04/22/12 Update of Stock Market Trends & Observations

Stock Market Trends & Observations
04/22/12 In Depth Stock Market Update

P os ted A pril 2 2 , 2 0 1 2 by Bob Categories: C Y C L E S, I N D E P T H U P D A T E
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MY CHART S Bookmark this link. LONG T ERM, SHORT T ERM WHAT S BEST ??? Recently I hav e made a few correct short term calls probably because I know our position in the wav e structure. When things become confusing (they alway s do), I may not be able to make short term calls with a
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CYCLES (3) DAILY UPDATE (94) EDSON GOULD (21) GLOSSARY (1)
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(they alway s do), I may not be able to make short term calls with a degree of certainty . And due to the fog normally associated with the short term, one should aim for more reliability found in the intermediate to longer term. Another part of my message is aimed for inv estors that stocks are to be sold, not held forev er. During a bull market peak when greed reins supreme, that message usually falls on deaf ears. Today I want to look at the intermediate/longer term outlook for the stock market because its of prime importance. My short to intermediate term sell signal of April 3, 201 2 was based on my longer term interpretations. WHERE WEVE BEEN Only after we make a significant new low below April 1 0, 201 2 will it be safe to say that we hav e begun a significant correction. So far all we hav e is a completed 3 step down. The market could do many things from this point, such as rally ing to a new high or beginning a multi-step down. There is no proof at this point which scenario is in play . It seems to me that we hav e not had a large enough correction to break the look of the rally since late Nov ember 201 1 . Of course if I hav e miscounted and we hav e not finished that rally , we should hav e one more step up before beginning the correction. At this time I believ e that we began a significant correction on April 2, 201 2. This outlook doesnt preclude the possibility of significant rallies, but the overall trend should be downward.
IN DEPTH UPDATE (23) JEFFREY SAUT (2) SELL/BUY UPDATE (20) WORDS OF WISDOM (10)
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04/22/12 In Depth Stock Market Update 04/18/12 Last Post For A Few Days 04/17/12 Whats The Upside For This Rally ??? 04/17/12 Sold Out Market, Ready For An Upside Fling Or ??? 04/12/12 Possible Price Projections 04/11/12 @ 10:45 PM EDT More Rally ??? 04/10/12 Simple Rules
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April 2012 (11) March 2012 (2) February 2012 (4) January 2012 (7) December 2011 (11) November 2011 (17) October 2011 (19)
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WHAT S HAPPENING? It appears that we hav e a head and shoulders forming in many of the index es. A break abov e the prior high will negate this formation. But a break below the neckline will also v alidate the head and shoulders formation.
September 2011 (17) August 2011 (32) July 2011 (17) June 2011 (10)
April 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 Mar
0 4 -2 1 -1 2 DJ IND 6 0 MIN - HEA D & SHOULDERS FORMING ???
MARKET AXIOMS & QUOT ES

