sell euphoria and buypanic.”The way he determines thatis to wait until prices startgapping in the charts.Gapping on the upside iseuphoria, while gapping onthe downside is panic.Jimmy Rogers courtesy of JeffSaut

"Cut your losses and let yourprofits run."

Don't marry a stock. Everystock must be sold.

Often times WHEN you take aposition can be moreimportant than WHAT youtake a position in.





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"If Santa fails to call thebears will roam on Broad andWall!"

About This Blog

Observations of Stock MarketTrends uses severalproprietary technicalindicators discovered by theauthor. The object of this blogis to notify you (preferably inadvance) of the importanttops and bottoms in the stockmarket. We know that'simpossible, but nevertheless,it's attempted in this blog.

"Observations of StockMarket Trends" is publishedon an irregular schedule but adaily update is likely when weare near a stock marketinflection point.

If you find the bloginteresting, please become afollower by entering youremail address in the section"Email Subscription" (top ofthis column). You must alsoconfirm your emailsubscription by clicking on alink in the confirmation email,otherwise you ain'tsubscribed.





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Disclosure

The content on this blog ismeant to be entertaininginformation and should not beconstrued as investmentadvice.

No statement by the blog'sauthor should be interpretedas a recommendation to buyor sell any security, financialinstrument, or to participatein a trading or investmentstrategy.

Any investment decision byanyone that results in lossesor gains based on informationfrom this blog is not theresponsibility of the blog'sauthor.

The blog's author will makestatements about certaininvestment vehicles andstrategies, but It's simply theauthor expressing hisopinion, or action, regardinghis own investments. Theseopinions are never to beconstrued as investmentadvice.

About Me





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01 /1 8 /1 2 - INDEXES - 6 0 MINUTES

CYCLES

I have alway s found the Hurst Cy cle concept to be interesting and I’ll try

to make this an integral part of my blog updates.

Y ou’ll notice how the dates of the anticipated cy cle lows don’t change

much from one month to the next (compare my last blog’s cy cle charts

with today ’s). Only a sharp move up or down changes the cy cle

expectations.

The first chart is the SP 500 cy cles from 1950 to 2042. The semi-circle

contact points at the bottom are cy cle low dates. When we have

numerous cy cles bottoming at the same time or large cy cles bottoming,

With 55 years of studying andinvesting in the stock market,I am sharing theseexperiences and knowledgeby writing a stock marketblog. This blog relies onseveral unique andproprietary indicators.

I have been correct at someof the biggest market turns inthe last 40 years. I was shortfor most of 1973-1974,reversed course and becamea buyer during the weekbefore Christmas 1974. I wasalso short for most of the firsthalf of 1982 but became abuyer on August 4, 1982. Thiswas five days before theAugust 9, 1982 blast off onthe historic bull market run ofthe 1980s and 1990s. In1999 I began tolling the bellon the stock market knowingthat the end was near (noone listened). In March 2003,prior to the beginning of theIraq war I became verybullish when it was obviousthat there was not one goodreason to own stocks(contrary opinion) and wehad also achieved a doublebottom. Shortly after theOctober 2007 peak I became





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these are usually important dates in stock market history . Due to the

size of this chart, only the large cy cles are v isible. Obviously cy cle lows

shown bey ond the present are predictions and not y et reality .

Some cy cle lows don’t produce bottoms. In a strongly upward trending

market, a cy cle low can be a sideway s pattern followed by a breakout to

the upside. Looking at the chart below y ou can see how several large

cy cle are approaching a crest and beginning a move to their cy cle low.

This is not a strongly upward trending market as portray ed by this

chart. At best it shows the last stage of a bull market, which coincides

with a large 3rd step in the wave count.

Click On Charts T o Enlarge

01 /1 8 /1 2 - 1 9 5 0 Da ta - 1 9 5 0 To 2 04 2

According to Hurst’s Principle of Proportionality – Waves in price

movement have an amplitude that is proportional to their wavelength.

This simply means that longer cy cles produce bigger moves up or down.

October 2007 peak I becamea seller and bear. Days priorto the March 2009 bottom, Ibought stocks in anticipationof a very good rally thatturned into a bull run. In thelater stages of the February-May 2011 topping process, Ibegan warning of animportant market correction.Since then my record is in thisblog.

To illustrate how things don'tgo perfectly for any analyst(such is life). My key indicatorbegan changing in characterduring 1987 and led to somelarge losses based onexcessive leverage andincorrect marketinterpretations. When I hadenough, I bailed out of themarket on October 6, 1987,just days before the 1987crash. But I had beenseverely damaged before thecrash. It took me severalyears to begin a recovery andrestore my faith in my keyindicator with a modifiedinterpretation. Since then,using the new method, thekey indicator has workedcorrectly.

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Smaller cy cles produce smaller fluctuations.

The next chart is a close up of the above chart and it shows a confluence

of cy cle lows occurring from May to September 2013. This appears to be

anticipating the most important cy cle bottom since March 2009.

Further out the cy cle low occurring in early 2018 is much larger and

there are also several other cy cles lows anticipated about the same time.

This calls into play the Principle of Synchronicity – Waves in price

movement are phased so as to cause simultaneous troughs. This means

all of these cy cles will bottom at the same time. This will likely be a time

for a very im portant m arket low. 2018 could mark the end of a long

period of bad markets that began with the bursting of the 2000 internet

bubble.

Please don’t get too caught up in the large cy cles and forget that we have

bull markets that occur in between these large cy cle lows. March 2009

to the present is a good example. There’s a time to be bearish and a time

to be bullish. Y ou don’t want to be like some famous wave analy sts and

become so bearish that y ou miss the good stuff between cy cle lows.

