ONE WHOLE YEAR!!!!

One year ago, on October 29, 2011 Understand, Survive and Thrive's first blog post was published. It has been a great year.

Today I will start by thanking God, who bestowed on me the passion, drive and skill of writing clearly and of explicitly conveying my message. Believe me it is a gift because at one point in my life, I did not know how to compose an essay. He also enabled me to comprehensively and uniquely analyze the financial markets (not as a full-time profession, but rather as a full-time hobby).

I would also like to thank all who have supported Understand, Survive and Thrive, by being a continuous reader of the blog posts and market analysis. And most importantly, I would like to extend my sincerest gratitude to my family and friends who encouraged, helped, and supported me during every aspect of life!!! Thank You all for your help and support..

Upcoming in November
Recent market research has brought forward few very interesting observations. These observations prompted a re-run of the Inflection Point Model on both Daily and Weekly time frames. It is important to note that weekly IPM turn dates have been very accurate in the past. Some of the past predictions of the Weekly IPM include: May 2011 top, July 2010 bottom, March 2009 bottom etc. So, when there is a turn date projected in this mode, it is worth noting.

In a nutshell, research shows that November and December can be very eventful. The question is: In which direction? Up or Down. These questions will be answered through following market analysis (will be sent to subscribers via e-mail):

1. Weekly IPM update and its implications (NEW)
2. Daily IPM update and its implications
3. Market's structural analysis: Various potentials and strategies
4. Market's sentiment analysis
5. Regular and Customized Technical indicators 
6. Supporting markets' structures
7. Time symmetry and potential reversals
8. Trading Algo Updates
9. Market Matrix Update
10. Market Barometer (NEW): Will statistically weigh all the above mentioned analysis techniques as parameters and then generate a total market directional probability

Note: Two new market analysis techniques will be introduced in November: Weekly Inflection Point Model and Autonomous Market Barometer.

All of this exhaustive market analysis will ultimately be combined into a single comprehensive Market Analysis report: "Market Analysis & TPI Story Line". This report will give a timeline based dissection of the stock market: How it ebbed and flowed, how it responded to various market shocks and how the Turn Point Identification Process unfolded. In future, it will be used as a blue print for maximizing UST services' potential profitability.

All market analysis components (mentioned above) will be available to the subscribers via e-mail. Although final decision about the pricing of the "Market Analysis & TPI Story Line" has not been taken, subscribers will receive at least 60% discount on this report, if not free. Although above mentioned analysis will take a lot of time and effort, hopefully it will help identify a very good trading opportunity for potentially significant profit generation.


Other Announcements:

• Admin fee has been waived for 2011 
• Market overview for October 30, 2011 will be published later in the week.
• Q3 Newsletter will be issued either in late November or December, depending on market analysis work load.  
• Subscription will close on November 1, 2011 (early morning)

In the end, I would again like to thank you for supporting Understand, Survive & Thrive. It has been an amazing journey.

If interested in this kind of Analysis, register now for Subscription Info.

Predicted vs Happened - 3 of 3 Starts!!!

In the name of Allah the most Gracious, most Merciful

Last night Understand, Survive and Thrive provided a comprehensive market analysis from every possible angle, and wrote: "1220 level possesses strong support for the market."

Lets see what happened:

Predicted

Happened

Subscribers were told to keep stops at 1207 in the last Trading Algorithm Update. Since the stop was not hit, they are still in the trade with SP500 futures up more than 16 points right now. If the market holds its gains today, it would suggest that we have started wave 3 of 3. This pattern means that we are off to the races to at least high 1200s in the near term. 

Moving Forward

It seems like "8/4 Trend Reversal Test" was successful in identifying the trend change. Moreover, we have been working on a Trade Probability Calculator, to justify whether a trade should be undertaken or not. Probability Calculator's output will be shared with subscribers and blog readers in November -suffice to say, it has brought numerical clarity in our trading.  

Current IPM turn window has resulted in a significant market bottom, marking the start of 3 of 3 (the strongest rally phase).  Next IPM turn date has been calculated, and Subscribers will be informed about it next week. Subscribers will also receive updated detailed stop levels by Friday. Right now bring the stop up to 1221 (SP500).

If interested in this kind of Analysis, register now for Subscription Info.

Deadline: October 31, 2011

Bull vs Bear for a Confused Market

BULL CASE

Structure – 5 wave rise è Wave 1 of 3

Following chart shows a clear 5 wave structural rise since Oct 20, 2011 bottom. 5 waves are usually followed by 3-wave corrections, like the one we are seeing right now. Moreover, market traced out a triangle during today’s decline. This suggests that we are in the final thrust lower of 2^nd wave down. Once this correction is complete, market will start rising again.

