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On the Brink--Stocks & Israel
Patterns for Profits
Instant Trend-Direction Change Signals
3 Portfolios (Top Chart)
Worldwide and Mostly USA ETFs Charts
(scroll down)
13 Months--June 27, 2008--July 31, 2009
Weekly--Hypothetical
See Comments below
Who are these men? And what are they watching?
Answer at the bottom of the page
From time immemorial all people everywhere have watched patterns--and loved it. Often, as here, they attach omens and meanings, good and bad, to what they see.
We do no differently. This is us, watching the progress of stock market. Any technician who looks at price charts sees in them patterns that, from scores of years of observations by hundreds of thousands or millions of market traders and investors, point to meanings that descry coming price turns or turns just now completed, and how far the next move will take prices to.
The chart pattern below tells us something. It semaphors changes in trend imminent.
This is easy. Momentum is rate of change. For example, if today's stock price gained 10% over yesterday's, and tomorrow's gains 8% over today's, it is loosing momentum. Prices lose momentum before they change trends.
In this chart there are three momentum series and one price series. The next text box tells what is happening here. It offers a portfolio on the brink of change.
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THE BRINK OF CHANGE
Prices drive all. They are the only 'real' depiction in any market chart. The rest are mental constructs derived from prices as aids to tell the probable status and future behavior of prices themselves. But prices are random, and order must be extracted if we are to gain any ground in trying to interpret them.
Note the bounciness of the price series. Trends may be recognized well after the fact. Next, notice the earlier emergent picture of trend change in the bottom curve, the 90-day momentum of prices.
At the end of the period from October to the first week in January, you could conclude the trend was turning while prices continued to oscillate sideways. The change in trend was confirmed when prices broke downward to a new low, but momentum did not, holding well above it previous, lower, sideways range. The trigger point in that instance was the next price rise from its previous lowest point (3/13/2009). The Portfolio rose 41% from there to the end of the chart.
Now, we see sign of a downtrend emerging as momentum makes its peak six weeks ago and continues lower to the current week just as prices surge to make their new, divergent high. The trigger (time for traders to act--sell) will be the first week that price turns down and momentum fails to make a new high.
Is that easy, or not? This sort of thing happens over and over, over decades and centuries. See a textbook case in the year 2000.)
If momentum does make a new high, confirming the price high, this setup is voided, and one must wait for the next.
New Copernican research techniques suggest increased probability of setup validity. These provide fineness and persistence of trend-direction discovery, like vapor con-trails miles high in the sky.
The two top curves are pictures of long-term money-flow momenta, one over 180 days, the other over 90 days. They tend to be early and to persist. They are viewed the same way as price momentum and provide equivalent templates for divergence comparison and set-ups.
CYCLICAL WORLD CONFIDENCE BEHAVIOR
Wars and Tops
Wars. Mid- to late-summer is the season of havoc. From July 28 though August 12, 1914, seven countries launched World War I. On the first day of September 1939 Germany invaded Poland, and on the 3rd, Britain and France declared war on Germany, starting World War II.
More recently, Iraq invaded Iran on September 22, 1980, starting the eight-year Iran-Iraq War. The First Gulf War started August 2, 1990. The International War on Terror started September 11, 2001. Russia invades Georgia, August 8, 2008.
Israel vs. nuclear Iran. If not soon, when? The Season of Havoc?
These dates are anecdotal, but they do add corroborative seasonal weight to the brink-of-change set-up in the chart above.
Tops in the stock market do the same. On September 3, 1929, and August 16, 1937, prices peaked and crashed -47% and -38% respectively over the next couple of months. In September 2001, terrorists blew up the World Trade Center in New York. The stock market was shut down from September 11 to the 17th when it reopened, -15% from its previous close.
This gathering of dates in a narrow window of time suggests a probability of strenuous price change nearby. The trigger rule makes a target date uniquely specific enough to act on with precision.
The next chart is more of the same, this time with the Mostly USA Portfolio. They could be brothers, with USA a little more wiry, a little more high strung, a little more volatile. The conclusions from each are identical.
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CONCLUSION
The first signs of possible trend change from up to down are now appearing across these ETF portfolios in the form of emergent divergences and inharmonious behavior among portfolio prices, money flows, and momentum series.
The prices and characteristics of these two portfolios express widespread global equities holdings and activity. As they go, so goes the world. The current rally is maturing rapidly enough now to crest in August or September, then fail and lapse into a resumption of the generational bear market which has been underway since October 2007 and is not destined to end before 2010 or 2012.
Lists of Portfolio Components. ETFs.
Caution:
without back testing, the conclusions of this article are conditional and more by way of notes to myself for further development, but also, for me, taking some action to hedge ETFs holdings pending definitive system signals that the trend has turned down.
See previous article here.
THE PHOTO AT THE TOP OF THE PAGE
These men are sadhus, holy men, in Allahabad, India.
They are looking, last week on July 22nd, at the total solar eclipse that passed over their city, throwing the land into near total darkness for nearly four minutes. Eclipses are omens to much of the World, usually maleficent.
This is what they saw.
Total Solar Eclipse, July 22, 2009 Allahabad, India
This reminds us we are not deceived by the patterns we see--they are real enough--but often by our interpretation of them.
CREDITS
Top photo, Holy Men Watching
Rajesh Kumar Singh/Associated Press
© 2009 Associated Press
Bottom photo, Total Solar Eclipse
Saurabh Das/Associated Press
© 2009 Associated Press
Written
7/31/2009 5:31 p.m. EDT
Posted
8/2/2009 4:10 p.m. EDT
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2009 The 2000 Corporation.
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