One man was responsible formy education, Edson Gould,the greatest technician thatever lived.

After reading many of thebooks on stock markettechnical analysis, I foundthat all of these methods hadhigh failure rates. I searchedfor a formula that workedconsistently and in 1973 Isubscribed to Edson Gould's"Findings & Forecasts". Here Istruck gold with the mastertechnician of the 20thcentury. Extending hismethods I discovered severalindicators that I use today.

If you find my observations ofinterest please add youremail address to the section,"Email Subscription".





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01 /1 8 /1 2 - 1 9 5 0 Da ta - La r g e Cy cles - 2 01 0 To 2 01 9

The third chart is also based on data from 1950 to the present and shows

late February to early March 2012 as the date for the next important

bottom (15/16 month cy cle low). After that bottom the chart shows a

lesser bottom occurring during May 2012. This chart is based on 62

y ears of data and it tries to fit the cy cles to this large data-set. In the

next chart we’re going to see a difference of opinion on the upcoming

bottom based on a shorter data-set.

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01 /1 8 -1 2 - 1 9 5 0 Da ta - Cy cle Deta il - Oct 2 01 1 To Nov 2 01 2

The following cy cle chart is based on data since late 2007 and is

obviously geared towards events that have affected us over the last 5

y ears. Looking at this chart y ou can see how the next cy cle low is

anticipated in late January (instead of late February ). For the moment I

am inclined to believe the 2007 cy cle data-set. If the late January cy cle

low is correct a decline should begin soon. Since this cy cle low is less

significant than the October low, it could be a quick correction with a

rapid reversal similar to November 2011.

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01 /1 8 /1 2 - 2 007 Da ta - Cy cles - A pr il 2 01 1 To Ma r ch 2 01 3

This next cy cle chart is based on data since 2007 and shows the

important cy cle lows over the last 5 y ears. Notice how it differs slightly

from the chart based on the 1950 data-set. It’s simply squeezing the

cy cles to fit into the time frame selected. I think long data-sets are

suitable for long cy cles and smaller data-sets are more accurate for

smaller cy cles. We’ll see how that works out in the near future.

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01 /1 8 /1 2 - 2 007 Da ta - 2 007 To Pr esen t

I find these cy cle charts to be of significant interest as it can give y ou an

idea of when to expect bottoms to occur. Wave counting gives y ou an

idea of where y ou are in the rally or decline. Altogether, these cy cle

lows coupled with wave counts can be of great help for narrowing down

valid buy points.

If y ou find these cy cle charts interesting, the serv ice “Hurst Signals”

prov ides cy cle charts and trading advice based on the work of J.M.

Hurst, “More info at HURST SIGNALS” It’s an excellent serv ice.

PRINCIPLES OF HURST ’S CYCLIC T HEORY

The Principle of Commonality – All equity (or forex or commodity ) price

movements have many elements in common (in other words similar

classes of tradable instruments have price movements with much in

common)

The Principle of Cy clicality – Price movements consist of a combination

http://hurstsignals.com/

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of specific waves and therefore exhibit cy clic characteristics.

The Principle of Summation – Price waves which combine to produce the

price movement do so by a process of simple addition.

The Principle of Harmonicity – The wavelengths of neighboring waves in

the collection of cy cles contributing to price movement are related by a

small integer value.

The Principle of Sy nchronicity – Waves in price movement are phased so

as to cause simultaneous troughs wherever possible

The Principle of Proportionality – Waves in price movement have an

amplitude that is proportional to their wavelength.

The Principle of Nominality – A specific, nominal collection of

harmonically related waves is common to all price movements.

The Principle of Variation – The prev ious four principles represent

strong tendencies, from which variation is to be expected.

Further information about Hurst’s Cy clic Principles can be found here.

Lotsa good Hurst info here.

************************************************************************************

CHART S

MY CHART LINK (updated constantly )

These are my personal charts and my play ground for doodling

trend lines, wave counts and other ideas.

I draw the trend lines and wave counts on a daily basis (sometimes

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http://www.sentientcode.com/downloads/SentientTraderHelp/HurstCyclicTheoryII.htm





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more often). Y ou can find these doodles from 1 minute to

monthly charts.

Y ou will find the best trend lines and wave counts on charts with

longer time frames. This gives perspective to the lines and

counts. Perspective was a favorite of Edson Gould.

I usually restrict my trend lines and wave 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 wave structure.

Page 1 – Buy /Sell Signals

Page 2 – Indexes With 1 Minute Bars





Page 7 – Indexes With Daily Bars

Page 8 – Indexes With Weekly Bars (since 1981)

Page 9 – Indexes With Monthly Bars (since 1981)

Page 10 – Indexes With 60 Minute Bars, Candlestick

Page 11 – Indexes With Daily Bars, Candlesticks

Page 12 – Indexes With Weekly Bars, Candlestick

Pages 13 through 14 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 wave count. Page 13 is a look-

every day indicator page. The other indicator pages are less

frequently v isited.

Page 15 – Hurst FLD Projections

Page 16 – Indicators, Long Term

Page 17 – International Indexes





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Page 18 through 30 are sector ETFs. They represent most of the

active 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. These are

stocks that have been in a lengthy uptrend. One qualification is

that they must not be severely damaged in a bear market so they

can’t rise to significant new highs in the following bull market.

The growth stocks show daily market action for the last 3 y ears

and weekly prices since 1992. This gives a good perspective of

how they have behaved in the immediate past (daily charts) and

how they behaved during good and bad times (weekly charts).

