Sunday, April 15, 2012

Euro Completes 8/4 Test - Get Ready!!!

It looks like Euro will complete its 8/4 test to the down side tonight. This could open floodgates to the downside. This could have severe consequences for the broader market. Firstly, it would confirm the down-trend prediction of the global equity index. Secondly, it could push US dollar higher, thus, bringing back the risk-off trade. Thirdly, risk-off trade could fuel another bond rally.

This chain reaction of events could morph into something substantial, especially if DJIA and Russell 2000 break below recent lows because these two indices will then join the Euro in completing the 8/4 test to the downside. As we know, 8/4 test has been a tremendous asset for our trading.

Detailed Euro analysis will be presented later tomorrow. 


  1. Just what i've been waiting for! : ) This doesn't sound good....

  2. Thanks Naqvi! Joe, it looks like you got your wish and Mark, I hope you have some cash laying around from your rentals for when the market changes to "risk on". Me, I'm thinking this is a tad early for the "leave in May" with earnings starting this week, but I also think this could be happening early with the market turning less optomistic after the FED poo pooed QE3 for the forseeable future. With QE being downplayed last week, the trend seems to be reversing on itself (maybe it even helped push Europe to confirm 8/4?)- now how long the 8/4 will last, or if this is the usual "out in May back in September" market philosophy, remains to be seen, but these are VERY interesting developments. Be careful out there, Brad

  3. Naqvi,

    What's the latest?

  4. Hey guys - seriously, who can sit day after day and watch this market? Is Apple really worth 630 one day...then drop all the way to 580 a few days after, and then go back to 610? Games are being played with billions of dollars and if you can't see the sucker at the table, time to look in the least that is what I had to do. I just finished my taxes for 2011 and it turns out I bought $2.8 million of stocks and sold $2.8 million of stocks for a grand total of +$400 for the year. The only one making money is TD Ameritrade...and I lived through more frustrating days than good ones. These sharp moves have been happening for a few years now, and it's all about making both bears and bulls upset so they get out of their positions...and it works.
    As far as risk on, that ship sailed back in December...I am not sure what would need to happen for something to be called "risk on" again. It's definitely not a WSJ article saying that "Eurozone fears ease as Spain thinks they can pay off their debt", because we all know that's not true. Unless you have a friend that knows what headline is coming out next, or what the next Jobs report will look like, it's pretty much impossible to guess.
    I do love the work that Naqvi is doing as he is trying to look at different rotation may be the only true way to know which direction the market is going in, but you would need to have weekly, or monthly stats and it would take forever to have a buy or sell signal. Daily stats are meaningless IMO lately.
    I appreciate the discussion here and wish us all luck - and in regard to my rentals, I just sent all my tenants new carbon monoxide /smoke alarms and received some very nice emails thanking me for the upgrade. I have never had a stock ever thank me for anything! :) -Mike

  5. Sorry guys, I have been swamped with preparation for exams. One course that I am taking deals with differential optimization of revenue management strategies. I must say, it utilizes all of statistical, calculus, financial and other knowledge bases that I have developed over the years.

    In any case, the markets should start to move down soon. I was expecting a break down in Euro, but so far it has not broken completely. I will be interesting to see how it closes today. As far as the equities are concerned, they should move down till the next IPM turn date (I still have to re-run the program). When I get a chance, I would like to share a weekly chart of SP500, DJIA and Russell. This chart gives a very strong argument for the case that the market has already topped!!!

    Overall, we still are in a neutral market. The 8/4 test is in process for DJIA and Russell 2000.

    8/4 Test:
    1- Setup: Complete
    2- Test: Complete / In process
    3- Breakdown: Pending

    A break below recent lows, will suggest that the 8/4 test was completed, confirming the downtrend.

  6. Good Morning Naqvi! Thanks for the input and I'm glad you have a bigger brain than I to understand "differential optimization of revenue management strategies". Now that is a mouthful!

    Mike is right, it is a game. What makes Apple worth a particular dollar amount one day and a different dollar amount the next. Unless something happens from a world/business/market perspective, and assuming that these factors remain relatively stagnant for a period of time (a couple of days) nothing - but trader's gut. The trader (either retail or pro) thinks the stock is too high, wants to capture profit, wants to get out before the fall, trader's gut.

    I did my taxes and the only place I made money was in my rentals too (aside from our 9-5s). I traded in and out of stocks approximately $800k and reaped a whopping $1029 in profit. Woo Hoo!

    I think Naqvi's analysis is correct, I think the market will trade either sideways for a bit or until we get out of earnings season then start to drop. But I'm thinking it is more due to the seasonality of the market (leave in May, get back in September) and not so much the European problems, the cat has fur balls, ad infinitum. Be care out there! Brad

  7. Its been over a week, and since the euro never broke and the dow never broke, does that mean were heading up?


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