Sunday, September 9, 2012

IPM Update and Future Action Plan

Due to recent software issues, I was unable to run the IPM. Today's run clearly shows that the turn date was scheduled for last week, specifically for September 7, 2012 (+/- 4 days). Based on this observation and the fact that the market was supposed to bottom during the next IPM turn window (mentioned on the blog in August), it is evident that if we had the latest IPM data we would have known that the market will bottom on ECB announcement.

Since the model was not run due to software issues we missed a good trading opportunity. I am upset with this development, as readers of this blog along with me missed a good long entry. Overall, the model has been ~97% accurate in accurately identifying market turn dates since Jan 2011 (when the model was developed). In back testing, the accuracy further increases.

In order to maintain software packages and to provide latest information to readers it has been decided by the UST team that a "IPM Only" subscription service should be started. The subscription will be used for: Updating model, getting software licenses, analyzing future markets like Gold, Oil, Eur/USD  and solving technical issues.


A- One IPM model report per month @ $15/month. This report will highlight the next turn date.
Schedule: 1st Weekend (Saturday / Sunday) of the month.

B- Two IPM model reports per month @ $28/month. First report will highlight the market turn date during the 1st weekend report and will then update the turn date based on re-run with new market data for the 2nd Report. Also, this report will include whether the next turn date is expected to be a Top or Bottom.
Schedule: 1st and 3rd Weekend of the month

Note: Package A data will not highlight whether the next turn date will be a top or bottom.

If interested, please send an e-mail to: . Subscription will start from this month i.e. next IPM turn date will be sent to subscribers next weekend. Subscription payments can be paid via pay pal to .

Please note that although we will try to put out general market analysis on this blog from time to time, IPM turn dates will not be disclosed on the blog.

Thursday, September 6, 2012

Divergences are Abound

Over the last few weeks market has shown pure resilience. It has refused to go down in the face of so many head-winds. But the question remains: Will this resilience result in a breakout? Or will it just attract more longs before breaking down?

Since mid-August one can see that glaring divergences have appeared across world indices. Although US indices are near the top, global index is much lower than the August high. Furthermore, England's FTSE, Japan's Nikkei, and Emerging Market ETF (EEM), are all showing serious market damage.

This kind of market action suggests that there is something wrong!! Either US markets are out of sync and will soon start to breakdown or US markets will soon pull all other markets to new highs. Based on the global economic environment with China's economic slow down, European recession, sovereign debt crisis and global political uncertainty, I think that US markets will follow the global markets and will soon start to move down. At this point, the question remains how soon, because we are running out of time in terms of the IPM bottom turn date?

Along with these developments, the sentiment indicators are showing red signals with optimism at very elevated levels. Moreover, Barrons recently came out with a Bullish magazine cover. This kind of optimism typically signifies a market top. Therefore, sentiment analysis suggests that we should be very cautious.

Along with sentiment there are some anecdotal observations that I have made over the last few weeks:
  1. Several stock market analysts, who have been reluctant to go long this market since 2010, have recently started buying stocks on leverage. Since these people are very influential, they must have convinced a lot of readers to buy also. Now the question remains, is the stock market going to play a hand on them and make them pay for their big bets??
  2. Apple recently won a huge patent fight against Samsung, giving them the ability to become the sole manufacturer of flat screen apple based smart phones. This ruling will enable Apple to sue other competitors for design similarities, thus amplifying their profit potential. However, since stock market is a forward looking mechanism, this kind of announcement (which is surely great for Apple) typically arrives at or near the top of a stock. So it will be interesting to see Apple's stock market action. If Apple does top out, it will take down the entire Nasdaq complex. 
  3. Netflix announced in July'2011 to increase rates. At that time everyone thought that it was the best decision because Netflix had no competition. However, the stock topped within 1 week and has since declined from $306 to $55. Be aware of Apple!!

In short, although it might be very tempting to buy over here, it will be prudent to wait for SP500 and DJIA to break above 1416 and 13200 respectively, and then jump in on the long side.

Sunday, September 2, 2012

Market Update - 09/01/2012

The blog has not been updated for the past few weeks because the market has been dull and there has not been much to write about. So I thought I should use this time to complete some other tasks and enjoy the end of summer.

After topping on August 21, 2012 by briefly peaking above 1424, the SP500 has went sideways to down. At the same time, the optimism has remained elevated. This behavior in conjunction with the next IPM turn date and the associated bottom, supports the argument that the market has already topped.

In order for this assumption to hold, market (SP500 and DJIA) should not rise above 1416 and 13175, respectively. Based on the market structure, market should start declining sharply very very soon.

The next IPM turn window is scheduled for the mid of September. Exact date will be published later.