Page 46 – Misc older charts

WAVE COUNT S SIMPLIFIED

My wave counts are not Elliott Wave! It’s different, simple and

functions without a maze of exclusions.

T here are 3 peaks (or valley s) to a com pleted wave count.

A reversal of trend takes place after a completed wave count.

Often times it’s as simple as counting 3 bumps (or dips) on a chart .

. . Other times, not so easy .

In a downtrend the same rules apply except 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 revealed until the surge phase has ended.





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When the m arket breaks a channel (regardless of the

perceived wave 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. Obviously the correction

following the third step is a reversal.

A single wave m ay sub-divide into another 3 waves. I will

call this an extension. 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 “wave” 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 Exchange (Canadian blue chips)

SOX = Semiconductors

TXX = Technology

************************************************************************************

Long T erm – UP

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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 2010

Large step two up ended in May 2011 .

Significant break above the May 2011 highs should signal that Step

3 up is official

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1 2 -2 8 -1 1 LONG TERM

************************************************************************************

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 TERM

VERY LONG T ERM COMMENT S

We have 3 possibilities for the future.

We have entered a very 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 intervening

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bull market rallies. Each bear market had a lower low than the

prev ious bear. The intervening bull market rallies saw new all

time highs before the next bear market began.

We also have formed a huge head and shoulders formation since

1998. If this formation is valid, 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 favor the m egaphone form ation as the m ost likely

scenario.

Since 2000 we have had two bear markets, 2000 to 2003 and 2007 to

2009. Like 1966 to 197 4, the recovery from the first bear market saw a

new all time high (2007 peak). It’s possible that we may experience

another all time high during the present recovery 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 recovery would call for a third and final bear

market. An estimated time for the conclusion of the final bear market is

approximately 2018.

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

event regarding the possible fundamentals to create this scenario. If this

did happen, every thing that could go wrong would have to go wrong.





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The reasons range from the absurd to the absurdly absurd. This scenario

is so dark that it doesn’t seem possible but nevertheless, the head and

shoulders formation is there and will be waiting until we pierce the all-

time highs of October 2007 .

Remember these are simply possible scenarios and are not embedded in

fact. Whatever the outcome, it never hurts to be a little cautious with

some of y our money . But in the worst case scenario, every thing that we

take for granted as being safe . . . . would not be safe. This is something

to never forget in the event things go very badly .

Hopefully we will never have to think about worst case scenarios other

than to have a good laugh at them presently .

************************************************************************************

EDSON GOULD

Edson Gould, Prem ier Stock Market Strategist – Edson

Gould had a profound influence on the development of my

techniques and indicators. Prior to me subscribing to his

advisory serv ice, I was just one of the crowd.

After 40 y ears I still have many of the publications from his

advisory serv ice, “Findings & Forecasts”. Fearing the loss of these

hard copy reports I have recently scanned and created pdf files of

these reports. Now I have hard copies and computerized versions

of the reports.

I have used a technique of his that I found in an obscure reference

in one of his reports. It was only mentioned once and never

again. I believe that he used this tool extensively and never told

the world it’s 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

exactly what I had been seeking. I have charted this method back

to 1939 and found it to be very useful. There is no mention of it in

the reports that I posted below as I have deleted any reference to

it. It’s a super secret indicator and I’d have to kill y ou if I told y ou

about it.

Edson Gould was truly a legend in his own time. It’s too bad that

today most people have forgotten or never heard of him or his

discoveries. 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 available upon request. This is a man that deserves to be

remembered throughout technical analy sis market history .

T he following are links to Edson Gould reports.

My Most Im portant Discovery by Edson Gould

It was also my most important discovery , for it explained the

irrational volatility 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 Davis

Swing Principle by Edson Gould

http://stockmarketobservations.wordpress.com/2011/10/28/swing-principle-by-edson-gould/

http://stockmarketobservations.wordpress.com/2011/10/28/decade-cycle-update-by-ned-davis/

http://stockmarketobservations.wordpress.com/2011/10/28/decade-cycle-by-edson-gould/

http://stockmarketobservations.wordpress.com/2011/10/28/edson-gould-concepts-by-william-scheinman/

http://stockmarketobservations.wordpress.com/2011/10/28/edson-gould-profile-by-mta/

http://stockmarketobservations.wordpress.com/2011/10/28/my-most-important-discovery-by-edson-gould/





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A measuring indicator

Utilities by Edson Gould

A forecasting indicator

Dividends 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 expect

div idends to return to their former levels and this indicator will

once again become useful. Prior to the late 1990s, it had 100

y ears of success.

Bottom s by Edson Gould

This was written and directed at the upcoming bottom in 197 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 Gould’s 197 4 Forecast

Gould’s 197 4 forecast kept me bearish and short throughout 197 4

until the week before Christmas 197 4, during which I began

making long term purchases. After that it was ride the bull phases

that transpired from 197 5 to 1982. 1982 to 2000 was the greatest

bull market of all time.




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Edson Gould’s Five Year Forecast 197 7 to 1982

This was a remarkable forecast in 197 7 , where the Dow Industrials

had never been higher than 1 ,000. NO ONE predicted a rise of this

magnitude in 197 7 . Most were waiting for a resumption of the

bear market.

