Wednesday, October 19, 2011

Inflection Point Model - October 19, 2011

Since May 2011, major market indices like DJIA, SP500 & Nasdaq, completed a 5-wave decline on October 4, 2011. However, Ndx-100 did not complete a 5-wave decline. This behavior gives rise to the primary question: Whether the decline over the last 5 months was just a minor correction in a broader bull market or is there some other thing going on? In order to get answer to this question, we would have to delve deep into market analysis.

Since bottoming on October 4, market has staged an impressive rally (~14% in 2 weeks). This rally has brought the markets back into the neutral territory. At this point technical and sentiment indicators are suggesting a continued rally after a brief correction. But one should wait for a good entry point. This will hopefully ensure that we do not get caught up in a sharp decline (if one ensues).

As mentioned in the latest market overview, a very significant UST Inflection Point Window is approaching. This turn date is very critical because either it will provide us with a very good buying opportunity till the end of the year or we will get a shorting opportunity. In order to further refine the turn date, we re-ran the Inflection Point Model. The program output is given below:

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Markets are very close to the turn window. Therefore, one should be very careful and be on the lookout for a trading opportunity. At the next turn date, both models are showing a very sharp turn, thus amplifying the importance of this turn date. Interestingly, this time frame also coincides with some astronomical dates and time symmetry turn date projections.

Since we are in a bear market, market needs to complete the 8/4 test to prove that trend has reversed from down to up. In this regard, markets will need to undergo a correction for the next 3-4 days, followed by a breakout. We will intently wait on the sidelines for the turn window and the Trading Algorithm signal. In the next few days, Trading Algorithm might generate a Short Sell or Buy Signal - we will trade the signal when it is generated and not our hypothesis. At this point, it would be worthwhile to evaluate the Market Matrix.  

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