No young or inexperienced trader believes the following adage (myself included when I was young) THERE ARE RICH TRADERS AND OLD TRADERS, BUT THERE ARE NO RICH, OLD TRADERS. - Anonymous
Is it possible that we are repeating the timing of last y ear???? Many index es peaked in February 201 1 while others peaked slightly higher in May 201 1 . This was followed by a correction that lasted until early October 201 1 . Today there are some similarities taking place in the index es. One of the main differences in 201 2 is that the index es hav e been weaker to this point than in 201 1 .
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******************* The essence of investment management is the management of risks, not the management of returns. Wellmanaged portfolios start with this precept. - Benjamin Graham 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
FEB - A PR 2 0 1 2 T SX DA ILY
FEB - A PR 2 0 1 1 T SX DA ILY
Canadian blue chips hav e been warning for ov er a y ear that there was something wrong in their market. They are heav ily dependent on oil, gold and commodities. Commodities and the stock market hav e been locked together for sev eral y ears and this could be a major warning to our stock market. Below is the TSX Canadian index compared to the
"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 pdfcrowd.com
SP500. Its v ery obv ious that the TSX has lagged badly in 201 2 and its telling us something is wrong.
If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks. - John (Jack) Bogle Stock are bought on expectations, not facts. Gerald Loeb Emotions are your worst enemy in the stock market. Don Hays 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. - The Book "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 than 0. - The Book "Extraordinary Popular pdfcrowd.com
0 4 -2 1 -1 2 T SX & SPX DA ILY
Here is a 1 5 week comparison chart of the SOX, COMPQ, TXX and SPX. Y ou can see how the SOX was warning of an impending problem well before the others by forming almost a double top.
"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. Anonymous A bubble is a bull market in which you don't have a position. - Anonymous A buy and hold strategy is a short term trade that went wrong. - Anonymous Markets can remain irrational longer than you can remain solvent. - John Maynard Keynes Return of principal is more important than the return on principal. - Anonymous Hope is your worst enemy in
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the market. - Anonymous Don't catch a falling knife. Anonymous 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
0 4 -2 1 -1 2 SOX , COMP, T X X , SPX , - DA ILY
HURST CY CLES PRESENT The following is one of the more ex tensiv e Hurst cy cle studies that Iv e done. It includes the near future and the period approaching the March 2009 bottom. The first chart shows the period, September 201 1 to February 201 3. There was a cy cle bottoming from late March to the first week of April 201 2. Its safe to say that the April 1 0, 201 2 bottom was that predicted cy cle bottom. The nex t cy cle of importance is ex pected around June 201 2. As we approach that date, the wav e count plus the Hurst cy clic data should fine tune the ex pected date range. Whether the June 201 2 bottom is the end of the correction that began on April 2, 201 2 cant be answered at this time.
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 make money, bears make money, pigs get slaughtered. - Bob's Grandfather
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A more important cy cle date is due from mid-Nov ember to January 201 3. This cy cle is the same one that bottomed in October 201 1 , which prov ided us with a sizable rally . If we are undergoing an ex tensiv e correction, its conceiv able this cy cle could be the bottom of the current correction. Notice that the Nov ember elections is within the window for this cy cle. But as usual well wait and see.
Never buy a stock that won't go up in a bull market. Never sell a stock that won't go down in a bear market. Anonymous Nobody is more bearish than a sold-out bull. - Anonymous The public is right during the trends but wrong at both ends. - Humphrey Neill Never sell a dull market short. - Anonymous 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 Cut your losses and let your profits run. - Anonymous Don't marry a stock. Every stock must be sold. Anonymous
0 4 -2 1 -1 2 HURST CY CLES - Sep 2 0 1 1 t o Feb 2 0 1 3
The nex t chart shows the period, January 2009 to April 201 4. This giv es y ou a broader v iew of the cy cles ex pected between now and 201 4. The cy cle that bottoms from September 201 3 to January 201 4 is the same cy cle that bottomed in March 2009. Obv iously this is an important cy cle giv en the importance of the 2009 bottom.
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Often times WHEN you take a position can be more important than WHAT you take a position in. Anonymous "If Santa fails to call the bears will roam on Broad and Wall!" - Lucien Hooper CLEVER QUIPS P/E ratio - The percentage of investors wetting their pants as the market keeps crashing. - Anonymous Those who can, do . . . Those who cant, teach . . . Those who cant teach, work for the government. - Anonymous Wall Street is a street with a river at one end and a graveyard at the other. Anonymous Never check stock prices on a Friday, it could spoil your weekend. - Anonymous Money talks, but all mine ever says is "goodbye" Anonymous Don't gamble. Take all of your savings and buy some good pdfcrowd.com
0 4 -2 1 -1 2 HURST CY CLES - 2 0 0 9 t o A pr 2 0 1 4
I hav e stated repeatedly since 2003 that I was anticipating the end of the bear market that began in 2000 to end in 201 8. Does the Hurst cy clic data support that supposition??? The following chart shows the period from 2006 to 2030. Prev iously , we had seen the important cy clic bottom for late 201 3. The nex t cy cle on this chart is late 201 7 to early 201 8. That certainly giv es credence to the possibility of an important bottom in 201 8. But a v ery important cy clic date ranges from late 2026 to late 2028. This is the same cy cle that last bottomed in 2009, before that it was 1 990 and 1 97 4. Here is a possible scenario; we could hav e an important bottom in 201 8, which would be comparable to the 1 97 4 bottom. The nex t important bottom in 2027 would be the kickoff point for the nex t bull market, which would equate to the 1 982 bottom. So 1 97 4 and 1 982 represent bear market bottom and bull market kickoff point, while 201 8 and 2027 would be the bear market bottom and bull market kickoff point of the
future. Who knows what might happen, but thats one fantasy prediction.
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 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 and February. - Mark Twain Economists have predicted 14 of the last 3 recessions. Anonymous
0 4 -2 1 -1 2 HURST CY CLES - 2 0 0 6 t o 2 0 3 0
The same picture as abov e only with more detail, 1 97 2 to 2033.
Market Correction - The day after you buy stocks. Anonymous In 2008 stocks were a good buy . . . . . Goodbye Mercedes, goodbye yacht, goodbye vacation home, goodbye . . . -Ed Hart (modified for today)
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 allow you to understand the blog author's thinking as pdfcrowd.com
0 4 -2 1 -1 2 HURST CY CLES - 1 9 7 2 t o 2 0 3 3
HURST CY CLES PAST I didnt hav e the software that produces these charts prior to the March 2009 bottom. I hav e often wondered how well it would hav e anticipated the 2009 bottom. The first chart seeking the March 2009 bottom shows the period of 1 990 to 201 4 and the data stops on August 31 , 2008. In this chart the software believ es that a significant bottom has occurred during the 3rd quarter of 2008. Its looking for a major bottom sometime from 201 1 to 201 2. Looking back we know this is incorrect. We could hav e stay ed out of trouble in August 2008 because the wav e count wasnt complete. At that time, stay ing out of the market was important because there were lots of rumors of Lehman Bros demise (and many other companies too). Lehman filed for bankruptcy on 9/1 5/08 and the market collapsed upon itself due to this ev ent.
