By   Tue, May 11, 2010

If you are a new subscriber and if you are a member of Fearless Forecasters at Trader's Talk, you may use coupon code "FF2012" {without the quotes} and you will get the first TWO months for just $47.50 as an introductory special.

To subscribe, please click here, and you will be guided into the registration process.

SevenSentinels.com is available to subscribing members on a monthly basis at $75 per month, or yearly for $750. 

To subscribe, please click here, and you will be guided into the registration process. When you subscribe, you acknowledge that you have read and agree to comply with the terms of service, and specifically that you agree that the materials provided in this service, including graphic images, buttons, and text, may not be copied, reproduced, republished, uploaded, posted, transmitted, or distributed in any way, without the prior written permission.

Please address subscription questions to SevenSentinels@aol.com. Many thanks and good trading! 

Charts courtesy of StockCharts.com 

By IYB   Sun, Jan 03, 2010

SevenSentinels.com is in a class by itself with 120%+ since June 19, 2010! We know of no other timing service that can even begin to match that record with real time tracking of trading results. Period.

...and if you click PERFORMANCE you will be linked to linked to a summary of our tracking account at Updown.com. 

--------------------------------------------

As we lay out our market analysis, we then explain how we are directly applying that analysis in the market, in real time, via real trades and we constantly update our current position in the intra day reports. Performance can be displayed over a week, month, three months, or longer, either in static form or on a comparative basis versus various equity markets and/or any other UpDown participants.

As can be seen, we have outperformed the S&P 500 by well over 100%, a record that is matched by no other timing services of which we are aware - at least none with real time open tracking. This is no small achievement. We hope that this makes it clear that the concepts detailed here produce very real results in real dollars. This trading account is for demonstration purposes only and is displayed to give the reader some appreciation for what the SevenSentinels.com advantage means to serious traders in real time with contemporaneous trades based on the trends and ideas identified here. 

We do not warrant, imply or in any other way want to suggest that your performance will match ours. How you trade is a very individual thing, and how you use information provided here is up to you. We are simply showing what we have achieved using the tools and analysis we are discussing here several times each morning, afternoon, and evening. We will note, of course, that past results do not guarantee future performance.

Your trading style will likely vary greatly from ours - as we tend to manage our accounts aggressively. We fully realize that most readers will manage their accounts in a more passive manner, perhaps employing less leverage or different instruments. We don't expect readers to take every one of our individual trades. We do believe, however, that the trading tools provided here will provide a very substantial competitive advantage to followers, regardless of their individual styles, so long, of course, as they employ common sense and stops as well as other sensible and necessary money management techniques.

We hasten to remind you, again, that all of your decisions and results are your own. We are not your investment advisor, and we are not responsible for anyone's results but our own. If you trade, you do so at your own risk.

By   Mon, May 24, 2010

...regarding the usefulness of this service for your purposes. If you have questions about how we present our analysis and ideas, please let us know. If there are changes you'd like to see, let us know that. In general, if there is anything that you'd like explained, amplified, modified, etc, we are open to your inquiries and ideas. We will continue to make the calls as we see them, drawing on our unique methods and four decades of experience. But if there are additional elements of information you think would be generally helpful to users of this service or if clarification is needed in any particular aspects, we welcome your input.

Non subscribers are also invited to send their questions or comments if they would wish to do so.

Please email your comments and/or questions to sevensentinels@aol.com

By   Sat, Apr 03, 2010

The most powerful trading concept on Earth. Period.

The Most Powerful Trading Concept on Earth. Period.

Chart courtesy of StockCharts.com

Perhaps the greatest trader of all time, Jesse Livermore, said, "There isn't a bull side or a bear side to the market. There is only the right side." His point was that if you are on the wrong side of the market, loss is not a risk, it's a certainty. And if you are on the right side, profits will accumulate on their own. The trend is your friend. That concept cannot be overstated. If you have come to recognize this simple but profound principle, then you've come to the right place.

By now, you've probably reviewed dozens or even hundreds of market timing services of various kinds. You may have noticed that virtually every one has this fatal weakness: each tries to anticipate the markets next move based on the use of a dizzying array of technical or fundamental indicators. Occasionally they may even get it exactly right, but even when they do, usually the critical timing is off and this kills trading performance. More often the market completely ignores even the best of indicators or analysis - indicators that have "seemed to work great in the past". These "market timers" get so caught up in trying to anticipate the next move that they "forget" to identify the current prevailing trend- the dominating line of least resistance here and now - which is truly all that matters to a stock investor or trader. That's precisely where we are very different.

The concept of the Seven Sentinels is my own and is based on a very simple but universal truth that I've observed in nature, everywhere I look, since I was a child - the principle that external follows internal. The Seven Sentinels are internal measures of the pressure produced by current prevailing money flow into or out of the market. External price movement follows this pressure as a very natural process, just as birth follows pregnancy, exhaling follows inhaling, a volcano follows the build up of gases below the Earth's surface or a Tsunami follows a 10.0 earthquake. Simple, yet perhaps the single most powerful trader's edge in existence. Period.

We invite you to visit {"IYB's Seven"at} Investors University and Fearless Forecasters at Traders-Talk.com for unbiased analytical evaluation of the Seven Sentinels by active professional traders. The Seven Sentinels have been accurately calling key market turns since their introduction on that site in 2004 and are very often the number one subject there.

