Archive for September, 2011

by David G. Hawkins

Short Term – Daily Bars Chart

In my last post here, regarding this chart, I said, “But yesterday, it came to a halt right at R1, with a rather long upper whisker on that candle.  This could well be indicating a pause, a minor pullback, in this uptrend.  If price does come down a bit in the next few days, I’d watch for support and a turnaround at either R3 or S2, or maybe even as low as S1.”  Well, price certainly did come down, and further than the three supports I mentioned.  It went down one more, close to the level of the S1 curve from the weekly bars chart.  And in the last four days price has turned around and is now strongly moving upwards.

Above the present value of price, there is R1 as well as five levels I’ve marked, copied over from curves on the weekly and monthly bars charts.  Any one of these could be the level of the next turn down.

Since early August, what we see on this chart is a succession of higher highs and higher lows, with large swings of price in between.  So, this is an uptrend from August, but not a strong one, and accompanied with large volatility.

Intermediate Term – Weekly Bars Chart

The second chart here is the weekly bars chart.  The uptrend that started with the dramatic bounce up from Old R4 in early August is continuing, holding comfortably above the new S1 curve.  But it’s certainly not a robust up trend, kind of meandering along, lacking conviction.  So, we must be ever on the alert for it to top out and turn down, which is why I’m careful to include the four curves above the current price, one S curve and three R curves, any one of which could well be the level of the end of this lack-luster up trend.  The trend could go even higher, up to that top red line segment, which is the level of the R curve from the monthly bars chart.

There’s another possibility for this lack-luster uptrend.  If it continues to bounce along above its S1 for a bit more, then this will qualify as a Foothill Pattern, which Paul Levine, the founder of the Midas Method, identified, and which I described in our book.  The Foothill Pattern is often the precursor to an explosive uptrend.  We should be on the alert for a one bar (one week) very strong up move that goes far above the current range of this up trend and breaks through at least one of the resistance levels I’ve marked on this chart.  That would be the entry signal to get on board a new, very strong up trend.

The lowest line segment on this chart, down at 952, marks the level of the newest S1 curve on the quarterly bars chart.  The end of this month will be the end of the third quarter, so I will spend considerable time in my next post exploring the quarterly bars chart.  Already I can see that it’s going to be telling us some very significant things about the long and very long term health of the stock market.

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by David G. Hawkins

Long Term – Monthly Bars Chart

The first chart here is the latest monthly bars chart.  A month ago I opined that this chart showed that the market had started a new downtrend in May.  Now, the August price bar on this chart shows what may be a new, different story.  Its long low whisker is what is often called a “Spring”, typically marking a bottom.  Additionally, look as the S2 curve which we have carried on this chart for a long time now.  This curve is launched from the price pullback in July of 2009, and is the second in the hierarchy of S curves that followed the uptrend that started in March of 2009.  (I also had the third S curve of this hierarchy on this chart, S3, launched from the Feb. 2010 pullback, but I’ve removed it here to reduce clutter on the chart.)  The August price bar gives every appearance of bouncing up from S2, so at the least I have to conclude that, most likely, the downtrend that started in May has ended.  What follows now may be just a sideways consolidation, or the start of a new uptrend.  If the unlikely happens – a strong break below S3 – that would be an extremely bearish indication for the market.

Intermediate Term – Weekly Bars Chart

The second chart here is the update of the weekly bars chart, which is the only chart I showed in my Aug. 14th post here.  In that last post, I emphasized that, by bouncing up from the Old R4 curve, the chart was giving a very strong indication that the downtrend had stopped.  And now, in the 2.5 weeks since then, we see a very clear follow-through of the bounce up.  This is the beginning of a new uptrend on this timeframe.  I’ve also marked on this chart, with the upper green line segment, the level of the S2 curve from the monthly bars chart, which confirms the support of Old R4.  Additionally, I’ve put in the basic S1 curve launched from the March 2009 low, and the middlegreen line segment which is at 1050, the level of the S1 curve from the monthly bars chart.  And finally, I’ve put in that lowest green line segment at 952 which is the level of the corresponding S1 curve from the quarterly bars chart.  These levels show where supports are, in the unlikely event that the market breaks below Old R4.  (I’ll have a lot more to say about the quarterly bars chart in my September month end review.)

Short Term – Daily Bars Chart

The third chart here is the daily bars chart, and it dramatically shows the bounce up from Old R4.  On Aug. 19th, price came sharply back down as if it were going to re-test Old R4, but didn’t even get down to the monthly S2 level before starting up again.  From that point on, we are clearly in an uptrend, with the hierarchy of S curves that’s following this trend already up to S2.  In the process of this new uptrend, price has robustly broken through the R3 and R2 resistance curves from the preceding downtrend, thus showing its strength.  But yesterday, it came to a halt right at R1, with a rather long upper whisker on that candle.  This could well be indicating a pause, a minor pullback, in this uptrend.  If price does come down a bit in the next few days, I’d watch for support and a turnaround at either R3 or S2, or maybe even as low as S1.

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