As part of the 197 7 to 1982 forecast: On Wednesday August 4,

1982 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 1982). It was based on the

Value Line Arithmetic Index, margin requirement were quite low,

and it had a multiplier of 100 times the Value Line Arithmetic

Index, which meant the leverage was very 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 explained that my key

indicator had reversed 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 was

mentioned by Gould only once in his market letters. If y ou didn’t

catch its importance, too bad, because he only gave 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 have modified this indicator slightly and researched it

back to 1939. This was a lot of work as it was before computers

and online data (remember when Barrons was available only on

paper, still is for the distant past). Meanwhile on Monday August

9, 1982 the market took off like a rocket and never looked back. I

http://stockmarketobservations.wordpress.com/2011/11/07/edson-goulds-five-year-forecast-1977-to-1982-may-1977/





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sky rocketed out of the red and had a big profit. In August 1982

the only people that were bullish were Edson Gould, Robert

Prechter and my self (probably a couple of others but I didn’t know

them). Every one else was extremely bearish. It was a perfect

example of crowd behavior.

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

achieved 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 “Taxes, 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 advance 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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The transaction record near stock market bottoms will show that I

am very skittish and usually remain so until the new direction is

well underway .

Qualified buy signal given from Decem ber 5th to

Decem ber 20th, 2011

Buy signal in October 2011 was never 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


SELL – AUGUST 25, 2011



BUY – JUNE 23, 2011

************************************************************************************

MISCELANEOUS

There are useful items throughout this blog. For instance, the

“Wall Street Quotes” can be very instructive. So make sure and

look all through the blog.

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Stock Market Update – 01/03/12Pos ted January 3 , 2012 by Bob


WHAT ’S HAPPENING?

From Jeffrey Saut’s column today :

“As for the technicals, by my work we experienced another Dow Theory

“buy signal” last week when both the DJIA (INDU/12217 .56) and the

DJTA (TRAN/5019.69) bettered their October 2011 closing reaction

“highs.” This week we may see another positive occurrence called a

“golden cross,” that is if the DJIA’s 50-day moving average

(@11934.29) crosses above its 200-DMA (@11946.57). That said, the

NY SE McClellan Oscillator is short-term overbought and the stock

market’s internal energy has not yet been fully recharged. Accordingly,

after the equity markets pop their collective “corks” with an early

January upside blow off, it would 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 write:








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“Throughout 2011, we 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 where the daily net

Advance/Decline reading for the S&P 500 is greater than

+/- 400. Up until recently, these types of days were

relatively rare and there were some periods where more

than a year went by without any all or nothing days. In

the last few years, however, we have seen an explosion of

occurrences, culminating with this year’s record reading

of 70 days! To put that number in perspective, from 1990

through 2004, there were only 67 all or nothing days!”

Such a volatile environment clearly calls for risk management and with

these thoughts we wish you a healthy and prosperous new year.

The call for this week: Since the day after Thanksgiving I have stuck

with the strategy that the Santa Claus rally had begun. On November

25th the SPX was changing hands around 1158. We are now 100 points

higher. Consequently, I would not chase the dragon right here since I

anticipate that an upside blow off is due …”

That’s the the way I see the market too and usually Jeffrey and I don’t

disagree. Cy cles point to some ty pe of bottom later in the month (see

charts – page 14, #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 ear’s blast off in the market averages

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





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“might” point to a one day upside wonder. Usually the January

corrections have carried into mid-January (or later) and I wouldn’t

expect any thing different this time.

CYCLES

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. It’s the big cy cles that are most interesting.

http://stockmarketobservations.files.wordpress.com/2012/01/01-03-12-hurst.jpg

http://hurstsignals.com/





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01 -03 -1 2 HURST CYCLES

01 -03 -1 2 HURST CYCLES-2

As y ou can see by the above chart we are heading for a low during

January that will be much less significant than the October 4, 2011 low.

The October low was a 51 month cy cle low, while the January cy cle is a

16 week cy cle low (green circle and line in the above chart). According

to JM Hurst’s 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

http://stockmarketobservations.files.wordpress.com/2012/01/01-03-12-hurst-21.jpg





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question. All cy cles less than the 16 week cy cle will bottom at the same

time as the 16 week cy cle meaning they will all have a common trough

date.

PRINCIPLES OF HURST ’S CYCLIC T HEORY

The Principle of Commonality – All equity (or forex or commodity ) price

movements have many elements in common (in other words similar

classes of tradable instruments have price movements with much in

common)

The Principle of Cy clicality – Price movements consist of a combination

of specific waves and therefore exhibit cy clic characteristics.

The Principle of Summation – Price waves which combine to produce the

price movement do so by a process of simple addition.

The Principle of Harmonicity – The wavelengths of neighbouring waves

in the collection of cy cles contributing to price movement are related by

a small integer value.

The Principle of Sy nchronicity – Waves in price movement are phased so

as to cause simultaneous troughs wherever possible

The Principle of Proportionality – Waves in price movement have an

amplitude that is proportional to their wavelength.

The Principle of Nominality – A specific, nominal collection of

harmonically related waves is common to all price movements.

The Principle of Variation – The prev ious four principles represent

strong tendencies, from which variation is to be expected.





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Further information about Hurst’s Cy clic Principles can be found here.

Lotsa good Hurst info here.

SCARY CHART

CLICK ON CHART S T O ENLARGE

http://stockmarketobservations.files.wordpress.com/2012/01/01-03-12-dj-ind-daily.jpg

http://www.sentientcode.com/downloads/SentientTraderHelp/HurstCyclicTheoryII.htm





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01 -03 -1 2 DJ IND DA ILY

Now that’s one scary chart (the red wave 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. I’ll be keeping an ey e on this

possibility in the day s ahead. Incidentally , I alway s have a scary chart

that I can pull out and show whenever 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

17 th. It seems a LOT of people took off for a vacation during the

holiday s. If activ ity had not dropped off during this period, I would have

had over 31 ,000 hits for the month (averaging over 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





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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.

