Price Time Volume Investing

First, thanks for all the recent comments.  I have been excessively busy with work and family matters and have not had a chance to respond to many of these comments.  I have read them and am trying to work the topics into future posts.

As for the market, the internals are setup for a rally.  The Advance minus Decline metrics backed off from overbought and are in position to continue the move up.

The 60 day moving average of the put-call ratio is above 1.05 which has lead to a rally for the past couple of years.  Before that, it was rare for this metric to go above one.

The new lows of the Nasdaq (and NYSE) show fewer on each push lower.  This is a positive divergence.

Now the bad.  After two complete five wave moves up from the 2002 low, the SPX appears to be moving to five waves lower.  The recent consolidation could be wave 4 which is not good for prices in the next several weeks/months.  The October 10th cycle turn appears to have provided support but with no move higher.  Patterns like this almost always bring lower prices as the fifth wave eventually completes.

The VLE started its move down in July 2007 and not October like the SPX.  I’ve mentioned here a number of times that I prefer the VLE as a measure of the total market.  I am no E-wave expert and others with more experience in this area are free to correct me.  But it appears like the market is putting in a low with a 3-3-5 extended bear formation.  It is possible that the move from 1317 to 1554 was wave four and we are currently in wave five.  (Note: this can be seen on the SPX chart above but is not as clear.)  If this is the case then the market should burn itself out to the downside during wave five and finally provide a tradeable low.

Charts courtesy of Stockcharts.com

My suggested strategy is to not guess and to wait for the market to show it’s hand before allocating cash.  Short term and day traders must be making a fortune with all the volatility.  Anyone wanting to hold a position for more than a day or two is most likely suffering losses.

Recap of recent posts:

• SP500 Index Time Cycles
• Full Moon Bottom?
• Oil and Gold
• Reading the Market is Not Predicting the Market
• Value Line Arithmetic Gann Fans and Angles
• Market Remains Trendless
• Long Term Semiconductor Charts
• Day Four Retrace of Six Day Swing
• DJIA Long Term Gann Angles
• Expected Correction on Lower Volume
• Nasdaq 100 Swing Chart Ready for Correction

Previous Weekend Outlook posts.

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Tags:   A-B-C Correction · Elliott Wave Analysis · Market Internals · Market Outlook · Standard and Poor's 500 (SP500) · Value Line Arithmetic Index (VLE)1 Comment