the blog author's thinking as he executes trades for his own portfolio. "Observations of Stock Market Trends" is published on an irregular schedule. The blog author tries to issue an update when a stock market inflection point is near or has taken place. Occasionally, illness or acts of god may interfere with a blog update. If you find this blog interesting, please become a follower by entering your email address in the section "Email Subscription" (top of this column). You must also confirm your email subscription by clicking on a link in the confirmation email, otherwise you ain't subscribed.
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The content on this blog is meant to be entertaining information and should not be construed as investment advice.
0 4 -2 1 -1 2 HURST CY CLES - 1 9 9 0 t o 2 0 1 4 da t a fr om 1 9 5 0 t o 8 -3 1 -0 8
No statement by the blog's author should be interpreted as a recommendation to buy or sell any security, financialpdfcrowd.com
The nex t chart shows the period of 1 965 to 201 4 and the data stops on March 31 , 2009. In retrospect we know the bottom has already occurred and a v ery snappy rally is underway . The chart now indicates that it ex pects a significant bottom from 201 0 to 201 1 . The dates are mov ing backward towards the present but not enough to say a bottom has occurred. The rally that has taken place by March 31 is not enough for the software to recognize that THE BOTTOM has occurred. In fact many of us at that time didnt know that the bear market of 2007 to 2009 was finished.
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 investments and 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
After 55 years of studying and investing in the stock market, I am sharing some of this knowledge by writing a stock market blog. Beginning in 1957, I realized quickly that technical analysis had inconsistent or high failure rates. Fundamental analysis?? Fundamental analysis was fundamentally flawed for telling you WHEN pdfcrowd.com
0 4 -2 1 -1 2 HURST CY CLES - 1 9 6 5 t o 2 0 1 4 da t a fr om 1 9 5 0 t o 0 3 -3 1 -0 9
Sometimes if y ou look at a close-up v iew of the time in question, the smaller cy cles may prov ide a clue to whether a major bottom has occurred, or will occur soon. The nex t chart shows the period of August 2006 to December 201 2 and the data stops on March 31 , 2009. This chart also isnt much help. It believ es that the last significant cy clic bottom occurred in September
2008 and has no useful information for the immediate future.
flawed for telling you WHEN to buy or sell a stock. In 1973 I subscribed to Edson Gould's "Findings & Forecasts" and was learning from the greatest technician of the 20th century. After reading "My Most Important Discovery" by Edson Gould it explained the irrational volatility of markets. The fog began to lift and I was on my way to understanding the "true" nature of the stock market.
0 4 -2 1 -1 2 HURST CY CLES - A u g 2 0 0 6 t o Dec 2 0 1 2 da t a fr om 1 9 5 0 t o 0 3 -3 1 09
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The nex t chart shows the period of 1 97 4 to 201 1 and the data stops on 07 /31 /09. At this point the market has had a good rally with higher highs but the software hasnt recognized March 2009 as THE BOTTOM. That result was a little surprising. I think that the rally was significant but not enough TIME has passed to award March 2009 the title of THE BOTTOM.
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The nex t chart shows the period of 1 97 4 to 201 1 and the data stops on 1 2/31 /09. Finally the rally and the time element are enough to recognize March 2009 as THE BOTTOM. By December 2009 the market hasnt ev en completed step 1 up from March 2009. There is a long way s to go before this bull is finished.
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So what did this study tell us about the software for Hurst cy cles? Primarily it told us that if a cy clic bottom is not occurring reasonably close to its predicted date, we must wait for a rally of large enough significance to countermand the predicted date. This is probably true all of the time for major bottoms. Nex t I want to try a smaller dataset instead of the 1 950 dataset. A dataset that begins in 1 998 may be an appropriate choice. All I need to do is find the time to run the data and write about it. A lot of tim e went into the creation of this blog update (2+ days). Im glad its finished. 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) 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 neighboring wav es in the collection of cy cles contributing to price mov ement are related by a small integer v alue.
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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. HURST CY CLE SOFT WARE Y ou can find further information about Hursts Cy clic Principles here. There is lots of good Hurst info at that link. If y ou want up to the minute info on the Hurst Cy cles, consider subscribing to their serv ice at the following link, Hurst Signals. Its a v ery good serv ice and Im a subscriber too. The software to generate the cy cles is ex pensiv e but Hurst Signals is more reasonable and the charts and comments are constantly updated throughout the market day . One reason that I subscribe to their serv ice is that it can be accessed quickly . For me, I dont hav e time to update my data files and boot up Parallels, a Windows v irtual OS running concurrent inside Apple OS X. Hurst Signals giv es me the answers I need quickly and straight to the point and its reasonably cheap. Hurst Signals operates inside y our browser, hence the speed. This serv ice has confirmed my thoughts on an approaching bottom on more than one occasion. Hurst Signals subscription price is $1 35 quarterly (less if y ou pay by the y ear).
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************************************************************************************ JEFFREY SAUT The following recording is about 8 minutes long and first up on the recording is Jeff Saut answering one my emails. I asked about the possibility of a multi-leg, multi-y ear bear market similar to 1 965-1 97 4. He begins my answer with a ty pical Hey Jeff, and then mov es on to comment about an ex cellent book One Way Pockets. The book is great and the recording is worth the listen. Jeffrey Sauts Verbal Com m ents Regarding My Letter From 12/06/05 I emailed Jeff my question shortly before December 2005. This was about 2 y ears after the end of the 2000 crash, and about 2 y ears prior to the October 2007 peak. As y ou can tell from my letter I was thinking of the really BIG picture. The book Jeffrey remarks about is highly recommended and its $1 0 at Amazon One Way Pockets. I hav e both the print and eBook v ersion (iPads rule). Sorry about the quality of the recording but at the time I didnt hav e the nifty Mac WireTap Studios capability of recording directly from line in. Jeffrey Saut of Ray mond James is a v ery sav v y guy and one of the few people that I follow. I found Jeff among the talking heads on CNBC, which is normally filled with worthless bobble-headed people. When I saw Jeff the first time, he was telling the audience different ideas than
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what ev ery one else was regurgitating. Immediately this catches my attention because Im ALWAY S interested in any one that has a mind apart from Wall Street. After listening to him ov er time, I realized this guy is smart, insightful and normally right on the mark. I find people like this v ery infrequently . And here is the website for Ray m ond Jam es Inv estm ent Planning ************************************************************************************ FEAR, HOPE & GREED Due to its importance, the following chart has become a constant in my blog. The driv ing force of how the stock market arriv es at a price is emotions and the primary of these emotions is fear, hope and greed. Its difficult for people to understand this principle because it doesnt seem logical. A comment I hear frequently is that the earnings of a company are still going up and the stock price MUST continue rising too. That can be true depending on a lot of factors but it might not stop the market from cutting the PE of y our stock in half. Rising earnings and div idends were an ongoing theme throughout the 1 97 3-1 97 4 bear market. Normally earnings suffer at some point during a bear market, but 1 97 4 was the ex ception. An ov er-priced market (remember the Nifty 50 from 1 97 2) plus an unstable political climate coupled with rising earnings came together in the perfect storm cutting the PE ratio of most stocks in half. Mentioning the Nifty 50 giv es y ou some idea of the old fart thats
