The Big Picture - Current Count

The market's wave 2 could have topped in August as a complex flat correction, but it didn't. The count was there, the indicators were there, the volume was there, the ending diagonal was there, but for some reason it reversed in late August after only 3 legs down. This was a corrective move down and foretold of this rally to new recent highs. What this did was make the count into a more complex double zigzag instead of the simple single flat that we had ending at the August highs. This is what the market does...it toys with you. We have been in the same price territory since May.

However, all this does is delay the inevitable and cause more pain for the bears (like me) in the short term and more pain for the bulls in the long term. The market will always try to cause maximum pain to the most people, but there is hope for the shorts (like me). Here is what I see.

We once again have a potential completed count with today's pop and drop. I also see 5 waves down since 9:45 this morning, so at a minimum after a retrace there should be another 5 waves down. What we hope for is at least 3 of these over the next few days. That will be a good start to show that the top is finally in. Another way to look at the past 5 months of price action is of a bear flag with a false breakout to the upside the last 2 weeks. However, let's not get too excited yet. This is only one day.

Months like the last 5 are reasons why we don't try to pick tops and gradually move in and out of positions...always leaving some dry powder for the rainy days (as September has been).

I am completely wrong if the market moves above the April highs.

Good Luck.

Total Volume Indicator continues to hit "dangerously" low levels

Today I was browsing thru my stockcharts.com folder called "Market Top 2007". These were the 80 or so charts I created back in 2007 and 2008 as the market tanked. I came across this one that continues to look like a great indicator.

This is a chart of the moving averages of the total volume of the markets (colored lines). The S&P is also on the chart in black. You can see the last time I updated the chart by the vertical black dashed line. Notice that before this line the market pretty much topped when the colored lines bottomed (where I have the horizontal dashed line). This is where volume is the lightests. You can see a noticeable downtrend in the volume since then. But, you can also see that the colored lines continue to bottom at market tops, at least for a short while.

Excluding the holiday time frame of 2009, the April top is where this indicator was the lowest (at about 1,000). We hit that point again during the August decline and are meandering that way again these past few weeks.

Buyer Beware!!! Low volumes have not been associated with bottoms these past few years and in fact the opposite has occurred in a kind of capitulation event of very high volumes at shorter term bottoms.

I continue to love this chart!