MAYBE T HIS WILL HAPPEN?

In the above chart notice how nicely the Andrews Pitchforks have

contained the market moves. We have broken to the upside from the

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 move to the upper line and slow the advance. The central line

“should” restrict any downward movement in the market (as long as all is

OK).

Partial profit taking can be entertained if y ou got in quickly after the

false move to the downside on December 15th.

Meantime we will stay with an “overall” uptrend theme.

************************************************************************************

CHART S











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monthly charts.
































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Page 31 through 45 are growth stocks with indicators (new).

These are stocks that have been in an uptrend. One qualification is

that they must not be severely damaged in a bear market so they

can’t rise to significant new highs in the following bull market.





Page 46 – Junk Pile












channel.









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Glossary Link

ABBREVIAT IONS



SPX = SP 500

ES = SP 500 Futures




TXX = Technology

************************************************************************************

Long T erm – UP

Uptrend






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3 up is official






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1 2 -2 8 -1 1 LONG TERM

************************************************************************************


Downtrend








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prior major low.


scenario.









approximately 2018.












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************************************************************************************

EDSON GOULD









of the reports.









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about it.






























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y ears of success.







y ears.

























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bear market.































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************************************************************************************




BUT . . . . .






Glossary Link














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Share this:




well underway .












BUY – JUNE 23, 2011

************************************************************************************

MISCELANEOUS






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Edson Gould’s 1979 Forecast (Dec 1978)Pos ted December 29, 2011 by Bob

Categories: EDSO N GO ULD

http://stockmarketobservations.files.wordpress.com/2011/12/edson-goulds-1979-forecast.jpg







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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 Gould’s “Findings & Forecast” from 197 4 to

197 9. Impressed by the quality of information, I kept Gould’s special

reports, y early forecasts and important portions of his semimonthly

market letters.

Having never written a book, Edson Gould’s stock market memoirs are

contained in his market letters and special reports. Searching the

internet I’ve found a couple of his reports and none of his market letters.

Except for the postings here, it’s certainly possible that Gould’s stock

market observations have been lost.

Some may say that these publications are old and not relevant. I would

suggest those believers read “One Way Pockets”. This little stock market

gem was written in 1917 and contains a wealth of important information.

“One Way Pockets” certainly proves how human behavior doesn’t

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 version of “One Way Pockets” is posted on

this blog.

Gould believed that the stock market was moved 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 extreme to the other formed

the foundation of Gould’s predictions. Crowd behavior in the stock

market is a timeless factor that will never change.

The ultimate book on crowd behavior is “Mem oirs of extraordinary

popular delusions and the m adness of crowds” by Charles

Mackay (1852). It is available for free from Google Books (click on the

link above).

Because of the timelessness of crowd behavior y ou will find that Gould’s

indicators still function very well in predicting the stock market.

Recently I scanned Edson Gould’s y early forecasts and many of his

market letters. There remains a significant number of pages and subjects

that have not been scanned.

To receive this report (pdf format), please complete the following form.

Name (required)

Email (required)

Comment (required)

http://books.google.com/books?id=NmEOAAAAQAAJ&printsec=frontcover&dq=Extraordinary+Popular+Delusions+and+the+Madness+of+Crowds&hl=en&ei=KKzGTvCUAqz_sQK0uLhJ&sa=X&oi=book_result&ct=result&resnum=4&ved=0CEsQ6AEwAw#v=onepage&q&f=false





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Edson Gould’s 1978 Forecast (Dec 1977)Pos ted December 29, 2011 by Bob

Categories: EDSO N GO ULD


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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 Gould’s “Findings & Forecast” from 197 4 to





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197 9. Impressed by the quality of information, I kept Gould’s special

reports, y early forecasts and important portions of his semimonthly

market letters.

Having never written a book, Edson Gould’s stock market memoirs are

contained in his market letters and special reports. Searching the

internet I’ve found a couple of his reports and none of his market letters.

Except for the postings here, it’s certainly possible that Gould’s stock

market observations have been lost.

Some may say that these publications are old and not relevant. I would

suggest those believers read “One Way Pockets”. This little stock market

gem was written in 1917 and contains a wealth of important information.

“One Way Pockets” certainly proves how human behavior doesn’t

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 version of “One Way Pockets” is posted on

this blog.

Gould believed that the stock market was moved by the emotions of the

crowd, fear, panic and greed. Those emotions combined with the

pendulum of swinging from one emotional extreme to the other formed

the foundation of Gould’s predictions. Crowd behavior in the stock

market is a timeless factor that will never change.

The ultimate book on crowd behavior is “Mem oirs of extraordinary

popular delusions and the m adness of crowds” by Charles

Mackay (1852). It is available for free from Google Books (click on the

link above).

http://books.google.com/books?id=NmEOAAAAQAAJ&printsec=frontcover&dq=Extraordinary+Popular+Delusions+and+the+Madness+of+Crowds&hl=en&ei=KKzGTvCUAqz_sQK0uLhJ&sa=X&oi=book_result&ct=result&resnum=4&ved=0CEsQ6AEwAw#v=onepage&q&f=false





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Share this:

Because of the timelessness of crowd behavior y ou will find that Gould’s

indicators still function very well in predicting the stock market.

Recently I scanned Edson Gould’s y early forecasts and many of his

market letters. There remains a significant number of pages and subjects

that have not been scanned.