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writing this blog. I can make it ev en worse by asking; Do y ou remember President Kennedy jawboning the steel industry ov er their price hike in 1 961 ? There were consequences for those actions as President Kennedy was widely v iewed as anti-business after the jawboning incident. Naturally the stock market didnt like that and since it was already ripe for a correction, it willingly obliged. The market decline began in Nov ember 1 961 (I think?). But I remember v ery well the climactic plunge in May 1 962 when the Dow Industrials lost 35 points in one day . The Dow av erage was only 61 2 at the time and a loss of 35 points was huge. It was a 5.7 % one day plunge. I thought the world was going to end as I had nev er seen any thing similar. I was a naiv e kid at the time and now Im not naiv e, just an old kid.
Fea r , Hope, a n d Gr eed
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************************************************************************************ WAVE COUNT S SIMPLIFIED Sometime during the period that I was subscribing to Edson Gould, 1 97 3 to 1 97 9, I changed Goulds method of wav e counting to my 3 steps up and 3 steps down theory . It was also during this period that I noted a wav e ex tension where a 3 step could turn into a 5 step (not a 4 step). I got better at calling the wav es as time elapsed, which is understandable as practice makes perfect. I think Elliotts ideas self destruct frequently in the stock market and his wav e complex ities are so ex treme that y ou can manipulate the count to say any thing y ou need. I hav e seen Robert Prechter use Elliott Wav e effectiv ely at times but not consistently . For me, consistency is important. 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. 3 steps m ust stay confined to a channel. Lay ing a straight edge on the chart will help y ou v isualize the channel. As the larger trend progresses, all of the steps that make up the trend will also be confined to a larger channel. Sometimes a channel doesnt become clear until the surge phase (v ertical
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mov e) has ended and the market settles into a methodical uptrend. When the m arket breaks its channel (regardless of the perceived wav e count), the step has term inated. This may often be y our best indicator that a wav e count has been completed. Som etim es ONE of the 3 wav es will sub-div ide into another 3 wav es. I call this an ex tension. When this happens (1 ) the trend is still intact, (2) the ov erall channel will widened and (3) instead of a total of 3 steps, there will be 5 steps. There are alway s trends within trends from the short term of a few day s to the super long term trend that may last centuries. Fitting it together giv es y ou remarkable market perspectiv e. The correction following the second step is normally larger than the correction that followed the first step. Usually I will use the terms step and wav e interchangeably . I frequently think of a step as shorter in duration and a wav e as longer term; such as there are 3 steps to a wav e. But the steps/wav es are all kinda the same as they fit inside one another like a matry oshka or Russian nesting doll. THE FOLLOWING IS ALSO AN IMPORTANT CONCEPT At the conclusion of a 3 (or 5) step move, their w ill be a counter move. This counter move MUST be of sufficient strength (or duration) to BREAK THE CHANNEL of the prior move. Breaking the channel has the appearance of breaking the LOOK of the prior move (channel). If a channel break doesnt occur after ALL of the counter trend steps have evolved, you have miscounted the steps and the
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previous trend is not finished. Breaking the channel is a very important concept because this may be the only clue you have that your count w as incorrect. Reading the glossary helps in the understanding of this blog. There are many other important facts in the glossary . Glossary Link ************************************************************************************ 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
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 1965 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. 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. 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
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pierce the all-time 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 the worst case scenario. This v ery long term thinking is almost not practical for inv estment strategies. Following the long term strategy should be adequate. But one should alway s keep this scenario in mind whenev er we are on the v erge of a new bear market. If correct it could indicate how bad things could become. ************************************************************************************ 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. One of the prime indicators that I use (series #1 ) 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. I believ e that he used this tool ex tensiv ely and nev er told the world its
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importance. 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 and researched it back to 1 939 for the Industrials, Transportations and Utilities . 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). Edson Gould was truly a legend in his own time. Its too bad that today many people hav e forgotten or nev er heard of him or his discov eries. This is a man that deserv es to be remembered throughout technical analy sis market history . Below y ou will find the first page of some of his 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. The book Ex traordinary Popular Delusions and the Madness of Crowds is v ery useful in ex plaining crowd behav ior. This book can be downloaded for free in pdf format from Google Books Mem oirs of Ex traordinary Popular Delusions and the Madness of Crowds 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
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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 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 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 This was a remarkable forecast in 1 97 7 , where the Dow Industrials had nev er been higher than 1 ,000. NO ONE had predicted a rise of this magnitude in 1 97 7 . Most were waiting for a resumption of the bear market.
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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 Link under Tax es, Futures Contracts and Money Management. 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 the 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 . SELL APRIL 3, 2012 ST OP BUY ING FEBRUARY 6, 2012 QUALIFIED BUY DECEMBER 15, 2011
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QUALIFIED BUY DECEMBER 12, 2011 QUALIFIED BUY DECEMBER 5, 2011 ACKNOWLEDGED BOT T OM OCT OBER 16, 2011 PREVIEW T O A BUY SIGNAL OCT OBER 2, 2011 BLOG SUSPENDED ON 9/27 /11 This blog was suspended the first time on 9/1 7 /1 1 due to a death accompanied by a family illness. It was suspended a second and longer time on 9/27 /1 1 due to an ex tremely serious family illness. Blog resumption with comments and charts began again on 1 1 /27 /1 1 . Unfortunately due to illness I clearly missed issuing a formal & important buy signal closer to the 1 0/4/1 1 bottom. Hopefully this error will not be repeated. 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 ************************************************************************************ MISCELLANEOUS 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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04/18/12 Last Post For A Few Days