Wave Relationship: Wave a = Wave c: 1220 (SP500), 61.8% retracement of Wave 1 move up from 1197 to 1254: 1220. Therefore, 1220 level possesses strong support for the market. If the market declines below 1197, it would suggest that we have topped and will decline sharply (look at the Bear Case).

Time: Today is the IPM turn date. Under such time based circumstances, it is a possible that market might bottom early tomorrow and then start a new rally phase (while still in the turn window).

Trend: One of the most important aspects of trading is the trend and right now, trend is up on all levels. We have regained the Bull Market status, uptrend has been confirmed by the 8/4 test, and we are in an uptrend even on shorter time-frame.

Sentiment: Today everyone on the TV was talking about the possibility of disappointment from Europe. This kind of behavior along with pessimistic readings from sentiment surveys suggests that we are closer to the bottom than to the top.

Indicators: Some of the technical indicators like NYSE stocks above 50DMA, TICK (10 DMA), NYAD (10 DMA) and others are showing incredible strength. Suggesting that current rally is not just a bear market rally, rather something more significant or at least long lasting.

Currencies: Currencies (EUR, AUD, GBP) are supporting patterns that portend a weaker dollar in the near future. Weak US dollar is good for the stock market

BEAR CASE

Structure – 3 Wave rise complete

Following chart shows the possibility of a completed 3 wave rise since October 4 low. Furthermore, the 2^nd wave retraced 61.8% decline of the 1^st wave down 1370s to 1070s (a common Fib relationship). This pattern would suggest that we will start declining in the 3^rd wave down - one of the strongest down moves.

Although this pattern can result in a sharp decline, it is just too good to be true. With everyone looking at Europe and blogosphere filled with the 61.8% retracement information, it seems like a little too obvious stopping location.

Time: Since today was the IPM turn date, it might be possible that market topped out yesterday and is about to decline sharply. This is probably the strongest argument in favor of a continued decline.

Sentiment: Sentiment did get a little frothy, but it is nowhere close to a market top. However, one should keep in mind that sentiment does not get very optimistic when in a bear market. In the event, we would like to mention that we are not in a bear market – at least by our measures.

Indicators: Very few indicators are indicating bearish divergences. This does not support a sharp decline.

Trend: Trend is up, so UST will not undertake a counter-trend short trade before market reversal from up to down - market breaks below 1210 and 1197.

STRATEGY

Only for Subscribers

Market Overview - October 24, 2011

Market has risen very sharply over the last 2 weeks. Personally, I was not expecting such a strong move, especially since the market was in a well-defined down trend. This kind of market behavior reminds us of the importance of having a systematic trading approach and to not let our emotions govern our trading decisions. For example, UST Trading Algo got out of the market at 1114 after shorting at 1185. It then stayed away from the market, eliminating the pain of shorting and losing money (BGG).

A reader recently commented on the blog that market might have already completed the rally, and we might top over the next few days. Personally, I would like to agree with the reader. However, recent market action has been so violently positive that it managed to pass the 8/4 trend change test. This test confirms that we are now in an uptrend and in a Bull market. In Bull markets, surprises will be to the upside. Therefore, one should avoid being short and manage risk in long trades.

One of the primary tenets of UST is to trade with the trend. This is because, similar to persistent declines that we saw in August and September 2011, market can undergo periods of persistent rise: Rise after Mar 2009 low, July 2009 low, February 2010 low & August 2010 low. Under such circumstances, trading against the trend can prove to be catastrophic. Therefore, as long as we are in an uptrend, our goal will be to identify bottoms and not tops. 

STRUCTURAL ANALYSIS
As long as the Trading Algorithm levels are not violated, current market structure supports a continued rally. The following chart shows a clear 5 wave rise (Wave I) since October 4^th low, followed by a 3 wave sideways correction (Wave 2). This kind of behavior suggests that the market is about to embark on the 3^rd wave up. This could result in a sharp rally to 1300 level (SP500).

This pattern is supported by technical indicators, sentiment readings, IPM turn window calculations and supporting markets. In fact, technical indicators (NYAD, TICK, TRIN) are showing such a strong market rise potential as we saw in March 2009 or July 2009. This behavior in conjunction with pessimistic sentiment, suggests that we are about to witness a sharp rally.

Note: In one of the future updates, UST will send out Market Matrix analysis (if time permits).

In November, Understand, Survive and Thrive will publish its Q4 newsletter. UST might also publish a special report highlighting the significance of the current rally and potential Bull Market/Bear Market scenarios. Both of these publications will be available to the subscribers, as soon as they will be released. Like IPM these publications might be very useful in navigating the end of year market gyrations.