To receive this report (pdf format), please complete the following form.

Name (required)

Email (required)

Comment (required)

Submit »


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Stock Market Update – 12/28/11Pos ted December 28, 2011 by Bob


SEASONALITY from Mike Burke

“Average returns for the coming week (12/26 to 12/30) 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 1964 the OTC has been up 75% of the time in the 4th year of the

Presidential Cycle with an average gain of 7 .6%. The best 4th year for

the OTC was 1980 (+33.7%), the worst 2008 (-40.5%) followed by

2000 (-39.3%).”

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OTC is Over The Counter, which is now known as NASDAQ.

If next y ear is going to be a “distant second to the 3rd y ear of a

Presidential Cy cle”, we’re going to have some problems. This y ear

(2011) the SP500 is even 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, 2011 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/


http://hurstsignals.com/order-now/





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1 2 -2 8 -1 1 Hu r st Cy cles

The next cy cle low of importance (but not on the degree of October 4) is

in late January 2012. Following that, the next cy cle low of importance is

in May 2012. The cy cle low in May is of unusual interest to me because I

have another chart that has shown something happening around May

2012 (next chart).

http://stockmarketobservations.files.wordpress.com/2011/12/12-28-11-hurst-cycles.jpg





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1 2 -2 8 -1 1 DJ In du str ia ls Weekly Ba r

The above chart is a Fibonacci time relationship to significant highs and

lows in the past (page 8 of my charts). We have two different cy cles

producing a common date around May 2012 (red vertical line). I think

this bears close watching to see what develops.

WHAT NOW?

http://stockmarketobservations.files.wordpress.com/2011/12/12-28-11-ind-week.png





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1 2 -2 8 -1 1 DJI 5 Min

We have 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.

http://stockmarketobservations.files.wordpress.com/2011/12/12-28-11-dji-5-min.png





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1 2 -2 8 -1 1 In ter est Ra tes V s Stocks 1 5 Min u te

Notice how interest rates began declining on December 23. This was the

tip-off that a market decline should follow. Since 1998′s Asian currency

crisis, interest rates have moved in lock step with the stock market.

Prev iously they moved in opposite directions (inverted chart). The

degree of interest rate movement doesn’t 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 have a solid bottom in stocks. The following chart say s we have

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 have found support at the 50% level but a v iolation

of the 61 .8% level would not be constructive.

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 exit.

http://stockmarketobservations.files.wordpress.com/2011/12/12-28-11-interest-rates-vs-stocks-15-minute.jpg





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1 2 -2 8 -1 1 TSX 1 5 Min

REAL ESTATE

Here’s an updated chart to give y ou nightmares. And y ou thought y our

house value had bottomed??? Not according to Robert Shiller. This

indicates another 25% decline in home prices by 2018 (my date).

http://stockmarketobservations.files.wordpress.com/2011/12/12-28-11-tsx-15-min.jpg





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1 2 -2 8 -1 1 Ca se Sh iller Rea l Esta te V a lu es

************************************************************************************

CHART S






monthly charts.


http://stockmarketobservations.files.wordpress.com/2011/12/12-28-11-case-shiller.jpg





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monthly charts.
































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Page 31 through 43 are growth stocks. These are stocks that have

risen in price since 1990. One qualification is that they must not

be severely damaged in a bear market so they can’t rise to

significant new highs in the following bull market.

















channel.









http://pdfcrowd.com















Glossary Link

ABBREVIAT IONS



SPX = SP 500

ES = SP 500 Futures




TXX = Technology

************************************************************************************

Long T erm – UP

Uptrend






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3 up is official






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1 2 -2 8 -1 1 LONG TERM

************************************************************************************


Downtrend








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http://pdfcrowd.com










prior major low.


scenario.









approximately 2018.












http://pdfcrowd.com













************************************************************************************

EDSON GOULD









of the reports.









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about it.






























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y ears of success.







y ears.

























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bear market.































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************************************************************************************




BUT . . . . .






Glossary Link














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Share this:




well underway .












BUY – JUNE 23, 2011

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MISCELANEOUS





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Undercut Low – Stock Market Update – 12/20/11Pos ted December 20, 2011 by Bob

Categories: DA ILY UPDA TE, SELL/BUY A C T IO N UPDA TE

DAILY UPDAT E FOLLOWS T HE BREAK

CHART S






monthly charts.




I restrict my trend lines and wave 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 wave structure.





http://stockmarketobservations.wordpress.com/2011/12/20/undercut-low-stock-market-update-122011/





http://pdfcrowd.com



















Page 15 – Hurst FLD Indicator















http://pdfcrowd.com

















channel.
















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Glossary Link

ABBREVIAT IONS



SPX = SP 500

ES = SP 500 Futures




TXX = Technology

************************************************************************************

DAILY UPDAT E


Monday was an undercut low just like October 4th

An undercut low is one that makes a new low, reverses immediately

surging away from the bottom. Now that is very irritating, y esterday ’s

low was a false move and today we have the breakaway move that I

anticipated. Very , very irritating.






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The market does whatever it can to confound its participants and it did

that to me. It’s another case of being correct but also being wrong at the

same time. I can’t tell y ou how many times that has happened to me

over the y ears, wrong but right.

So I’ll quit cry ing about it and get on the right side of the market.

Dow Industrials are up 317 at the moment.