P os ted A pril 1 7 , 2 0 1 2 by Bob Categories: D A I L Y U P D A T E
WHAT S HAPPENING? The ov erall trend in the market is down for the nex t sev eral weeks/months. That will remain my v iew until otherwise stated in the category SELL/BUY ACTION UPDATE. Ov erall downtrend doesnt preclude the possibility of a good rally . ****************************** Since Im going to be busy , this will likely be my last post for a few day s. Today s rally carried the Nasdaq Composite back to the 50% retracement
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point (see earlier post for chart). To date the rally hasnt been enough to break the look of the downtrend and if that continues, I would interpret that as a significant negativ e. The market is no longer ov ersold but is at best neutral. Neutral allows room for more rally but that isnt a reason in itself to rally . The market rally has some problems as many of the index es hav ent participated. Many peaked on April 1 2th and hav e formed a lower high as of today . Higher or lower highs is split 50-50 on the 1 0 index es that I watch. I think that we could muddle around awhile longer before a real breakdown occurs. I didnt seem to point out any thing positiv e in this update so Ill say that I think its possible (didnt say it was going to happen) that we could rally back to the prior high on April 2nd. An upside failure should take place at that time (no meaningful new high). We hav e price projections to about 1 407 in the SPX. Ov erall Im not a bull and any long position that I hav e has my finger resting on the trigger. The chart below shows the June SP 500 futures since April 8. As y ou can see we hav e a small double top (today and April 1 2). It probably isnt meaningful but well watch it to be sure.
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0 4 -1 8 -1 2 Ju n e SP 5 0 0 Fu t u r es !5 Min u t e Ba r s
MY CHART S This is the link to my charts on StockCharts. V ote below and tell me how I should arrange the charts on page 1 .
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"What Is Your Preferred Order For The Index Charts" - on page 1 of "My Charts"
SHORT term charts followed by LONGER term charts LONG term charts followed by SHORTER term charts (this is the present order of the charts) I don't care
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04/17/12 Whats The Upside For This Rally ???

