Is This Just A Correction, Or The Start Of Something More

Is This Just A Correction, Or The Start Of Something More

Courtesy of David Grandey

All About Trends 

In our article on Feb. 9 entitled "The Market Is Following A Script You Can Profit From" we decided to do is a more detailed follow up to that article with a few more examples from the past in order to cement it in your brain.

In the event the opportunity rears its head you’ll be prepared in advance and won’t be one of those people who is a deer in the headlights or the ostrich who sees the lion coming and sticks it’s head in the sand thinking that is going to help, you’ll have the tools to be able to seize the moment and take action.

Is this just a correction? Or the start of something more.

If this is just a normal intermediate term correction then it’s not over till we come down touch the 200 day averages or prior support levels in the indexes (Wave 1, The A Wave, First Thrust Down) then bounce and build all new basing structures. The building of all new basing structures are what we call bottom of cups being built and those take time.

However if this is the start of something more? Then we come down, hit the 200 day averages or prior support levels (Wave 1, The A Wave, First Thrust Down) then we look for a ABC snapback rally off of those lows (Wave 2, The B wave, Snapback Rally). That could last for a month to three months. If this is the start of something more then that snapback rally abc will fail and then watch out. Upon a failure that would be the start of Wave 3, Bombs Away, The C Wave, Katie bar the door, The wonder to behold call it what you will.

If the market really did top and this is the start of the big picture wave 3, The big picture C wave call it what you will. Then let’s look at what that looks like from a chart perspective of a former new issue leader from 2007 as an example.

This issue starts off as being in a nice uptrend and above the green line, then it proceeds to put in an early warning change in trend alert pattern called a double top. After that double top it then sells off (blue box) Everything in the blue box is what we are referring to as Wave 1, The A Wave, First Thrust Down.

If you look close the blue box action traces out 5 waves down too. Notice where the issue stopped going down? Right down to a prior support level (light blue line). That all completed the 1st leg down, Wave 1, A Wave call it what you will they are all the same thing.

From there this issue proceeded to bounce (everything above the pink line) That bounce is the Snapback Rally, The B Wave, Wave 2. The real key is that failure of the Pink Line. That failure started the "Wonder To Behold" Wave 3, and as we like to say "Bombs Away". What we want to key in on is that pink line failure, should our markets follow this script and break to the downside of a pink line like in the charts above down the road THEN this is something more than just a correction.

In the meantime in the current market climate we need to trace out 5 clear waves down most likely to the 200 day average or a prior support level which we have yet to do. We are on our way that’s for sure.

If the chart above is the equivalent of a legend in the shopping mall that says you are here I’d say that we are somewhere in the blue box.

THEN we get our Snapback rally, B Wave, Wave 2. We’ll be monitoring the situation as we go on in time so stick around because when and if the current markets trace out a similar pattern over the next month or two then it is one big short selling opportunity to profit from upon a break of the pink line like in the chart above.

Below are a few other examples showing the same set up.

Now lets look at one from a major big picture perspective, that being the OTC Comp. off of the year 2000 peak when it first started and thru present day.

To learn more, sign up for our free newsletter at www.allabouttrends.net and receive our free report – “How To Outperform 90% Of Wall Street With Just $500 A Week.”