Price Time Volume Investing

I’ve been asked by many people over the past few months why I think the October low will be “the” low before a new five wave bull market. While the SP500 Index (SPX) e-wave charts do little to support this guess, the total market is in much better shape. I’ve been able to call the long term accurately since about 2004 using the total equal weighted market versus the major indices and I’ll continue to use that until it fails. Still, the look of many charts are not supporting my view. I will be quick to change my view in the next several months if what is isn’t what I guessed.

I use the VLE Index (components at link) to judge the actual strength or weakness of the market. For me this has proven to be the best indicator of current and future market conditions over the past ten years. Charts to this index can be found in the right sidebar and are updated weekly.

First let me discuss why I believe October will be the low. The SPX chart has been a great tool for predicting time cycles. The first five wave cycle lasted 877 calendar days. The correction and subsequent second five wave cycle ended just prior to 877 days from the completion of the first cycle. The March low was 218 days from the end of the second five wave cycle while the duration of the 2005 a-b-c correction was 218 days.

The duration of the first five waves and the following a-b-c correction was 1096 days. October 10th is 1096 days from the end of the a-b-c correction. I won’t go into all the symmetries contained in this chart but they are obvious. My original guess was a bounce off the March low up into June/July and then down into October. That guess didn’t work out as well as my previous guesses over the past few years. But October 10th remains a significant cycle turn day.

Still, the SPX price action remains weaker than I had guessed and the e-wave action does not support a big move up from October. What is bullish? I go back to the Value Line Index (VLE) which has been a better predictor of price than the SPX has.

The VLE never broke through the top of the first five wave cycle the way the SPX did. My thoughts have always been that the SPX is weighted to whatever is in a good economic cycle. Financials and energy were hot for a few years. Now they are not and the SPX may be weak. But the average run of the mill growth stock is doing fine. Thus the VLE is stronger than the SPX and the DOW. Price bounced off the 1:2 ascending Gann angle (as it did with the SPX) and is in good shape above the 1:1 descending angle.

The 25% time cycle hits at the end of September on the monthly chart (which is close enough to 10 October for me). The question that remains is will price make a high at this time cycle or a low?

I have continued this post here.

Recap of posts this week:

• Another Oct-Mar Range View
• End of Oct07 to Mar08 Time Cycle Approaching
• Google (GOOG) Updated Range Square
• Low Volume Nothing Day
• Smallcaps Are Looking Very Strong During This Swing
• SPX Elliott Wave Guess
• Agriculture Stock Near the 1:2 Gann Angle
• NYSE Perspective from Three Time Frames
• Low Volume Consolidation Day
• Top 100 Stocks Near 50 Day Moving Average
• Another Good Day for the Nasdaq Composite
• CRB over Twenty Year Bond as Inflation Gauge

Post Modified: August 17th, 2008 at 7:11 pm

Tags:   A-B-C Correction · Dow Jones Industrial Average · Elliott Wave Analysis · Gann Angle Fan · Market Cycles · Market Outlook · Standard and Poor's 500 (S&P500) · Value Line Arithmetic Index (VLE) · Volume3 Comments