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WHAT S HAPPENING? Now that the rally is underway , where are we going (see last nights blog for the speculativ e buy update)??? Below is a chart with an idea of a possible stopping point for this rally . Of course if we are in 4th and 5th step up, we would make new highs. Ill count the steps on the way up and let y ou know what I think is happening. If y ou made me choose right now, I would want to say that this is a rally in a downward correction. BUT . . . the SP 500 futures makes it look like this is a bigger step 2 up since April 1 0th (see second chart). But Ill worry about all of that another day . Meanwhile, Im going to enjoy the rally and make a couple of dollars. Im going to hav e minimum contact with the blog for the rest of this week. Doesnt mean Im out of the loop, just means I wont be talking much. Got things to do, people to see, blah, blah, blah.
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0 4 -1 7 -1 2 Na sda q Com posit e 1 5 Min u t e Ba r s
The chart below shows the entire decline since April 2nd. Y ou can easily see that we might be starting a bigger step 2 up today . Dont forget the projection on page 3 of MY CHART S , chart #40.5, which say s we are going to the area of SP 500 1 407 . Well see how that works out.
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0 4 -1 7 -1 2 Ju n e SP 5 0 0 Fu t u r es 2 4 Min u t e Ba r s
Earlier I had stated the following: FUT URE SCENARIOS (1 ) We will hav e a failed rally attempt at a new high and that will driv e the nail into the short term coffin. (2) We will hav e a token new high, which could be disregarded under certain circumstances. (3) We will make a legitimate new high, which means we will hav e an ex tension for V ery Short Step #4 and #5. After 5th step up, we would hav e a significant correction. (4) We will hav e a sideway s pattern to break the uptrend since Nov ember. MY CHART S This is the link to my charts on StockCharts. V ote below and tell me how I should arrange the charts on page 1 .
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04/17/12 Sold Out Market, Ready For An Upside Fling Or ???