In any case, risk-management should be of paramount importance. Subscribers will continue to receive stop-loss levels and trailing stop locations.  


SUBSCRIPTION
A special Subscription promotion is currently running through October 31, 2011. There are only 3 spots left. If you want to get information for subscription, please send e-mail to: subscription.ust@gmail.com. After October, subscription will not be opened at least until January 2012.

Trend Reversal Update

Step 1 - Setup (Complete)

Step 2 - Test   (Complete)

Step 3 - Breakout  (In Process)

It seems like market trend has reversed. 3rd Wave up is underway. Markets might have bottomed yesterday within the IPM window (already sent to subscribers).

Inflection Point Model - October 19, 2011

Since May 2011, major market indices like DJIA, SP500 & Nasdaq, completed a 5-wave decline on October 4, 2011. However, Ndx-100 did not complete a 5-wave decline. This behavior gives rise to the primary question: Whether the decline over the last 5 months was just a minor correction in a broader bull market or is there some other thing going on? In order to get answer to this question, we would have to delve deep into market analysis.

Since bottoming on October 4, market has staged an impressive rally (~14% in 2 weeks). This rally has brought the markets back into the neutral territory. At this point technical and sentiment indicators are suggesting a continued rally after a brief correction. But one should wait for a good entry point. This will hopefully ensure that we do not get caught up in a sharp decline (if one ensues).

As mentioned in the latest market overview, a very significant UST Inflection Point Window is approaching. This turn date is very critical because either it will provide us with a very good buying opportunity till the end of the year or we will get a shorting opportunity. In order to further refine the turn date, we re-ran the Inflection Point Model. The program output is given below:

 Subscriber Only

ANALYSIS

Markets are very close to the turn window. Therefore, one should be very careful and be on the lookout for a trading opportunity. At the next turn date, both models are showing a very sharp turn, thus amplifying the importance of this turn date. Interestingly, this time frame also coincides with some astronomical dates and time symmetry turn date projections.

Since we are in a bear market, market needs to complete the 8/4 test to prove that trend has reversed from down to up. In this regard, markets will need to undergo a correction for the next 3-4 days, followed by a breakout. We will intently wait on the sidelines for the turn window and the Trading Algorithm signal. In the next few days, Trading Algorithm might generate a Short Sell or Buy Signal - we will trade the signal when it is generated and not our hypothesis. At this point, it would be worthwhile to evaluate the Market Matrix.  

MARKET PROBABILISTIC ANALYSIS

Subscriber Only

UST Update and Market Overview

Its been a while since the last market update was posted at Understand, Survive and Thrive. For the last two week, we were having severe computing issues including modem issues, router problems, modelling software license update and computer replacement. After several days of troubleshooting, we are back and running. The only caveat is that over the next few weeks, I will be having mid-term exams and presentations. As a result of these scheduled obligations, market updates will be less frequent.

Due to modelling software's update, the license had to be re-installed. This prevented us from re-running the model for the past 2-3 weeks. When the IPM was re-run yesterday, I was shocked to see that October 4th bottom occurred within the turn window specified at UST: September 28 (+/- 4 days). In the near future, I will address this observation in detail with lessons learned and future action plan.

As mentioned previously, the primary task of Understand, Survive and Thrive is to manage risk and trade in the direction of the trend. After shorting at 1185 (SP500), UST Trading Algorithm exited the market at 1114 for a 4.5% profit. Culminating the choppy month of September with a handsome 10%+ profit (details of trades will be provided in the Q3 Newletter).

In spite of such amazing performance in September, the UST analytic team believes that our most important achievement is that we did not get caught up short in the recent sharp rally. Some of our peers have lost over 15% as they stayed short on a break above 1100. This allowed us to keep our powder dry while continuously analyzing the market for directional clues.

MARKET ACTION
In terms of the market action, there hasn't been a lot going on. Although the market has rallied more than 10% in less than 2 weeks, it is still in a downtrend. To be clear, we would have loved to catch this rally if the model had been re-run in time but this is not the goal of trading. The goal of trading is to be disciplined and opportunities will come our way.

At this point, I would like to mention that around one week ago the UST Tading Algo suggested that if the market declined below 1150, it might provide a good shorting opportunity. However, market never broke below 1150; again validating the importance of the UST Trading Algo (By the grace of God).

WHY NOT LONG?
In the event, one could ask: Why didn't we go long on Oct 4, 2011? Following reasons prevented us from going long:
1- We were not able to re-run the model for the past 2-3 weeks, as mentioned above.
2- We did not feel comfortable undertaking a counter trend trade.
3- We wanted the market to prove that it had turned from down to up.
4- When we last ran the IPM model, the October 2011 turn date (will be provided to subscribers) appeared to be one of the largest/most significant turn dates in a long time. With the well-defined market structure carved out by major indices since May 2011, it was highly likely that market would bottom at this significant turn date and then rally for a few months. Instead market bottomed at the last turn date.

