Wednesday, November 21, 2012

Thanksgiving Rally - Exhausted Already?

Early last week, UST wrote on CNN Money that the market will go sideways till around Thanksgiving. And on Nov 9, 2012 it was written on this blog that market might need one more down leg to complete the current decline phase. Last week market declined into 1340s and then bottomed on Friday (Nov 16, 2012) before rallying 50 points in less than 3 days. In other words, market is still at the point where it was 1.5 weeks ago.

Market's sideways movement prediction was based on IPM turn date, which was e-mailed to subscribers on Nov 9, 2012. Inflection Point Model (Model), utilizes cycle analysis and superimposes Fourier transforms to generate market turn windows. This data is sent out to subscribers twice a month, along with current market analysis and the prediction that whether next turn will be a top or a bottom.

Yesterday, DJIA rallied more than 200 points – biggest point gains in quite a while. In order to further analyze the strength of this rally, we will see few internal strength indicators:

NYSE Advance Decline Line (NYAD):

NYAD registered its strongest reading list last October, which marked the market bottom after a lengthy 5 month correction (May 2011 to Sept 2011). However, one interesting thing to note is that we saw similar or even higher spikes in NYAD in August 2011, but that did not mark the bottom. In fact, market made a lower low in Oct 2011. Therefore, it is possible that we might see lower low from current levels. Although in Bear markets rallies are furious with high Advance/Decline numbers, the thing which differentiates a Bear market from a Bull market is the consistency of these spikes. Normally, a cluster of high spikes in NYAD are seen at the start of a Bull market. 

TRIN: TRIN did not register a low enough reading to mark the start of a new Bull Run.

TICK: Tick did not register a high enough reading to mark the start of a new Bull Run.

VIX: Vix is very close to a sell signal. Signal will be generated on a Vix close above 15.4. Declines typically materialize within 1-6 days of the Sell Signal. So we have to be careful at this point in time. 

Market structure is getting clearer with every passing day. Following figure shows the chart which was presented over the weekend, along with latest market data. We can clearly see that the market is rising in 4th Wave. This rise should not break above 1422 in order to maintain this count. The highest probability stopping area is: 1390-1406

In terms of the near terms structure, there are various possibilities. These will be narrowed down as the structure matures. But the best part is that we have a model which has given us an estimate of where the market should turn (by the grace of God). Model’s update was already sent to subscribers on Nov 9, 2012. This is a classic instance where having the IPM info, greatly amplifies readers’ ability to make educated trades. 

If interested in these updates, please fill out the form below. 


  1. Thanks Naqvi, As an investor, I'm looking for an "edge" to be successful. After reviewing your analysis on this blog and your subscription emails, reviewing other analysts points of view, it seems that from a short term standpoint (and I don't mean daily, I mean over the next few weeks) most are pointing towards a beginning to mid-December bottoming of the SP500. It will be interesting to see what happens. This last "rally" was a bounce and it will continue to fade as we decline after the Thanksgiving Holiday.

    Happy Thanksgiving everyone and remember, be careful out there (both in the markets and traveling on the roads)! Brad

  2. Thanks for your input Brad. I agree with you about both market and Thanksgiving travels. Happy Thanksgiving to all.

  3. Naqvi,

    This sounds very similar to earlier this year when you said it shouldn't rise above 1380, then not 1400, then it can't break above 1420. You keep raising your levels as the market goes up. Back then the market busted thru. Just saying. Any chance this new rise from 1343 is a wave 2 which is a correction from wave 1 that lasted from 1476 to 1344?

  4. I agree with your observations. As I have always mentioned (based on my understanding and experience with Elliott wave) that they evolve with market. And that is why, one cannot predict with 100% certainty how market structure will evolve till the end of the current wave. Wave structure is the clearest at the end of the move. That is why we use IPM model to understand how long a correction should last. Models output in conjunction with Elliott waves gives a very clear picture. But i will not say that it is also 100% accurate because there is no crystal ball, and I tell you that I will be lying. But timing model along with Elliott wave analysis has served very well, along with other proprietary analysis techniques. Furthermore, Elliott wave analysis can help you define the risk so that if one is wrong, he does not stay on the wrong side of the trade.


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