Wednesday, July 13, 2011

Turn Point Action Plan - July 13 to July 22

We have finally entered the turn window, with the market declining over the past few sessions. This decline has brought back a lot of pessimism in the market related the European debt issues and US slow economic recovery.

After re-running the Inflection Point Models, following charts and conclusions were achieved. 
These models are suggesting that the next market turn date will be around July 19, 2011 (+/- 4 days). Therefore, the turn window from July 13 to July 22 is still valid. Furthermore, we are in the earnings season and many times market turns during early earnings weeks, after deceiving many by its initial decline. This week is also the options expiration week, which in itself brings many market turns.

On the other hand, market's recent decline was 5 wave, which suggests that after the market undergoes a partial bounce, it will again decline to 1290s. In any case, I will wait for the Trading algorithm to generate a buy signal before jumping in on the long side. Overall, the market is tracing out a nice base, as discussed in June posts, before exploding higher. Risk-Management is the key over here to ensure that we are not caught in market's trap.

Note: If the does not bottom during this turn window and continues to decline after July 22, 2011, then the markets might face severe downside risk.

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