Downtrend back on track!!

It has been ten days since I last posted. During those ten days I patiently watched while wave 2 completed. I hope it has completed because when dealing with stocks you never know. That's why short term trading is so difficult. Recently, Tim Knight, who authors "The Slope of Hope" blog trashed Elliott Wave Theory because it didn't work for him as a short term trader.. Everyone was confused about the termination of wave 2. By the way, today, Thursday, is the Fall Equinox and also there is a full moon. There is a strong correlation between the stock market and the full moon. Reversals often occur at this time. Not infallible, of course! So, what should we expect at this time? The end of wave 2 and the beginning of wave 3! Wave 3, as has been pointed out, can be very violent, especially in a bear market. Wave 3 may take us all the way into 2011, so be prepared for it. Be short the market or be in cash, or short term Treasuries. Another author, who seems to get it, is the author of "XTRENDS". He is using another method involving math and geometry to predict a downtrend at this time.

Are we there yet?

No, we are not there. Where? Down, down, down! Actually we have witnessed a short term uptrend within the long term downtrend. This is normal, but very trying, especially for short term traders who get whipsawed often. The above chart represents the Elliott Wave Theory pattern five waves down and three waves up. We label the waves, 1-2-3-4-5 in downtrend and A-B-C in the correction waves. Wave C has completed and we are in the beginning stages of Wave III. The arrow shows where we are right now.

Downtrend resumes

The beginning of the month, and a holiday weekend, often witness an uptrend in the market. This time was no exception. The market moved up although it was with low volume. The follow through that we mentioned did not happen. The uptrend ran out of steam and the downtrend resumed today. Hopefully the market will break through support at 1041. It has already failed three times to break through this support level. If it does so this time it will be significant.

Another rally filled with Hope

Today we had a great rally which was enjoyed by the media and by the Bulls. They hope that this is the beginning of a new upward trend. Alas, I think they will be very disappointed. For the next few days the markets may continue to go up. Why?, it is the beginning of a new month and many people put money into the market at the beginning of the month. The test for the uptrend will be whether the volume and the upthrust can continue. In the past, there was no follow through, and the markets began to go down again. I believe the same thing will happen with this upward move. It will run out of steam. Time will tell. I believe the downtrend is still in play for the intermediate and long term periods.