SevenSentinels.com has just one overriding purpose: to keep you focused on the prevailing trend -the right side, regardless of the market's deception and to continually provide you the perspective and confidence to be right and sit tight. We keep providing that perspective every day in up markets and down, trend days and countertrend days, regardless of the news hype and market (over) reactions, and regardless of your trading style which will undoubtedly vary greatly from our demo trading account tracked here. Our singular mission is to keep you on the right side of the current trend. Period.

We humbly invite you to discover for yourself whether the SevenSentinels.com will help you begin to experience world class market understanding and trading performance. We bid you the very best of success and good trading.   

By   Sun, Apr 04, 2010

Market Trends Explained

SevenSentinels.com

Context is Everything

Cycles {or trends if you'd prefer} are the primary organizing factor within equities markets price movement over time. When you look at a chart of the Dow Jones Industrial Average or the Standard and Poor's 500 Index, for example, price movements appear random. The market goes up; the market goes down; the market goes sideways.... and some will tell you that you cannot possibly know what it is likely to do next. But they are wrong. Market movements aren't random. Markets are organized, they are regular, they are repeating. And the primary organizing elements are called cycles. You can learn to appreciate how these cycles run and repeat, and most importantly, you can learn to go with, rather than fight, these cycles.

Round, like a circle in a spiral
Like a wheel within a wheel
Never ending or beginning 
On an ever spinning wheel....

Here, for example you can see just one simple organizing element- the very strong tendency for the market to bottom out every four years, in the non-presidential election year in the US. In ten of last 15  four year periods, the four year time span has nearly precisely pinpointed the cycle bottom :

Chart courtesy of DecisionPoint.com

Below we see the Dow Jones Industrial Average for the past 110 years, and if you look closely, you can identify the 20-year secular bull and bear phases:

And here we can see the cyclical bull and bear markets of the past 15 years:

And looking at the 8 and 34 for week moving averages, the crosses of the shorter one above and below the longer moving average identify the onset of the cyclical bull and bear markets:

We shall look at these organizing factors and demystify this seemingly "random" set of market moves, so that you, the trader, can make sense of the markets' regular and repeating trends. Once you understand the market in terms of its various cycles and learn to trade with the trend, you will experience a "quantum leap" in trading performance.

The concept of the Seven Sentinels is my own and is based on a very simple but universal principle that I've observed in nature, everywhere I look, since I was a child - and that principle is that internal proceeds external. The Seven Sentinels are internal measures of building pressure and impending market thrust. External price movement follows this building pressure, just as exhaling follows inhaling, or a volcano follows the build up of gases below the Earths surface, or a Tsunami follows a major earthquake. 

Below you can see the onset of short term trends identified by Seven Sentinel Buy and Sell Signals:

Though analysts have identified longer term market and economic cycles, some lasting hundreds and even thousands of years, as well as shorter term trends that one could track down to seconds if he wished, the time cycles that are most important to a serious trader are the following:

 1.    Super Cycle, AKA the Secular Trend, AKA the "20-year" cycle

2.    Primary Cycle, AKA the Bull Market/Bear Market Cycle, AKA the "4-year cycles

3.    Intermediate Term Cycle, AKA "prevailing trend" typically several months.
4.    The Short Term Cycle which usually runs a few days to weeks
5.    The Very Short Term Cycle, usually minutes or hours

Of these, the one that has the most influence on trading success, in my opinion, is Number 3- the Intermediate Term Trend. The Seven Sentinels were developed precisely for the purpose of identifying the Intermediate Term Trend turning points, and keeping the trader in synch with the "prevailing trend". Once that is accomplished, trading success becomes relatively assured, assuming, of course, that the trader employs effective self control, discipline, and money management techniques which are talked about elsewhere on this site.

Market Trends Explained

SevenSentinels.com

Context is Everything

Cycles {or trends if you'd prefer} are the primary organizing factor within equities markets price movement over time. When you look at a chart of the Dow Jones Industrial Average or the Standard and Poor's 500 Index, for example, price movements appear random. The market goes up; the market goes down; the market goes sideways.... and some will tell you that you cannot possibly know what it is likely to do next. But they are wrong. Market movements aren't random. Markets are organized, they are regular, they are repeating. And the primary organizing elements are called cycles. You can learn to appreciate how these cycles run and repeat, and most importantly, you can learn to go with, rather than fight, these cycles.

Round, like a circle in a spiral
Like a wheel within a wheel
Never ending or beginning 
On an ever spinning wheel....

Here, for example you can see just one simple organizing element- the very strong tendency for the market to bottom out every four years, in the non-presidential election year in the US. In ten of last 15  four year periods, the four year time span has nearly precisely pinpointed the cycle bottom :

Chart courtesy of DecisionPoint.com

Below we see the Dow Jones Industrial Average for the past 110 years, and if you look closely, you can identify the 20-year secular bull and bear phases:

And here we can see the cyclical bull and bear markets of the past 15 years:

And looking at the 8 and 34 for week moving averages, the crosses of the shorter one above and below the longer moving average identify the onset of the cyclical bull and bear markets:

We shall look at these organizing factors and demystify this seemingly "random" set of market moves, so that you, the trader, can make sense of the markets' regular and repeating trends. Once you understand the market in terms of its various cycles and learn to trade with the trend, you will experience a "quantum leap" in trading performance.

The concept of the Seven Sentinels is my own and is based on a very simple but universal principle that I've observed in nature, everywhere I look, since I was a child - and that principle is that internal proceeds external. The Seven Sentinels are internal measures of building pressure and impending market thrust. External price movement follows this building pressure, just as exhaling follows inhaling, or a volcano follows the build up of gases below the Earths surface, or a Tsunami follows a major earthquake. 

