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Thursday, April 26, 2012

IPM Turn Window Update!!

Over the past week or so, markets have managed to stay above critical levels, thus, preventing an immediate decline. However, over the last week the market structure has been choppy at best, with several up/down gyrations. This kind of behavior is a hallmark of market correction, rather than a new rally phase.

Yesterday, I was surprised by the Put/Call ratio activity. Although market's rise was neither sharp nor significant, the Put/Call ratio collapsed. This kind of activity does not bode well for the market's immediate future. Lower Put/Call ratio means complacency and complacency leads to market declines. After witnessing this curious market action, I decided to re-run the IPM Turn Model to gather some insight about the market direction.

After re-running the Inflection Point Model, following outcome was achieved.



According to this analysis the next IPM turn date is scheduled for May 3, 2012 (+/- 4 days, Higher Probability: -2/+4 days). 

Over the past few weeks, I have tried to optimize the IPM turn model to define whether the market will Top or Bottom at the next turn date. Per analysis, next IPM turn date should be a market bottom. Please note that this bottom could result in a brief rally, followed by a new low in May 2012. 

This market potential is possible when market pattern is taken into account. If this pattern is confirmed, we will see further selling. Confirmation of this pattern will coincide with confirmation of the 8/4 test in the major indices. A break below 1360 and 12800 will confirm this pattern in SP500 and DJIA, respectively. 

Please note that since, we only have 6-7 days left in the IPM turn date, markets should start declining very soon i.e. Today/Tomorrow!!

9 comments:

  1. Thanks Naqvi, but now I'm confused. If what you are saying is correct, the market will start dropping into a bottom sometime next week (or so) as we go into the next turn window. This bottom could produce a bounce or short rally, then a steeper drop off to new May lows. A "turn window" to me is a period of time (days) in which the market changes its trend. The market will go up until it hits the turn window, when the market's trend will shift and start heading in the other direction.

    If that is the case, then wouldn't the markets currently be in the topping phase (after they have been trading sideways and consolidating for the last two weeks) and the "bottom" next week (or so) be merely consolidation at a new level (with a short rally during consolidation) on its way to a lower point in May?

    It doesn't make sense to me that we have a "bottom" next week, then a pop, then a lower "bottom". To me this is consolidation unless I'm missing something here. Be careful out there! Brad

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  2. I thinks he means this:

    Decline until May 3rd
    Rally after May 3rd
    Decline later in May lows.

    Too many IPMs haha
    Joseph

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  3. I do quite a bit of reading. One of my latest favorites is this site. http://chart.ly/symbols/SPX

    A couple of the posters seem to have a lot on the ball and their comments make for interesting thought. Be careful out there! Brad

    p.s. I wouldn't be holding equities going into the weekend, just my thoughts.

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  4. Hey Brad - interesting stuff...I enjoy reading Dave's take on the action each day:

    http://www.etfdigest.com/davesdaily/

    He's a bit cynical, but how can you not be if it was your job to figure this out everyday. I am still on the sidelines...seems like being short is gaining more popularity once again...does that mean long is still strong? Place your bets!...round and round she goes :) -Mike

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  5. Thanks Mike, (and Joe too for the market clarification) I like reading who thinks what and figure out who makes the most sense. Here is another one I read form time to time:

    http://www.guerillastocktrading.com/stock-market/stock-market-forecast-for-trading-week-of-may-7-2012/

    To get other weeks, change the link from "-may-7-" to whatever Monday you want and the review will pop up (at least that is how I've been changing weeks). The consensus seems to be to stay on the sidelines though. These markets are very unpredictable. I even got an email from "National Memo" saying that the world order has changed and that China is now the economic power. Beijing and Washington DC are in cahoots to do what they can to lower the purchase power of the dollar and kill the dollar as the world's trading currency. In its place will be the Yuan. The guy arguing this point was pretty compelling. I'm American, but I do think the world currency is about to change, and the Yuan will be the winner. I thought this before I saw the email from National Memo. Maybe investing in Chinese companies that mine natural resources like copper, zinc, nickel and platinum, manufacturing companies, could be an interesting way to mitigate the risk of the US markets. Just some thought. Be careful out there! Brad

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  6. Ok, S&P broke below 1360. Markets should decline from here now. Hold on tight!

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  7. I don't think so... As mentioned in this update above, market was supposed to put in a short term bottom within the turn window. Today was the last day of the turn window. It seems like the market has put in a short-term bottom, and could rise for next 3-4 days. This rally will be followed by a break down to high 1200s towards the end of june. By the way, Russell2000, Euro and SP500 have also completed the 8/4 test to the down side and are now in down trends.

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  8. Any news? We are going lower? Are we still seeing a small rally up?
    Thanks
    Joseph

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  9. Any news Naqvi? Are we still seeing this rally? Thanks. Joseph

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