Monday, September 19, 2011

Market Matrix - Objective Market Heat Map

Over the past few weeks, market has been behaving in a very strange fashion. Neither was it allowing us to go fully long, nor short. Luckily, the Trading Algorithm kept us away from this choppy market -  preventing us from being whipsawed.

Markets have now entered the Inflection Point Model turn window. This window was predicted by the model on September 5, 2011. Today, we saw a sharp decline at the market open. Recent bounce might be a good shorting opportunity with stop above 1210. 

In order to gain better market perspective and to benefit its readers, UST is publishing its proprietary Market Matrix. This matrix highlights market internals in the form of an objective Heat Map. I hope that you will find it interesting and enlightening. Detailed Market Matrix analysis and its market implications will be presented tomorrow.


Used For
Prop. 1
Neutral / Top Picking
Short-term trend is neutral, while Long-term trend is down. Good time for Top picking with tight stops.
Prop. 2
Long: 2-6 years
Elliott Wave
EW Common
60% Contrarian b/c widely used
Suggesting that market has peaked and will start a sharp decline
EW analysis suggests that market has completed a choppy side-ways correction and is headed lower. Market should not rise above 1216.
EW Proprietary
Not widely used: High probability
Market's recent behavior has been choppy. Market structure requires one more down leg.
Sentiment Measure 1
Individual Investors
Neutral: Similar number of bears & bulls
Sentiment measures are showing  pessimism. However, since we are in a bear market these pessimistic readings can get even more severe before we can bottom. In the medium turn, this pessimism could prove to be the fuel for a strong rally.
     Since we have Fed Reserves announcement this week, it would be interesting how market participants react to this news. An initial unfavorable market reaction to Fed announcement, might be enough to instill excessive pessimism for the market to start a sharp rally.
Sentiment Measure 2
Individual Investors
Strong Buy: Very high number of bears in an up trending market
Sentiment Measure 3
Investment Advisors
Buy: Bears outnumbered the bulls for the first time in 1 year.
Sentiment Measure 4
Investment Advisors
Buy: Pessimism remained stayed elevated in an up trending market.
Sentiment Measure 5
Money Managers
Strong Buy: Pessimism increased in an up trending market.
Sentiment Measure 6
Neutral: Elevated bulls
Put/Call (6/6)

CPC: Very Elevated: Buy
CPCE: Very Elevated: Buy
Sentiment Measure 9
Traders Forum
Sell: Too much bullishness in a sideways market.
Sentiment M. 10
Strong Buy: Very pessimistic reading, in an up trending market
Fear Spike; close back within BB
Neutral: Vix rose but did not stay above the BB.
We might need another fear spike, to declare the bottom.
MACD Divergence
Indicates Tiring Trend: 5th Wave
Negative Divergences Present; We might have seen the top.
All of these indicators are neutral to bearish, suggesting a test of the lows is possible. This test could break the lows for a few days, creating a technical positive divergence among various technical indicators. This divergence, could then lead to a significant rally. At the same time some market internals are strong. 
        This technical picture in conjunction with a possible turn date indicates that the up to sideways correction might have already been completed. This correction could lead to a significant decline.
Sentiment Div.
Indicates Tiring Trend
No significant divergence in major indices.  Market might need further decline. 
RSI Divergence
Indicates Tiring Trend
Market would need to decline to create + divergence. Barrier RSI: Near a Sell
Indicates Tiring Trend
Buy: Tick showed that recent rally was very strong, we might be near a low
NYSE Adv Decline
Indicates Tiring Trend: 5th Wave
Buy: AD showed that recent rally was not strong, we might be see test of the lows.
Indicates market turns
Timing Model
Sell: IPM turn date was: 9/15-9/23. MFI bottom: Sept. end
NY Vol (Up/Down)
Fear Spikes
Neutral: Spike meant 3rd wave sell-off. Last down move left or bottomed ABC
Test of High/Low
W/o exceeding by 1%
Market Tested the highs
Emerging Markets
Breaking to new lows. Trend is lower
These markets suggest that overall market trend is down, and we might soon see a new low below 1100 in the SP500. Renewed rally in the US dollar, & strong decline in Real Estate and Emerging Markets means an upcoming decline.
Market Leading Indices
US Dollar
Strong Uptrend: Deflationary pressure
Broke to new lows. Market could follow soon.
Real Estate
Completing a triangle like all other markets.

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