Seven Sentinels and Today's Market, SSBS or Top? I Have the Answer (Don)
"Well, at least I have a very strong opinion as to the answer. I s'pose it's possible that that is not the same thing.
Today saw all seven of seven sentinels move to buy territory. When that happens, we have a significant event, though not necessarily what most traders might expect. Sometimes it means we have a bona fide SSBS, and the kick off to a big move, like the signal that occurred on March 12, 2009 and the move that followed- a massive 50% rally on the SPX over the following three months. But many would be surprised perhaps to learn that more often - those times when there has not been a divergent set up prior to the 7 of 7, this event marks a ST top.
Many other things happened today that happen only at one of two times- at kickoff points and at ST tops. Roger's sentiment extremes are one such example. 9 to 1 Upside volume and up - like todays 25+ to 1, is another such example. Extremes of all sorts occur at kick off points and at ST tops. The trick is to be able to distinguish the difference. And that difference, imho, is "SET-UP".
I've done an exhaustive study of all internal measures of the market that we could access, and the conclusion I've reached is just what I had concluded earlier. The vast majority of internal measures made new lows on July 8, coincident with a new low in SPX. There had been NO divergent set up prior to that low. Very few internal measures showed any positive divergence to the earlier June 22 low. The positive divergences we could find were between June 22 when the SPX closed at 893 and July 8 when it closed at 879 were the NYMO (discussed earlier) which closed at a HIGHER -66 vs -79, and the 19 day moving averages of TICK and TICKQ which closed at +30 versus -50 and +132 versus-90 respectively. That's it! Indicators that did NOT show positive divergence ranged from NAMO and the rest of the McClellan Oscillators on other indices to Swenlins Trading Oscillator to Decision Point's ITVM and STVM, to both the NY and Nssdaq net new highs, to the number of SPX issues over their 50 day moving averages, to Transportation and Nasdaq averages themselves, and to many many more. A quick review of Decision Point will quickly confirm what I am saying.
The weight of the evidence says we have NOT, repeat NOT set up the internals for an advance.
When a day like today occurs that triggers all 7 of seven sentinels positive, most of the time, because the market has not done it's work in setting up the internals for an advance, that event is a "false positive" and marks a ST TOP. When that occurs, I treat it as a ST top and get fully short. That, again, occurs when there has been no divergent set up, as right now.
The other perhaps 20% of those 7 of 7 events mark a real SS Buy Signal. THAT occurs when all 7 of seven go to a buy position after a true divergent set up - like on March 12, 2009 for example. When that occurs I treat it as a REAL Seven Sentinels Buy Signal, issue an announcement, mark it on the chart and get fully long. That is NOT the case here.
CONCLUSION: This is a bull trap - a ST trading top. The correct position currently is SHORT. JMHO, of course.
We could well be in the early stages of that set up process, as todays internal strength was truly impressive. Time will tell. Right or wrong, I just wanted to make my view of today as clear as possible. Good Trading, D"
http://www.traders-talk.com/mb2/index.php?showtopic=108607
"Well, at least I have a very strong opinion as to the answer. I s'pose it's possible that that is not the same thing.
Today saw all seven of seven sentinels move to buy territory. When that happens, we have a significant event, though not necessarily what most traders might expect. Sometimes it means we have a bona fide SSBS, and the kick off to a big move, like the signal that occurred on March 12, 2009 and the move that followed- a massive 50% rally on the SPX over the following three months. But many would be surprised perhaps to learn that more often - those times when there has not been a divergent set up prior to the 7 of 7, this event marks a ST top.
Many other things happened today that happen only at one of two times- at kickoff points and at ST tops. Roger's sentiment extremes are one such example. 9 to 1 Upside volume and up - like todays 25+ to 1, is another such example. Extremes of all sorts occur at kick off points and at ST tops. The trick is to be able to distinguish the difference. And that difference, imho, is "SET-UP".
I've done an exhaustive study of all internal measures of the market that we could access, and the conclusion I've reached is just what I had concluded earlier. The vast majority of internal measures made new lows on July 8, coincident with a new low in SPX. There had been NO divergent set up prior to that low. Very few internal measures showed any positive divergence to the earlier June 22 low. The positive divergences we could find were between June 22 when the SPX closed at 893 and July 8 when it closed at 879 were the NYMO (discussed earlier) which closed at a HIGHER -66 vs -79, and the 19 day moving averages of TICK and TICKQ which closed at +30 versus -50 and +132 versus-90 respectively. That's it! Indicators that did NOT show positive divergence ranged from NAMO and the rest of the McClellan Oscillators on other indices to Swenlins Trading Oscillator to Decision Point's ITVM and STVM, to both the NY and Nssdaq net new highs, to the number of SPX issues over their 50 day moving averages, to Transportation and Nasdaq averages themselves, and to many many more. A quick review of Decision Point will quickly confirm what I am saying.
The weight of the evidence says we have NOT, repeat NOT set up the internals for an advance.
When a day like today occurs that triggers all 7 of seven sentinels positive, most of the time, because the market has not done it's work in setting up the internals for an advance, that event is a "false positive" and marks a ST TOP. When that occurs, I treat it as a ST top and get fully short. That, again, occurs when there has been no divergent set up, as right now.
The other perhaps 20% of those 7 of 7 events mark a real SS Buy Signal. THAT occurs when all 7 of seven go to a buy position after a true divergent set up - like on March 12, 2009 for example. When that occurs I treat it as a REAL Seven Sentinels Buy Signal, issue an announcement, mark it on the chart and get fully long. That is NOT the case here.
CONCLUSION: This is a bull trap - a ST trading top. The correct position currently is SHORT. JMHO, of course.
We could well be in the early stages of that set up process, as todays internal strength was truly impressive. Time will tell. Right or wrong, I just wanted to make my view of today as clear as possible. Good Trading, D"
http://www.traders-talk.com/mb2/index.php?showtopic=108607
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