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Tuesday, August 9, 2011

August 9 (Updated)

Update 3:50

Main indicator has bottomed, but needs one more 60 min candle to confirm. However, this is the last candle of the day. I am entering a trade on my Trend System, but as of right now it is unconfirmed. I wanted to enter it based on the buy signals from the secondary indicators.


Another day, another panic.

I am still not showing my micro-count because it is useless (as is any micro-count from anybody). If someone thinks they can predict the bottom of this panic wave based on a count they are deluding themselves. 1-2, 1-2, yadda, yadda is useless. This is one of those times where EW gives you no insight at all into the market behavior. Why?

Because this is a panic. This is an extremely volatile short burst move, and it will be over only when the fear burns itself out. Today looks like a likely candidate... But then again, so did Friday, and we dropped another 5% since that low.

End of mini-rant.

On the more useful side, my 60-min chart finally gave a divergence signal with the low today. I have one secondary indicator that gave a buy, and another one that is just about to do so. But my main indicator has not issued a buy yet. It has slowed significantly (slope is nearing zero from very negative) but not there yet. A strong up day tomorrow will likely trigger it.

The fact that I did get a divergence signal means that this cycle *can* be like a "normal" cycle (as I described here). Which means that we don't have a "spike bottom with no divergence" like we did in Sept and Oct 2008, and May 2010.

This means that I am not necessarily looking for lower lows once my cycle chart bottoms.

Like I said on Aug 3, if we got a bottom signal with *no* divergence with the indicators this oversold, the only 3 times that happened was Sept and Oct 2008 and May 2010 and all 3 times were accompanied by lower lows within the next week or so.

But in this case, we have divergence (which happens in 93% of cycles and subcycles) which means that this low could legitimately be the cycle low.

That is what I will be keeping my eye on in the coming couple of weeks. If we clear 118 without making a new low, then I think the downtrend is likely over and we are likely in a new uptrend.
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