Below you can see the onset of short term trends identified by Seven Sentinel Buy and Sell Signals:

Though analysts have identified longer term market and economic cycles, some lasting hundreds and even thousands of years, as well as shorter term trends that one could track down to seconds if he wished, the time cycles that are most important to a serious trader are the following:

 1.    Super Cycle, AKA the Secular Trend, AKA the "20-year" cycle

2.    Primary Cycle, AKA the Bull Market/Bear Market Cycle, AKA the "4-year cycles

3.    Intermediate Term Cycle, AKA "prevailing trend" typically several months.
4.    The Short Term Cycle which usually runs a few days to weeks
5.    The Very Short Term Cycle, usually minutes or hours

Of these, the one that has the most influence on trading success, in my opinion, is Number 3- the Intermediate Term Trend. The Seven Sentinels were developed precisely for the purpose of identifying the Intermediate Term Trend turning points, and keeping the trader in synch with the "prevailing trend". Once that is accomplished, trading success becomes relatively assured, assuming, of course, that the trader employs effective self control, discipline, and money management techniques which are talked about elsewhere on this site.

By   Sun, Apr 11, 2010

The 40-Year Cycle

Secular Trend

SevenSentinels.com
The "40-Year Cycle"

The Super Cycle, otherwise known as the Secular Trend is often called the "20-year cycle" (actually a 40-year cycle when taken peak to peak or trough to trough) because it defines the market environment for a whole generation of traders and investors, and tends to change roughly every 18-20 years from secular bull market to secular bear market, then back to secular bull again, ad infinitum.

Secular BULL markets are typically 18 (+ or - 3) year periods characterized by expanding valuations (P/E ratios, etc.), expanding public participation in equity markets, expanding speculation, and sharply rising prices. During a secular bull market, the entire Dow Jones Industrial Average or S&P500 will expand by as much as 10-15 fold or more. 1982 to 2000 was an excellent example of a secular bull market in all regards, as the Dow Jones Industrial Average expanded from the 700's to well over 10,000 in those 18 years.

Secular BEAR markets, by contrast, are periods of roughly the same length of time which are characterized by shrinking valuations, shrinking public participation, declining speculation, and range bound prices. The 1965 to 1982 secular bear market, for example, kept the Dow Jones Industrial Average range bound between roughly 500 and 1000 for that entire period as valuations, participation and speculation shrank markedly. The current secular bear market which began from the 2000 valuation peak clearly shares these characteristics, as even casual study will demonstrate.

Notice in the chart below 6 distinct secular cycles: 1909-1929 secular bull market (expanding), 1929-1945 secular bear (rangebound), 1945-1965 secular bull (expanding), 1965-1982 secular bear (rangebound). 1982-2000 secular bull (expanding), 2000-present secular bear (rangebound). We can expect that the current secular bear market, bound in the range of roughly DJ 6000-14000 to run until late in the next decade (2017+or-) at which time we can reasonably expect the onset of the next secular bull market which could take us another 15X+ higher to the area of 100,000 Dow Jones Industrial Average!

Chart courtesy of StockCharts.com

Why does any of this matter to a trader, particularly a "short term" trader? Precisely because context is everything! When one recognizes the current secular trend, he or she can then know how to expect the cyclical bull and bear cycles to behave. And that is important. Recognizing the current climate as a secular bear market, for example, the trader would have expected the the secular trend to stay rangebound, thus for the cyclical bull market cycle from 2003 to top somewhere in the vicinity of 1500 on S&P 500..... and he would have been RIGHT in 2007. "The crowd" labored under the delusion that SPX was on its way to 2500 or 3000 or perhaps much higher, and failed to get out of the way before the collapse of 2008. And most were very badly hurt. Likewise the trader who understands the secular trend in play would actually expect that this collapse is coming and would take it down at least into the vicinity of 800 if not lower. And his profits would have been spectacular had he traded that decline effectively. There was and will be in the future, a massive trading advantage in having that perspective. Context is everything. That advantage cannot be overstated.

By IYB   Sun, Apr 04, 2010

The Matrix, the Market and Andy Kaufman

"If you believe there's nothing up his sleeve, then nothing is cool"

If you haven't seen the Matrix film series, I highly recommend it, because it really is a powerful metaphor for the market. Lest I leave any doubt in this article, my point is that the market isthe Matrix, symbolically speaking. And the Matrix is the most elaborate deception ever conceived. Only those who see beyond this deception will truly be free.

The market operates on two levels. Level one is what seems true, very much like the Matrix, which is believed by the many. Level two is what is true, and this level is recognized by the few - and those few have become true masters of the market.

I have punctuated this piece with continual quotations from "The Matrix" series for sake of illustration.

MORPHEUS: "I AM TRYING TO FREE YOUR MIND NEO. BUT I CAN ONLY SHOW YOU THE DOOR. YOU ARE THE ONE THAT HAS TO WALK THROUGH IT...

Successful trading requires forgetting everything you thought you knew, and everything that seems logical - and appreciating the market for its purity and simplicity. Making that extraordinary leap of faith is not easy;  in fact it's not even possible for some, precisely because it is so unnatural. The market is not what it appears; and it has but one purpose, and that purpose is to deceive us. And its efficiency of purpose is a wonder to behold!

MORPHEUS: "THE MATRIX IS A SYSTEM, NEO. THAT SYSTEM IS OUR ENEMY.

When, very early on in my career, a successful veteran trader who had become my mentor stated over lunch one day that 'there has been more misinformation written about the stock market in the last 50 years, than about any other subject on this planet', I listened intently. 'Because it's such a popular subject, and half of what's written is wrong?' I asked. 'No', he replied, 'because 99.9% of what is written is based on superstition and myth.'

MORPHEUS: WHAT IS THE MATRIX? CONTROL. THE MATRIX IS A COMPUTER GENERATED DREAMWORLD BUILT TO KEEP US UNDER CONTROL.

Your job is look beyond this deception, and to FIND the 0.1% that is truth - those diamonds in the coalfield - and hang on to those gems for dear life.

MORPHEUS: "YOU ARE HERE BECAUSE YOU KNOW SOMETHING. WHAT YOU KNOW, YOU CAN'T EXPLAIN. YOU FELT IT YOUR ENTIRE LIFE. THERE IS SOMETHING WRONG WITH THE WORLD. YOU DON'T KNOW WHAT IT IS, BUT IT'S THERE, LIKE A SPLINTER IN YOUR MIND, DRIVING YOU MAD. IT'S THIS FEELING THAT HAS BROUGHT YOU TO ME. DO YOU KNOW WHAT I AM TALKING ABOUT?"

Could the old man be right, I pondered? How can this be? How could any serious investor base decisions on superstition? Why would people invest real dollars based on myth? Then the answers began to come. It is because they want to believe! Houdini made a career of giving people what they wanted - an illusion that they could believe!

MORPHEUS: "IF THE VIRTUAL REALITY APPARATUS, AS YOU CALLED IT, WAS WIRED TO ALL OF YOUR SENSES AND CONTROLLED THEM COMPLETELY, WOULD YOU BE ABLE TO TELL THE DIFFERENCE BETWEEN THE VIRTUAL WORLD AND THE REAL WORLD?"

NEO: "YOU MIGHT NOT. NO."

And Houdini was not alone. P.T. Barnum mastered the art of deception, and of course, illusion WAS Andy Kaufman - he succeeded in making people actually believe that they were seeing things that are far beyond most people's wildest imagination. Like the market AND the Matrix, he mastered manipulation of mass perception and belief. I am absolutely certain that each would deeply appreciate the film "The Matrix". And I am also certain that each had the instincts to become brilliant traders.

MORPHEUS: "ALL THEY NEEDED TO CONTROL THIS MIND WAS SOMETHING TO OCCUPY OUR MIND. AND THEY BUILT A PRISON OUT OF OUR PAST; WIRED IT TO OUR BRAIN AND TURNED US INTO SLAVES."

Much later in my life, Michael Stipe of R.E.M. wrote a song about this concept - Man on the Moon - using Andy Kaufman as his example. The words hit home with me in a major way - as I'm a huge fan of the 20th Century's greatest hoaxer who was so successful, incidentally, that to this day, many remained convinced that he had faked his own death - and they await his return! Think of it. Illusion so "real" that it became immortal! 

NEO: "THIS ISN'T REAL?"

Houdini, Barnum and Kaufman knew instinctively that people want to believe that which promises them money, fame, health, sex, mystery, love, excitement, immortality - you name it. Whether what they get is fact or fantasy is completely immaterial. What they seek is served up to them, and they are grateful.

CYPHER: {MARVELING AT THE SENSORY WORLD AND POINTING TO A MORSEL OF STEAK}: YOU KNOW, I KNOW THIS STEAK DOES NOT EXIST. I KNOW THAT WHEN I PUT IT IN MY MOUTH, THE MATRIX IS TELLING MY BRAIN THAT IT IS JUICY AND DELICIOUS. AFTER NINE YEARS, DO YOU KNOW WHAT I HAVE REALIZED? THAT IGNORANCE IS BLISS.

And so it is with most traders. They remain blissful in their world of illusion, oblivious to the fact that they are looking to charlatans for guidance, or depending on "indicators" and "systems" that bear no correlation whatsoever to trading success. Or worse yet, they believe what the market seems to be telling them, still blissfully unaware of the market's central purpose - deception. Real stock market success, I ultimately learned, comes only by following an unnatural path, not unlike what Neo learned from Morpheus. We must learn that 'what looks like it should work, doesn't'. What seems logical isn't. In short we must start by unlearning everything we thought we knew - because like the Matrix, or an Andy Kaufman performance, it is all illusion. If you believe, you are just begging for others to take your trading capital- or as Stipe says "nothing is cool".

MORPHEUS: "THE MATRIX IS A SYSTEM, NEO. THAT SYSTEM IS OUR ENEMY.  

Our ways are not the market's ways. What is real is unnatural. It took thousands of hours of pouring over the works, biographies and interviews with many of the greatest traders, to fully begin to absorb that truth. My overwhelming desire has been to discover what really makes money.

MORPHEUS: "YOU HAVE TO UNDERSTAND MOST OF THESE PEOPLE ARE NOT READY TO BE UNPLUGGED AND MANY OF THEM ARE SO INERT, SO HOPELESSLY DEPENDENT ON THE SYSTEM, THAT THEY WILL FIGHT ANY CHANGE."

The Matrix, the Market and Andy Kaufman

"Market is designed to fool most of the people most of the time" - J.L. Livermore

"If you believe there's nothing up his sleeve, then nothing is cool" - R.E.M.

------------------------------------------------------------

If you haven't seen the Matrix film series, I highly recommend it, because I believe it can be viewed as a powerful metaphor for the market. Lest I leave any doubt in this article, my point is that the market is the Matrix, symbolically speaking. And the Matrix is the most elaborate deception ever conceived. Only those who see beyond this deception will truly be free to profit from market trading.

The market operates on two levels. Level one is what seems true, very much like the Matrix, which is believed by the many. Level two is what is true, and this level is recognized by the few - and those few have become true masters of the market.

I have punctuated this piece with continual quotations from "The Matrix" series for sake of illustration.

MORPHEUS: "I AM TRYING TO FREE YOUR MIND NEO. BUT I CAN ONLY SHOW YOU THE DOOR. YOU ARE THE ONE THAT HAS TO WALK THROUGH IT...

Successful trading requires forgetting everything you thought you knew, and everything that seems logical - and appreciating the market for its purity and simplicity. Making that extraordinary leap of faith is not easy;  in fact it's not even possible for some, precisely because it is so unnatural. The market is not what it appears; and it has but one purpose, and that purpose is to deceive us. And its efficiency of purpose is a wonder to behold!

MORPHEUS: "THE MATRIX IS A SYSTEM, NEO. THAT SYSTEM IS OUR ENEMY.

When, very early on in my career, a successful veteran trader who had become my mentor stated over lunch one day that 'there has been more misinformation written about the stock market in the last 50 years, than about any other subject on this planet', I listened intently. 'Because it's such a popular subject, and half of what's written is wrong?' I asked. 'No', he replied, 'because 99.9% of what is written is based on superstition and myth.'

MORPHEUS: WHAT IS THE MATRIX? CONTROL. THE MATRIX IS A COMPUTER GENERATED DREAMWORLD BUILT TO KEEP US UNDER CONTROL.

Your job is look beyond this deception, and to FIND the 0.1% that is truth - those diamonds in the coalfield - and hang on to those gems for dear life.

MORPHEUS: "YOU ARE HERE BECAUSE YOU KNOW SOMETHING. WHAT YOU KNOW, YOU CAN'T EXPLAIN. YOU FELT IT YOUR ENTIRE LIFE. THERE IS SOMETHING WRONG WITH THE WORLD. YOU DON'T KNOW WHAT IT IS, BUT IT'S THERE, LIKE A SPLINTER IN YOUR MIND, DRIVING YOU MAD. IT'S THIS FEELING THAT HAS BROUGHT YOU TO ME. DO YOU KNOW WHAT I AM TALKING ABOUT?"

Could the old man be right, I pondered? How can this be? How could any serious investor base decisions on superstition? Why would people invest real dollars based on myth? Then the answers began to come. It is because they want to believe! Houdini made a career of giving people what they wanted - an illusion that they could believe!

MORPHEUS: "IF THE VIRTUAL REALITY APPARATUS, AS YOU CALLED IT, WAS WIRED TO ALL OF YOUR SENSES AND CONTROLLED THEM COMPLETELY, WOULD YOU BE ABLE TO TELL THE DIFFERENCE BETWEEN THE VIRTUAL WORLD AND THE REAL WORLD?"

NEO: "YOU MIGHT NOT. NO."

And Houdini was not alone. P.T. Barnum mastered the art of deception, and of course, illusion WAS Andy Kaufman - he succeeded in making people actually believe that they were seeing things that are far beyond most people's wildest imagination. Like the market AND the Matrix, he mastered manipulation of mass perception and belief. I am absolutely certain that each would deeply appreciate the film "The Matrix". And I am also certain that each had the instincts to become brilliant traders.

MORPHEUS: "ALL THEY NEEDED TO CONTROL THIS MIND WAS SOMETHING TO OCCUPY OUR MIND. AND THEY BUILT A PRISON OUT OF OUR PAST; WIRED IT TO OUR BRAIN AND TURNED US INTO SLAVES."

Much later in my life, Michael Stipe of R.E.M. wrote a song about this concept - Man on the Moon - using Andy Kaufman as his example. The words hit home with me in a major way - as I'm a huge fan of the 20th Century's greatest hoaxer who was so successful, incidentally, that to this day, many remained convinced that he had faked his own death - and they await his return! Think of it. Illusion so "real" that it became immortal! 

NEO: "THIS ISN'T REAL?"

Houdini, Barnum and Kaufman knew instinctively that people want to believe that which promises them money, fame, health, sex, mystery, love, excitement, immortality - you name it. Whether what they get is fact or fantasy is completely immaterial. What they seek is served up to them, and they are grateful.

CYPHER: {MARVELING AT THE SENSORY WORLD AND POINTING TO A MORSEL OF STEAK}: YOU KNOW, I KNOW THIS STEAK DOES NOT EXIST. I KNOW THAT WHEN I PUT IT IN MY MOUTH, THE MATRIX IS TELLING MY BRAIN THAT IT IS JUICY AND DELICIOUS. AFTER NINE YEARS, DO YOU KNOW WHAT I HAVE REALIZED? THAT IGNORANCE IS BLISS.

And so it is with most traders. They remain blissful in their world of illusion, oblivious to the fact that they are looking to charlatans for guidance, or depending on "indicators" and "systems" that bear no correlation whatsoever to trading success. Or worse yet, they believe what the market seems to be telling them, still blissfully unaware of the market's central purpose - deception. Real stock market success, I ultimately learned, comes only by following an unnatural path, not unlike what Neo learned from Morpheus. We must learn that 'what looks like it should work, doesn't'. What seems logical isn't. In short we must start by unlearning everything we thought we knew - because like the Matrix, or an Andy Kaufman performance, it is all illusion. If you believe, you are just begging for others to take your trading capital- or as Stipe says "nothing is cool".

MORPHEUS: "THE MATRIX IS A SYSTEM, NEO. THAT SYSTEM IS OUR ENEMY.  

Our ways are not the market's ways. What is real is unnatural. It took thousands of hours of pouring over the works, biographies and interviews with many of the greatest traders, to fully begin to absorb that truth. My overwhelming desire has been to discover what really makes money.

MORPHEUS: "YOU HAVE TO UNDERSTAND MOST OF THESE PEOPLE ARE NOT READY TO BE UNPLUGGED AND MANY OF THEM ARE SO INERT, SO HOPELESSLY DEPENDENT ON THE SYSTEM, THAT THEY WILL FIGHT ANY CHANGE."

By   Mon, Apr 12, 2010

The Primary Trend (The Four Year Cycle)

The primary cycle is simple, yet profound. And once you learn to recognize it, you will never again finding yourself vacillating daily with the single day rallies and declines, wondering "Is this a bull market or a bear market?" That basic cornerstone will always be at the very center of your trading strategy.

Chart courtesy of StockCharts.com

The Primary Trend-Bull or Bear Market

The Primary Cycle, AKA the bull market/bear market cycle, AKA the 4-year cycle is the cornerstone of the successful market trader, because it defines the primary direction of the market. Over the years, bull markets have averaged 2.5 years in length, bear markets 1.5 years, though these numbers are just that- averages, and some primary bull markets or bear markets have been somewhat longer, some much shorter. But the propensity for the primary cycle to bottom in the mid-presidential year (1950, 54, 58, 62, 66, 70, 74, 78, 82, 86, 90, 94, 98, 2002, 06, 2010) has been uncanny, as shown below. Once one recognizes that pattern on the charts, it all starts to make sense....and come into clear focus. When this trader becomes conscious of the primary trend in real time, his trading performance is likely to improve exponentially. He immediately has a massive trading advantage over his competition, "the crowd". Context is everything.

As we write this in late 2009,we are  smack dab in the middle of a primary bull market at just over 1000 on SPX. Yet millions of traders worldwide, and talking heads on CNBC, on Bloomberg, in the Wall Street Journal, and on trading message centers everywhere are talking about "double dips" and new lows below 666 SPX. But that's all it is - Talk. If you understand market cycles, you have the huge advantage over these millions of traders and self apointed "experts"- the advantage of knowing that we are in and will continue to be in a bull market well into 2010. You will recognize this rally for what it is....a genuine bull market. The beauty of it all is that when you choose to buy, millions of willing "bagholders" are only too happy to take the sell side of your trade. Why? They sell because they are clueless about the Primary Cycle. They only "know" what the talking heads are telling them about "double dips" and what they "feel" about the market. 

Understanding of the primary cycle alone is enough to distinguish market winners from the herd of market losers. In a zero sum game, each new level of understanding puts you closer to the top 1% who make 99% of the stock market profits!

By   Sun, Apr 04, 2010

   
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By   Fri, May 18, 2012

Primary Cycle: Bull Market

Intermediate Term: ~Seven Sentinels~ Sell Mode Overall/7 of 7 on Sell 

Short Term: ~Hourly Trend Trackers~ Buy Mode Overall/1 of 8 on Buy 

Open Position: 20% TWM (33.08) Cash 80%

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The Intermediate Term Downtrend which began from the "last gasp high" on March 19 has now accelerated into a steep waterfall decline. The 13 day exponential moving average of the NYA above gives us a meaningful picture of that trend. Readers may recall that after our Seven Sentinels Sell Signal of March 6, we were viewing every incursion of markets above that 13-day ema as an important selling opportunity. The circles above show those sell areas, and the last one shows our next approximate target selling area.

That 13 dema line continues to define the trend in progress, and again any and all incursions above that 13 dema should be sold. That 13 dema currently reads 7784.08, and tonight's close  for NYA was 7480.43, some 304 NYA points below the 13 dema, the deepest distance yet below that line.

We had said in March and April that levels above this "line of least resistance" or downtrend line represented sell areas, and the deeper we went below that LOLR, the more oversold we'd be...so that the deepest discounts would represent likely rebound points. We have, of course stayed out of all longs, and have remained short to varying degrees during the decline this far, and will continue to do so as we move forward. We were the heaviest short above the trend-line and the are now the lightest short as we've gotten extremely oversold. On the next rebound to or above that trend-line, we'll again get short to perhaps as much as 100%. We should keep in mind, by the way, that while we have varied our short commitment from as high as 100% to as low as 0% since March, the vast majority of traders and investors have been LONG by varying amounts. So while others are dealing with deep losses on their portfolios, our primary concern is what percentage short we will trade at each step along the way in this IT decline.

To that point, we note tonight some incredible oversold extremes that indicate that a very sharp rebound can occur at any time now, and in fact is "overdue" by historical standards. We use the term "overdue" lightly, because the market's timing is what it is. We just mean that it is coming later than normal.

Note for example our SPX:VIX oversold/overbought indicator, which indicates oversold (high likelihood of rebound imminent) when the index trades below its Bollinger Bands:

Notice that the indicator has closed below the BB's for four consecutive days. We went back and looked at the the last four years, and found that the ONLY other time it closed below the BB's for four consecutive days was May 7, 2010, at the closing low the day after the flash crash, just before a sharp rebound of 60+ SPX points in four days to the next optimal short entry point above the 13-day ema. Similarly three consecutive down days over that four year period occurred at low points before snap-backs to the 13 day ema:

Another study of our VIX and VXN arrays on a DAILY basis shows the reading right now to be at 5-year extremes that have occurred at very significant Short Term lows in the past:

So by many, many measures, we are at a level where the risk of a sharp rebound to the 13 dema is extreme. We remain 20% short, and patiently wait and watch for opportunity to increase that at the best possible time and price levels - above the 13-day ema.

EOM

By   Wed, May 09, 2012

Primary Cycle: Bull Market

Intermediate Term: ~Seven Sentinels~ Sell Mode Overall/1 of 7 on Buy

Short Term: ~Hourly Trend Trackers~ Sell Mode Overall/4 of 7 on Buy

Sell Target Areas: > COMPQ 2940, NDX 2627, INDU 12940, RUT 791, SPX 1363

Initial Downside Target Areas: COMPQ 2900, NDX 2608, DJ 12544, RUT 752, SPX 1328

Open Position:  25% TZA (18.95), 25% SDS (15.86), 20% QID (34.24), Cash 30%

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Tonight as we go through data from the day and week, we see all of the warning signs that everyone else sees - signs that warn of an impending trend change. Markets are getting oversold and divergent on a daily basis:

Oversold:

Divergent NAMO versus price:

Series of hammers (above COMPQ chart and below NDX and RUT):

But a reminder tonight about what we do and how we work, from our home page....

{Timers nearly always try} to anticipate the markets next move based on the use of ...technical or fundamental indicators.  These "market timers" get so caught up in trying to anticipate the next move that they "forget" to identify the current prevailing trend- the dominating line of least resistance here and now - which is truly all that matters to a stock investor or trader. That's precisely where we are very different.

SevenSentinels.com has just one overriding purpose: to keep us all focused on the prevailing trend -the right side, regardless of the market's deception and to continually provide us with the perspective and confidence to be right and sit tight. 

Our singular mission is to keep us on the right side of the current trend. Period.

Our point, of course, is that "yes" we definitely see these warning signs of trend change....but we STAY focused on the current trend rather than jump ahead and conclude that because of an indicator or array of indicators, that the trend WILL change tomorrow or the next day, and that we need to take action now ahead of that change. Our philosophy, which has served us extremely well over the years, is that it is right to be on alert for trend change, but until it happens, we will stay with the current trend- the one underway RIGHT NOW.

And that trend is down. Currently our Seven Sentinels are on sell mode and six of the seven remain on individual sells. The Hourly Trend Tracker is on sell mode and three of the seven remain on sell. We took 30% off today at the low. If we get a BUY from the Hourly Trend Tracker, we'll reduce shorts to somewhere between 25 and 50%, and await another HTT sell. At some point the Seven Sentinels will go to BUY, and at that point we'll reverse to long. But we are nowhere near that point just yet.

It appears to us, too, that we are near a rally point. But here's the important point: We may NOT be. We may, in fact, be on the verge of a real wash-out. If that occurs, our trend indicators will keep us short for a very profitable move. IF, on the other hand, we are indeed going to get a trend change, our indicators will get us out very quickly - and for the RIGHT reason - because we truly DO have a trend change.

So we sit tight. More on this tomorrow as it will be a very important day - one way or the other.

EOM

By   Mon, Apr 30, 2012

Primary Cycle: Bull Market

Intermediate Term: ~Seven Sentinels~ Sell Mode Overall/2 of 7 on Sell 

Short Term: Up ~Hourly Sentinels~ Buy Mode Overall/3 of 7 on Buy

Sell Target Areas: > COMPQ 3025, NDX 2715, INDU 13020, RUT 810, SPX 1390

Downside Target Areas: COMPQ 2900, NDX 2604, DJ 12544, RUT 752, SPX 1328

Open Position: 20% DXD (13.5), 30% QID (34.24), 25% SDS (15.86), 25% TZA (18.95)

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Lest we be misunderstood with regard to Apple Computer, let us first say that we recognize fully the spectacular success of this company. Steve Jobs was a genius like we may never see again in our life times. Apple's products are not only top shelf quality, but cutting edge - and miles ahead of the competition in every product line. The company is one of the best managed we've encountered, and it's cash position puts it in a position to do just about anything it can imagine in future years. And 30% of it's revenue comes from the hottest growth market on the planet, China, so that it may be just getting warmed up in terms of overall growth and size.

In fact, in a word, Apple is "the" LEADER, and its coattails go beyond NDX, beyond COMPQ, beyond NYA or SPX, even beyond the US Securities Markets. But AAPL is a stock, and stocks TREND. And AAPL, the LEADER of leaders among stocks, is now TRENDING DOWN. Leaders trend up and leaders trend down and the broad market follows the leaders. That's why we call them leaders. And AAPL is trending down.

We have been observing of late that the MACD on APPL is decidedly down, as is the trend as indicated by CCI. The spectacular earnings report for last quarter has not managed to change that overall downtrend in the slightest, as this "echo" of last quarter's spectacular price rise of some 240 points caused big ripples through domestic and even international markets this last week. In fact that spike simply formed the low volume right shoulder to the head & shoulders pattern being carved out....

Consider for example, the pattern of NYA, looking especially at the nearly perfectly formed H&S top pattern with confirming volume. Notice, btw, that it was at the time of our March 6, 2012 Seven Sentinels Sell Signal that the upside momentum in NYA was broken in what we see now was a "too early" call in the decline to follow, but certainly served as the set up for what is following.

