Before creating the model, I was using the traditional technical to forecast my trades. I should say there are both pros and cons comparing the two. Long story short, I found it quite interesting to combine both to spot better trading opportunities. As Bill Jones (our VIP member) always uses both methods for his amazing trades.
Here I am going to to use the traditional charts to illustrate what I think the direction of the market is heading. First, I need to make some assumptions: Last rally started from Feb 9 to Apr 26 (first top) which last 54 trading days. Let's assume we are still in bull market, I want to use golden ratio to estimate the number of down days ahead. Consider the serve level of the recent drops, I decided to use a larger ratio 0.618 to multiply 54 and got 33.4 total down days. By moving forward that many days starting from Apr 26, the target bottom date would be around Jun 10 - June 14. Before I did this calculation, I have drawn a hand made estimation on chart. Please see the above chart for the estimation where the green arrow starts from the short term bottom (which is very near I think) and the red arrow points to the next leg down to complete the whole correction. The date where the red arrow pointing to is around the time that I calculated earlier, could be earlier and could be later as well.
My conclusion would be S&P 500 rally to or close to 1120 and then start dropping again. The above estimation was made from a bull market stand point and if the market is under the control of bears, we will see a similar situation on the green arrow but the downside the red arrow points to would be much worse. For the above analysis, I was using the model to spot the bottom and use traditional technical forecast from there. Hopefully this would help on your analysis.
Today the market is under
Today the market is under turbulence and concluded with a lower closing day. I re-run my model and figured out that for today's figure is lower than yesterday but very close. That means we could have experience a short term turn with high volatility or we just heading back down again this is a disaster scenario. My thinking is the market is ready for a pop for that many of straight down days and the short term risk considered being low. Gold and gold stock is ready for a small rally and trade within channels.One amazing thing that I saw right before the market close. DOW -66.6 points and -0.66%!! What will that imply?
The market unfolded as
The market unfolded as expected, one may think yesterday morning was the best entry point for this bounce play. Just a reminder here, the market still in downtrend and therefore tight stop is needed. One may think there are some stock not following this bounce and it is because there are better stocks out there and the best stocks will be loaded up by value investors. The more safe bet would just go with the index fund because it would capture most uptrend of the good stocks if you don't have any favorite or don't know how to evaluate stocks. This bounce play could take 8-10 days to finish and I expect the market continue to go down afterwards.
You may wonder how I located the bottom in such a sliding environment, the trick is research, research and research. I keep improving the model, fine tune it, extends it. I accumulated signals of over 250+ large market cap stocks and input to the model and produce an overview of the market. This signals are consistent and reliable so far. The model works better on a basket of stocks instead of an individual ones. The charts posted on this site is powered by this model and I think the signals are quite reliable even it is for individual stocks. The model works best on low volatile stocks (not price spikes) which provides excellent signals for swing trades. Hope you like it.