1 2 /2 0/1 1 DJI 1 5 MIN

************************************************************************************

Long T erm – UP

Uptrend


http://stockmarketobservations.files.wordpress.com/2011/12/12-20-11-dji-15-min.jpg





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3 up is official

http://stockmarketobservations.files.wordpress.com/2011/12/12-18-11-long-term.jpg





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1 2 /1 8 /1 1 LONG TERM

************************************************************************************


Downtrend








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1 2 /1 8 /1 1 V ERY LONG TERM











http://pdfcrowd.com










prior major low.


scenario.









approximately 2018.












http://pdfcrowd.com













************************************************************************************

EDSON GOULD









of the reports.









http://pdfcrowd.com








about it.






























http://pdfcrowd.com














y ears of success.







y ears.

























http://pdfcrowd.com






bear market.































http://pdfcrowd.com








************************************************************************************




BUT . . . . .






Glossary Link














http://pdfcrowd.com


Share this:




well underway .










BUY – JUNE 23, 2011

************************************************************************************

MISCELANEOUS






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CHART S






monthly charts.

















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Page 7 – Indexes With Daily Bars (plus some indicators)

Page 8 – Indexes With Daily Bars (candlesticks – last 13 months)

Page 9 – Indexes With Daily Bars (since November 2008)

Page 10 – Indexes With Weekly Bars (Candlesticks and Indicators,

last 4 Y ears)



Pages 13 through 16 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 wave count. Page 13 is a look-


















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channel.





















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Glossary Link

ABBREVIAT IONS



SPX = SP 500

ES = SP 500 Futures




TXX = Technology

************************************************************************************

DAILY UPDAT E


“If Santa fails to call the bears will roam on Broad and Wall”

As I’ve said before this is a seasonally strong time of the y ear. It doesn’t

paint a good picture to have the bears in control during December.

The breakdown of Thursday and Friday ’s indecisive candlesticks show

that we have more downside ahead. Ahead I’ll be looking for divergent

market action coupled with a completed wave count.

Thankfully I didn’t have a full-on buy signal and was operating under a

“qualified buy ”. The safe action would have been to wait for the breakout

rally . This is a good example that bottom picking is dangerous and stops






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are important to avoid damage.

The cy cle charts below show a bottom coming in late January . The first

chart can be seen on page 14 of my charts. Of course the January bottom

could just be a stop off point to even lower prices. We’ll see when we’re

in the neighborhood of that time zone. The second chart is from Terry

Laundry and is available to subscribers and clients.

I will publish a more comprehensive cy cle chart in the near future.

1 2 /1 9 /1 1 Cy cles

http://stockmarketobservations.files.wordpress.com/2011/12/12-19-11-cycles1.jpg





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1 2 /1 9 /1 1 Cy cles by Ter r y La u n dr y

************************************************************************************

Long T erm – UP

Uptrend








3 up is official


http://stockmarketobservations.files.wordpress.com/2011/12/12-19-11-cycle-by-terry-laundry.jpg





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http://pdfcrowd.com


1 2 /1 8 /1 1 LONG TERM

************************************************************************************


Downtrend








http://pdfcrowd.com













http://pdfcrowd.com










prior major low.


scenario.









approximately 2018.












http://pdfcrowd.com













************************************************************************************

EDSON GOULD









of the reports.









http://pdfcrowd.com








about it.






























http://pdfcrowd.com














y ears of success.







y ears.

























http://pdfcrowd.com






bear market.































http://pdfcrowd.com








************************************************************************************




BUT . . . . .






Glossary Link














http://pdfcrowd.com


Share this:




well underway .










BUY – JUNE 23, 2011

************************************************************************************

MISCELANEOUS






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Categories: WEEKLY UPDA TE


CHART S






monthly charts.










http://stockmarketobservations.wordpress.com/category/weekly-update/






http://pdfcrowd.com











last 4 Y ears)























http://pdfcrowd.com













channel.





















http://pdfcrowd.com



Glossary Link

ABBREVIAT IONS



SPX = SP 500

ES = SP 500 Futures




TXX = Technology

************************************************************************************

DAILY UPDAT E


Seasonally , the next two weeks have 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 market’s favor for

a rally .

In the first chart, notice the last 2 candlesticks. These two are called an

inverted hammer and when it occurs in a downtrend, it reflects

indecision on the part of the bears. It often precedes a rally . A break

above or below the range of Thursday and Friday ’s limits would decide

which direction y ou should go. I expect upward movement.

I was not stopped out on Friday so we’ll 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 have higher highs (or lower lows). That’s why I

wasn’t stopped out on Friday , the prior bottom hasn’t been touched.

We are still operating under the qualified buy guidelines.





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http://stockmarketobservations.files.wordpress.com/2011/12/12-18-11-spx-candlesticks-daily.jpg





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1 2 /1 8 /1 1 SPX Ca n dlest icks Da ily

The second chart is one that I had not been familiar with before. It’s 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 average value of the ADS index is zero. Progressively bigger positive

values indicate progressively better-than-average conditions, whereas

progressively more negative values indicate progressively worse-than-

average conditions. The ADS index may be used to compare business

conditions at different times. A value of -3.0, for example, would

indicate business conditions significantly worse than at any time in

either the 1990-91 or the 2001 recession, during which the ADS index

never 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 example shows in August of 2007 the index

dropped into recessionary territory even as the mainstream media

continued to bleat about a “soft landing”scenario. 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

government scrambled to keep the economy from sliding off into the

aby ss with massive stimulus injections, the ADS index bottomed and

turned up.

It wasn’t 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 recovery . 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 recovery . 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 even with

the m assive am ounts of stim ulus, liquidity , credit and

housing bubble. In the past econom ic recoveries, the post

recession generally reached well into positive readings before

the next decline. In the past two cy cles (since 2000) the index

has barely risen half of norm al expansion value.”

