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Ian's BBS discussion of the Base Low concept:The Base Lows you cite [1989 and 1994 were mentioned in the question] are indeed memorable Base Lows and standout like landmarks. However, during the course of a Bull Run, there are invariably minor Base Lows which invariably relate to the "cycles" of three legs up with two downlegs in between that all Elliott Wave gurus use. I don't profess to be one, but let me give you some guidance on how I peg a Base Low, a stake in the ground: 1. The first requirement is that there has to be a leg up of >25%. The Elliott Wave types would have it at >23.6%. :-) 2. Then there must be at least an Intermediate Correction - in my book that is now a 12 to 16% correction. It used to be 10% to 15% moons ago when things were less volatile, but I have adjusted for the more herky jerky behavior of recent times.
4. Then we look for the follow-through day which is the 4 through 7 day strong move after the turn-around day, and that happened yesterday. 5. The next clue, and I was glad to see you have it pegged, is to keep a beady eye on the % of NYSE stocks above the 200 Day MA. Understand that these numbers at this stage can be a trifle misleading since we are dealing with a 200 Day MA that is still falling instead of the usual rising in a Bull Market Correction. Anyway, given that caveat (where obviusly the bar is low), the clue is to see 8% to 10% point moves within three successive days. We have jumped 15% in just four days to get us to 35% above the 200 Day MA, which is good. I would suggest you watch the next week to see continued moves up of 8 to 10% points at least once more to get us close to 50% in a hurry. Goodness is usually measured above 53% for this indicator.
6. None of this matters to day-traders - they know what they are doing and are playing either side of the market anyway. But swing traders are looking not to miss too much of a run, if this a genuine up leg in a major oversold situation. Beyond that, the longer term Samurai types who are Patient, Prudent and Pounce, want more assurance that this is not another pump and dump trap. 7. Swing Traders must turn their attention to Industry Group Rotation, Leaders breaking out in abundance, far fewer false breakouts, and movement up through normal resistance points made on the way down:
8. Given all that mumbo jumbo (good stuff), the real resistance is at 61.8% back to that last high of 2328 mentioned above, and seems a long way to Tipperary at this point in time. Let's take one small step for HGSers and then we can make one giant leap for success by then. By then the other signs of 17 curling above the 50 Day MA and the Nasdaq piercing upwards through declining tops lines from the highs should fall into place. Only then will the true turn-around of the direction of the market be in place.
So, I have given you the High, Higher and Highest scenario off a "Low Limb" of the decision tree to guide you on expectations for the upside for NOW. They are 1600, 1750 and 2000, respectively. I hope this will help those of you who are struggling with uncertainty to lay out a map of the upward scenarios of varying degrees. A retest of the lows recently set cannot be ruled out, since at this stage we have little to go on but a bounce off a very oversold situation. For sustained movement upwards we need positive stimulus on the Fundamental front with injections by Congress and the Administration quickly to offset the gloom and doom of lay-offs, aircraft industry demise, consumer confidence slowing, etc., etc. etc. which has now become the soundbites of the airwaves. Uncle Alan pops up again on Oct 3. which is a good omen as that is when my fourth grandson is due! I am naturally tight on time as I am hurrying to get all the work done for the upcoming seminar, so please understand that this is meant to be a timely Flash bulletin to help all the readers of this bb understand the near term road map. Best of luck to you all. Regards, Ian. |
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