As a result of these developments, we did not buy stocks on Oct 4, 2011.

Note: The best aspect of being a human is that we continuously evolve with time and learn from our experiences. In similar fashion, the UST team has updated its set of trading rules based on IPM turn window trading. These updates will hopefully (God willing) help us through our future trading endeavors.

PRESENT MARKET LOCATION
Right now, it looks like the market bottomed (at least in the intermediate term), on October 4, 2011. Since this bottom and the subsequent sharp rally does not guarantee a long-term up-trend, it is possible that we might have already completed a partial retracement of the previous 5-wave decline and have started another down leg. On the other hand, its possible that we might just undergo a partial decline before the major break-out. In order to mitigate such uncertainty, UST uses the 8/4 test to justify a market bottom.

The 8/4 test is divided into 3 parts:
1- Setup
2- Test/Hold
3- Breakout

If the market has bottomed, it is currently at the first step - "The Setup". This step will be followed by a retest of critical levels / partial retracement of the recent rally. UST Trading Algorithm will generate a buy signal during the correction, if this correction coincides with the Inflection Point Model turn date and Market Matrix buy signal.

In the coming days, we will discuss market's structural potential to decipher whether next turn window will mark the market bottom or whether it will mark a top before beginning the next sharp decline phase.

Market Turn Coming???

It seems like market is making itself ready for a final turn lower, to put in the low for the current decline.

It is just very hard to believe that market turned up the very same day, it officially went into the bear market territory. A lot of people tend to exit the market on the close in the bear market territory. Therefore, if the market can close under 1090, it would trigger a lot of sell signals which will in turn mark capitulation.

On the sentiment front, we are getting extreme pessimistic readings which are conducive to a sharp rally. For example, Investor Intelligence survey dropped down to level of Bears last seen in March 2009. Although this is significant pessimism, it is difficult to assimilate that market bottomed on the same day pessimism hit an extreme level. Typically, markets tend to remain oversold for some time. In this way a lot of participants, who trade based on sentiment measures, assume that market has further to decline.

Overall, we are likely to see a new low over the coming weeks. Actual critical levels, market timing and Market Matrix analysis will be shared with subscribers. However, we will keep this blog updated as we see critical developments.

Note: We are in a bear market/ downtrend, and rallies will typically fail in a bear market. Therefore, we will not buy this rally until unless our proprietary indicators give a buy signal or the trend is changes.

For Subscription Info (if Subscription opens up in October), please fill out the following form:

 

Market Overview - October 3, 2011

One of the most prominent Sunday headline was that Greece could not meet its budget deficit reduction targets for 2011 - as if anyone thought that they will? Global stocks sold-off throughout Sunday night into Monday. Right now US stocks are stuck in a neutral battle between Bears and the Bulls. However, it seems like that the resolution will be to the downside. Next few weeks will be very interesting and hopefully rewarding for UST readers.

There is not a lot to add in terms of market analysis. Markets are in a well-defined down trend and are tracing out a series of 1 and 2s. One of these days, this sequence of 1s and 2s will give way to a sharp decline in the stock prices. This sharp decline will mark the 3rd wave. Keeping in mind the length of 1s and 2s, there is an increased possibility of a mini-crash in the stock market.

On the sentiment front, we are seeing positive developments with pessimism reaching long-term extremes. However, short-term panic is not evident through the market action. This suggests that there is potential of a severe decline in the near term. In the longer term, market might be close to a low. We will discuss the Inflection Point Model timing in one of the upcoming subscriber only reports.

At this point we can reduce the stop down to 1140 (SP500). Congrats to the readers, who have now bagged more than 3.5% profit, with (God willing) much more to come. This eliminates all of risk from current trade, alongside ensure a handsome profit. Further stop updates will be provided in the upcoming Subscriber Trading Algorithm update.

There are certain very important dates on the horizon with in next few weeks. These dates can act as potential turning point. Thus, in order to manage risk and maximize profitability, it is crucial to follow the trading algorithm. There will be significant trading opportunities over the next few weeks, along with the possibility of picking the bottom for a 20+% rally. We will send a special report to the subscribers near the potential turn date.  

SUBSCRIPTION
Subscription services will start this week. We would like to welcome all subscribers. We might open Subscription for only one week for only 10-15 subscribers in mid October - not sure yet. All those who registered will received Market Matrix, Trading Algorithm, Inflection Point Model, Newsletters and Special Reports, as mentioned in the subscription brochure.

If you want to get information if Subscription opens up in October, please fill out the following form: