Tuesday, April 20, 2010

Sea change

Sea change or seachange is an idiom for broad transformation drawn from a phrase in the song "Full fathom five" in Shakespeare's The Tempest, and connotes a transformation: see Sea change (transformation) - wikipedia

The past trading sessions have seen a shift in my daily charts from all-bullish-all-the-time to  a mixed bag of longer term Buys and now new Sells that are spreading across a wide spectrum of ETF's and individual stocks.  Is it time to become all out bearish, again? 

It's time to stick to our trend models and follow their lead.  As I have published, the Daily SPX Model has flipped Short.  Since this is my main market gauge, this Sell carries a lot of weight.  But as we have seen with charts like SDS, the shift in trend has not extended across the board.  Note that the strongest market index this past year, Value Line (chart below), has flirted with Daily Sells for the past two days, but remains entrenched in its mid-February Buy signal.   For the time being, that too has to be taken seriously. 

Whether or not markets are exhibiting a sea change to the downside, has yet to be determined.  I remain mostly in cash, awaiting a higher confidence resolution, one way or the other.

Respect the trends.


 Value Line Daily Trend Model


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5 comments:

Anonymous said...

all indexes opened Up and still up in the first hour of tuesday.

this, after two down days which corrected back to a 50% fib at yesterdays close.
and today continues UP.

the bearish forecast would have today going back Down.

Allan said...

In EW terms, an initial Wave 1 down was corrected yesterday and into this morning with a Wave 2 retracement. The alternate is that it all was a simple ABC decline that has run its course and we go on to new highs.

This is where the trend models come in handy, at a certain threshold, the Daily trend reverses and that is that. Although daily trends remain mixed, it is a temporary condition that will be resolved as the dominant trend seizes control.

Anonymous said...

Allan, please pardon the imposition of a request..........
i'm quite sure you have several readers here from the Gilder Forum, and EZCH has had a very good run recently, with a relatively big correction ystdy with the market. i am curious if it is now in a short mode on the daily, and where a weekly sell might be ? they report their Quarter May 6th i think.

thnx

Allan said...

Re: EZCH

Daily Model = BUY February 3rd @ $12.80; SELL April 16th @ $19.11; Buy trigger = close above $20.43.

Weekly = LONG w/stop @ $17.43

Anonymous said...

Let the whipsaws begin. You trend followers are about to get sliced and diced for the next 6 months.

Mr. E