That coincides with my v iew that a multi-step correction began in 2000

and continues onward to possibly 2018.





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1 2 /1 8 /1 1 A DS Econ om y Sin ce 2 000

http://stockmarketobservations.files.wordpress.com/2011/12/12-18-11-ads_2000.jpg





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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






http://stockmarketobservations.files.wordpress.com/2011/12/12-18-11-ads_since-1960.jpg





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3 up is official






http://pdfcrowd.com


1 2 /1 8 /1 1 LONG TERM

************************************************************************************


Downtrend








http://pdfcrowd.com













http://pdfcrowd.com










prior major low.


scenario.









approximately 2018.












http://pdfcrowd.com













************************************************************************************

EDSON GOULD









of the reports.









http://pdfcrowd.com








about it.






























http://pdfcrowd.com














y ears of success.







y ears.

























http://pdfcrowd.com






bear market.































http://pdfcrowd.com








************************************************************************************




BUT . . . . .






Glossary Link














http://pdfcrowd.com


Share this:




well underway .










BUY – JUNE 23, 2011

************************************************************************************

MISCELANEOUS






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Qualified Buy . . . Again – 12/15/11Pos ted December 15, 2011 by Bob



CHART S






monthly charts.












http://stockmarketobservations.wordpress.com/2011/12/15/qualified-buy-again-121511/





http://pdfcrowd.com











last 4 Y ears)























http://pdfcrowd.com













channel.





















http://pdfcrowd.com



Glossary Link

ABBREVIAT IONS



SPX = SP 500

ES = SP 500 Futures




TXX = Technology

************************************************************************************

DAILY UPDAT E


A buy point could arrive 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 over. This allows y ou better safety in

executing y our buy order. Make sure and put a close stop following y our

buy .

If the market doesn’t move 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 don’t

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 have to wait and see the

character of the rally and see if it has legs. Short term doesn’t mean a

couple of day s of rally . It should be several weeks in duration, hopefully

it will turn into step 2 up (see chart below). Step one was November 28

to December 7 .

The SP 500 is at an important support level (SP500 1212). We are also at

the 50% retracement level for the Nov 28 to Dec 7 rally , plus the 38%

retracement of the October rally . If the SP500 1212 level doesn’t 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 have 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.

I’m not particularly happy to see the semiconductors (SOX) weaker than

most other indexes. That doesn’t send a good message but should they

reverse and fall in line it would be OK. Meanwhile, the transportation

stocks have been making a good move upward and that’s good news.

The one caveat would be that we are in a 5 step down instead of 3. One

must be very careful of that possibility should y ou buy . I know I will be

on guard with close stops to protect my investment. Stops are y our best

friend and use them wisely so y ou can sleep well.





http://pdfcrowd.com


1 2 /1 5 /1 1 DJI 1 5 MIN

************************************************************************************

EDSON GOULD









of the reports.


http://stockmarketobservations.files.wordpress.com/2011/12/12-15-11-dji-15-min.jpg





http://pdfcrowd.com











about it.


























http://pdfcrowd.com
















y ears of success.







y ears.





















http://pdfcrowd.com









bear market.































http://pdfcrowd.com











************************************************************************************




BUT . . . . .






Glossary Link











http://pdfcrowd.com








well underway .










BUY – JUNE 23, 2011

************************************************************************************

Long T erm – UP

Uptrend








3 up is official













http://pdfcrowd.com







http://pdfcrowd.com


1 2 -03 -1 1 Lon g Ter m

************************************************************************************


Downtrend








http://pdfcrowd.com


1 2 -03 -1 1 V er y Lon g Ter m











http://pdfcrowd.com










prior major low.


scenario.









approximately 2018.












http://pdfcrowd.com


Share this:












************************************************************************************

MISCELANEOUS





Stock Market Update (Qualified Buy Mode)– 12/12/11


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Pos ted December 12, 2011 by Bob



CHART S






monthly charts.
























http://pdfcrowd.com


last 4 Y ears)































http://pdfcrowd.com





channel.


















Glossary Link

ABBREVIAT IONS



SPX = SP 500

ES = SP 500 Futures







http://pdfcrowd.com




TXX = Technology

************************************************************************************

DAILY UPDAT E


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 wave down ending last Thursday . Watching the rally and first

correction after the 3 count has not produced an environment to safely

buy stocks.

After a smart Friday rally we broke Thursday ’s lows and are obviously in

a 5 wave down. In other words it’s 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 2:15 EST. The market

is alway s volatile after the announcement.





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1 2 /1 2 /1 1 TSX 1 5 MIN

************************************************************************************

EDSON GOULD









of the reports.






http://stockmarketobservations.files.wordpress.com/2011/12/12-12-11-tsx-15-min.jpg





http://pdfcrowd.com







about it.































http://pdfcrowd.com













y ears of success.







y ears.



























http://pdfcrowd.com





bear market.































http://pdfcrowd.com







************************************************************************************




BUT . . . . .






Glossary Link















http://pdfcrowd.com




well underway .










BUY – JUNE 23, 2011

************************************************************************************

Long T erm – UP

Uptrend








3 up is official














http://pdfcrowd.com


1 2 -03 -1 1 Lon g Ter m





http://pdfcrowd.com


************************************************************************************


Downtrend




1 2 -03 -1 1 V er y Lon g Ter m






http://pdfcrowd.com















prior major low.


scenario.









approximately 2018.





http://pdfcrowd.com


Share this:



















************************************************************************************

MISCELANEOUS






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