Nov 10

Here is another look at an indicator that is saying that the 'potential' for an Intermediate Degree pullback has been confirmed. I often look at PPO movements (see this post for why PPO is a superior indicator to MACD) movements on a couple of different timeframes. I like 14,30,10 as a 'fast' PPO indicator (I think the default 12,26,9 is too fast) for finding bottoms and I like 34,89,21 as a 'slow' PPO indicator for finding tops. Looking for confirmed divergences often givens you insight as to what is happening. And the wave up since the 2011 has now formed such a divergence on the slow PPO on the Daily chart.

Combined with the recent 60-min, Daily and now Weekly sell signals from my Trend System, I think the market is at risk for an Intermediate Degree correction. The more I study the charts this weekend, the more realistic I think that possibility is becoming.

Nov 9

Today the Weekly Trend System went from long to short. Now before anybody reads too much into this, let's say what this does and doesn't mean:

1) This means that the conditions have been meet for a top signal
2) Having a top signal in place does not guarantee there will be a top

From my backtests with the Weekly System, it:

a) issued a few sell signals without actual tops between mid-80s to late-90s
b) issued a sell signal in mid 99 and it issued a buy in late 99 for a loss (no actual top)
c) issued a sell in late 2000 and a buy in late 2001 for a gain (actual top)
d) issued a sell in mid 2002 and a buy in late 2002 for a gain (continued selloff)
e) issued a sell in mid 2006 and a buy in late 2006 for a loss (no actual top)
f) captured most of the 2007-2009 selloff (actual top)

Getting a sell signal is far from a 'lock' in forecasting a major top. If I tried to tune out all the noise the system would be so slow to respond that the bear market correction would be halfway done before a sell was issued because they move so fast. So the system is set up to filter some 'noise' but is not so insensitive that it can't be faked out during volatile uptrends.

I certainly am NOT inclined to call 'the top' of this cyclical bull market since 2009 based on this weekly sell signal.

In fact, if I had to make a call right now, I would say this is closer to the 1999 or 2006 corrections in terms of analogy. That is assuming of course that this pullback is forming into an actual correction (some wave of Intermediate degree), which is by no means guaranteed at this point.

But I am just reporting what the systems are saying, do with them what you will. And if you choose to do nothing and ignore it, or even do the opposite of what it is saying, that's fine by me too.

Nov 8

Daily System went from long to short this morning. This is starting to look a decent correction is shaping up.

As I said in my last Long Term Update, I thought that the next major correction would be an Intermediate wave down. However I was expecting another wave up into the end of the year before that Intermediate correction would take place. ... Now, I am not so sure. This correction is really looking like it could have some legs to it.

So if my large count is right and the next large correction (that we are possibly in right now) is an Intermediate wave down, as I said in my last Long Term Update: ... will be an Intermediate pullback (think the Apr-June 2010 pullback and not the May-Oct 2011 pullback)

Nov 7

So much for sure footing. 60-min system back on a sell.

Nov 1

60-min System moved from short to long yesterday morning.

For anybody who cares, here is my current thinking about what's happening: