Saturday, March 5, 2011

Mid March 2011 Buy? - Inflection Point Model (Part 1)

In the name of God, who granted me insight, knowledge and wisdom to walk through the confusing financial markets. On February 5, 2011, it was stated that the inflection point models were suggesting a top in the financial markets around February 14, 2011 (+/- 4 days). Later, it was stated on February 16, 2011 that "Based on analysis SP500 should not exceed 1345 in the near term. If it does break above this level then the risk-reward ratio, which is currently very low for shorting the market will turn higher." 

Interestingly, the market topped on February 18, 2011 at 1344 and immediately declined to 1294 within next 4 trading days. Furthermore, since then the market has chopped around without exceeding the February highs. Although I have been out of the market during this chop fest, I am keenly watching the unfolding socioeconomic situation, Elliott Wave pattern, sentiment gyrations and the Inflection Point Model. 

In order to generate new turn dates, the two Inflection Point Models were re-ran and following conclusions were achieved. 

Model 1 and model 2 are both suggesting that the next market turn date will be around March 14, 2011 (+/- 4 days). Therefore, we can have a turn window from March 9 to March 18. This means that we can still see further decline in the equity market into these turn dates. Furthermore, week of March 14 is the options expirations week and many market turns take place during options expiration. Interestingly, Spring Equinox: March 21 (Monday) and Full Moon: March 19 (Saturday). 

When the time comes, the turn date will be narrowed in conjunction with several other indicators like:

1- Sentiment
2- Elliott Wave structure of Indices, US Dollar and Commodities 
3- Cycles 
4- Technical Indicators

These will be discussed in an upcoming Market Matrix post. In short, we might be nearing a significant bottom. But we are not there and might need further selling to reach that point.Therefore, one should be vigilant for potential long opportunities, but should wait for a confirmation from other models before entering long. 1270-1280 (SP500) is a good area for the bottom. However, if market rises above 1340, it would suggest that market has already bottomed.


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