JUST AN IDEA OF WHAT S HAPPENING? At this time Im unwilling to change the official, The ov erall trend in the market is down for the nex t sev eral weeks/months. That will remain my v iew until otherwise stated in the category SELL/BUY ACTION UPDATE . . . . BUT . . . T his m arket looks like it m ight be sold out. If this is true, the m arket could be ready to rally .
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In the chart below, notice the failure to penetrate the Sunday lows either today or late Monday /Tuesday night. Well see how the market reacts to some of the economic reports on Tuesday morning. Presently the market is slowly eroding downward and is unwilling to rally (1 :30 AM EDT). Its either waiting for Europe to open or tomorrows economic reports.
0 4 -1 6 -1 2 , Ju n e SP5 0 0 Fu t u r es, 3 Min u t e Ba r s
The following chart is the same chart as abov e only a longer time frame (22 minute bars). It shows the entire decline since the April 2nd peak.
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0 4 -1 6 -1 2 , Ju n e SP 5 0 0 Fu t u r es, 2 2 Min u t e Ba r s
If we hold in this area meaning we dont break the lows made today (Monday ) . . . THEN Im willing to buy for a short term fling on the upside. If we break the lows shown on the abov e chart, then buy ing aint such a good idea and one should toss this idea in the trash. So Im going to take my cue from the market action and act accordingly . If we do rally beginning tomorrow, we could be (1 ) looking for a failed rally attempt at a new high, (2) the market wants to trace out a 4th and 5th step up or (3) may be the market just wants to rally a little bit and then come down in another step down. As alway s, well find out for sure later. Naturally if Europe decides to hav e a stroke, all bets are off on the rally front.
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0 4 -1 6 -1 2 RUT 2 0 0 0 DA ILY
Earlier I had stated the following: FUT URE SCENARIOS (1 ) We will hav e a failed rally attempt at a new high and that will driv e the nail into the short term coffin. (2) We will hav e a token new high, which could be disregarded under certain circumstances. (3) We will make a legitimate new high, which means we will hav e an ex tension for V ery Short Step #4 and #5. After 5th step up, we would hav e a significant correction. (4) We will hav e a sideway s pattern to break the uptrend since
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Nov ember. MY CHART S This is the link to my charts on StockCharts. V ote below and tell me how I should arrange the charts on page 1 .
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04/22/12 Update of Stock Market Trends &amp; Observations

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04/22/12 Update of Stock Market Trends &amp; Observations

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0 4 -2 1 -1 2 DJ IND 6 0 MIN - HEA D & SHOULDERS FORMING ???

MARKET AXIOMS & QUOT ES

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0 4 -2 1 -1 2 T SX & SPX DA ILY

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0 4 -2 1 -1 2 HURST CY CLES - Sep 2 0 1 1 t o Feb 2 0 1 3

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The same picture as abov e only with more detail, 1 97 2 to 2033.

About T his Blog

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2008 and has no useful information for the immediate future.

0 4 -2 1 -1 2 HURST CY CLES - A u g 2 0 0 6 t o Dec 2 0 1 2 da t a fr om 1 9 5 0 t o 0 3 -3 1 09

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Fea r , Hope, a n d Gr eed

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1 2 -2 8 -1 1 V ERY LONG T ERM

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04/18/12 Last Post For A Few Days

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04/17/12 Whats The Upside For This Rally ???

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04/17/12 Sold Out Market, Ready For An Upside Fling Or ???

0 4 -1 6 -1 2 , Ju n e SP5 0 0 Fu t u r es, 3 Min u t e Ba r s

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04/22/12 Update of Stock Market Trends & Observations

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