*~1Best~* Market Timing & Trend-Signals

[*~1Best~*]

Coming to a Pivotal Week:

Markets bounced off from the important supports which I noted during the last several days since 3/21. Since market has not shown strong move to upside breaking above the upper TL, we need to see directional confirmation.

Trading volumes show normal profit taking and consolidation. Market closed with "doji" signaling indecision and also indicators are mixed. At this point, we need to see directional confirmation during the next week.


Market Correction is coming, this time for real
http://www.traders-talk.com/mb2/index.php?showtopic=68491
http://www.ft.com/cms/s/06246766-dd93-11db...0b5df10621.html

Note that his projection is vague as he is referring the correction will occurring

QUOTE: “I believe that over the next 12 months a market correction will occur and this time it will be a real correction….. Market developments in the past few weeks should be seen as a warning. What has been evident for a number of months is that, in the US, we are seeing lagging inflation and slower growth. Whether this means that we are going to have to fend off recessionary tendencies is not yet clear. However, what is clear to me is that in the next year a material correction in the markets will occur.”

Comment: This is nothing new since we knew about the housing market bubble and correction as I commented during “Jan-Mar 2006” for the forthcoming housing market correction and its impact on the economy. That was 15 months ago when I projected the correction by which we now see the impact through “subprime market meltdown” which I forecasted during “Jan-Mar 2006” market comment posts. Having said that, I do not believe that housing market is bottomed; but, we will see a meaning bottom and confirmation of housing market recovery within 12-24 months. I do realize that R.E. market cycle is longer than other soft financial market cycle such as financial instrument markets. LIQUIDITY: Recently I noted about the liquidity which is an old news; thus, it is not a new event which market is now pricing in. YEN CARRY TRADES: Again, this is not a new news which market has priced in since May 2006 which US and International markets initially reacted to the BOJ comment at the same time when Dr Bernanke and other Fed speakers were inducing a market correction. At that time, market corrections which we have seen in financial markets – US and International markets – were from 8% - 30%.

Conclusion: In summary, I do believe that we will see a correction more than what we have seen during the 2/27/07 – 3/14/07 which was 5 – 10%; however, at this point, as I commented before, “Retest of Breakout” Scenario which was supported by the Double Bottom actions on 3/5/07 and 3/14/07 has not been negated. Therefore, as of today, the “Retest of Breakout” Scenario is valid.

EQUITY - FINANCIAL MARKET CORRECTION:

I consider a “meaningful correction” in given context within which we are viewing market condition and phase. What I am referring to is “Given Market Condition” which we need to consider because market does not always follow predictable pattern which we have observed based on the historical patterns and data analysis, such as “Time & Price Correction” which is a typical 10% and 3-5 months.

NEW POLICY ON TRADE DEFICIT:

Taking corrective actions on "Trade Deficit" such as we heard on Friday, 3/30, is a good news as I noted. I consider it as a positive development which I commented during Jan - Feb 2007 when I noted various charts showing increased trade deficit trend. The recent trade deficit is unprecedented high number in our history. Since the trade agreement can't be accomplished by mutual consent, we need to take action as we have seen on 3/30. This development is positive for LT US Economy even though WS can make a point that it is not good for WS. It may not good for particular companies which do international trades, but is good for US workers. The new trade policy may lead the current trade deficit trend to equal trades which are balanced, not trade deficit for us and trade surplus for them.

COMMENT ON RATIO CHARTS AND ANALYSIS:

The ratio analysis is valid when it is used in the context given in market condition. I posted many ratio charts in the past. Ratio charts can be in combinations of many different indices, breadth, markets, etc.. Recently, I have noticed that some traders are using ratio charts to time the market turns after observing other traders presentation of the market analysis based on the analysis which was successful.

I also presented Breadth and ratio analysis as a part of market analysis and timing studies in the past. The variations of ratio analysis and timing are many such as various $RH__:$CPC, $various $BP___:$VIX, $NASI:$VIX, $NASI:$VXN, $GOLD:$ HUI, $COMPQ:$INDU, etc. For those who are in the market long enough and have done due-diligence have come across those presentations. I came across that many traders are using the same indicators when they noticed successful methods which have shown effective market turn. I would like to note when most of traders are using the same methods, such as $NASI turning signals, the signals will be ineffective since everyone can’t be right at the same time. Having said that, during the middle of a trend, majority traders are correct since the new trend is developing until it reaches at a point when it is about to reverse. To apply this concept, the question which we are addressing right now it whether the ST/IT trend is reversed.

TREND CHANGE:

VST-ST (very short term) Trend was reversed as we have seen during 2/27-3/14 and reversed again on 3/14 with “Double Bottom” and “W” formation. Now, we want to know whether ST-IT trend is changed.

We now need to see a directional confirmation during the next week.