NDX and COMPQ, naturally, look very much like AAPL itself, as that one stock makes up so much of their individual weightings. Notice MACD is still in sell mode despite recent "strength", and, of course, notice the confirming volume pattern for a H&S top as in the above two charts:

Then finally note the same H&S top pattern with confirming volume for the Transportations, in addition to the fact that they have failed since Mid March to confirm any further new highs in the Dow Jones Industrials, a Dow Theory Sell Signal:

Frankly, the recent move in markets above their 13-day ema's surprised us. We expected the move to be contained at that 13 dema. But the whole world experienced "shock and awe" at AAPL's latest quarterly report last Tuesday. Had that not been a "shocker" to investors and traders around the world, the stock would not have rallied 55 points from that report into the next morning.

We will always be subject to shocks and surprises, black swans, and news reports and events that move markets in extreme cases way beyond where they would have gone under more sane "normal" conditions. That's why TRENDS are of such key importance.

The bottom line is that we read the current market still to be in the early stages of a significant Intermediate Term decline. In fact this IT decline may be the shot across the bow, setting up a final new high in SPX later this year {perhaps around the election} that is NOT confirmed by the NYSE advance-decline line. If this is, in fact, that "decline before the decline", the one that sets up conditions for a Primary Trend Bear Market, then it is likely, as we still believe will be the case, that this decline will be deep and severe, taking SPX well into the 1200's at minimum.

For the short term, we saw these patterns on daily TRIN and TRINQ Friday:

These were individual short term sell signals from TRIN and TRINQ daily indicators, but interestingly when BOTH sell signals have occurred together on an up day for SPX and COMPQ over the years, we can not find a single example of where that did NOT produce a good short term top on the market. Many such examples, in fact, occurred right at the exact top before a very substantial slide, like, for example, this day at the end of April 2011:

Those dual TRIN/TRINQ daily sell signals on up days for SPX/COMPQ occurred, again, right at the end of April 2011, where we've placed down arrows and line... at the onset of a very substantial decline. We found many such examples over the last twelve years:

But we do not want here to be misunderstood either. We do NOT mean to imply that a double TRIN/TRINQ sell on an up day all by itself indicates a big slide ahead. What we ARE saying is that given the Seven Sentinles Sell Signal still in progress, the IT down-trend which we regard as very "young", the position of all averages over their 13 dema's in that down-trend, the down-trend of leader AAPL, and now the TRIN/Q sell signal, we believe there as a very good chance that we are ready right now to start the next slide.

This does not negate the point that we've made many times recently that we have a stop at a Seven Sentinels Buy Signal *if* should that occur. We do NOT expect that signal to occur, especially with our daily sell signals now on Friday. But we always use the Sentinels as our ultimate stop for risk management reasons, and we will always respect those signals no matter what analysis, opinions or expectations we may hold.

We sit tight at fully short.

EOM

By   Fri, Apr 27, 2012

Primary Cycle: Bull Market

Intermediate Term: ~Seven Sentinels~ Sell Mode Overall/2 of 7 on Sell 

Short Term: Up ~Hourly Sentinels~ Buy Mode Overall/3 of 7 on Buy

Sell Target Areas: > COMPQ 3016, NDX 2710, INDU 13007, RUT 805, SPX 1381

Downside Target Areas: COMPQ 2900, NDX 2604, DJ 12544, RUT 752, SPX 1328

Open Position: 20% DXD (13.5), 30% QID (34.24), 25% SDS (15.86), 25% TZA (18.95)

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3:20... Just to put this market into perspective, let us remember that it was the apple which caused all of the excitement this week with a blow-out quarter. But this is the same stock, let is remember, that had a manic move right into the beginning of Q2, but then broke down hard into a downtrend as shown below by MACD and CCI. This huge pop this week was based on last quarter's earnings for AAPL - or put another way, AAPL already moved up 240 points last quarter as it looked forward to these quarterly earnings and that quarter is now history. This huge "pop", btw, has not done a thing to improve the look of this chart: (more text below chart}

Indeed, the chart above describes the look of all major averages in here. We of course stand ready to respect and act on a Seven Sentinels Buy Signal if we get one. But it is entirely possible, perhaps probable, that we have seen a one-off occurrance this week with AAPL's spike bolstered by AMZN's. Again, though, we'll let the market speak, and we will respect what it has to say....and will trade accordingly.

Regular weekly report on Sunday.

2:10... In the very short term, we are getting sell signals in the VXN array that we'd shown earlier as being extremely overbought. But we are more interested in the Short to Intermediate Term trends, and there, the jury remains out at this hour with no SS buy signal.... so that we remain on sell. We will be patient:

12:45... Markets remain on the razors edge between going to IT buy mode and confirming a short term top that will lead to a slide to new lows. We will wait for the Seven Sentinels to give us that trend definition. Meanwhile though, we are seeing significant overbought levels for the very short term via VIX and VXN, as well as sell signals on TRINQ/TRIN:

11:30... Again, our objective is not to speculate on whether or not the trend has/will change from down to up, but to read the market and to either stay in sync with the IT downtrend - or the opposite if internals produce a buy signal. Accordingly, we are on an IT sell where we remain, and at the moment we have TRINQ and from last night BPCOMPQ still on sell mode, and TRIN has moved in and out of sell mode all day.  VST indicators are on sell mode currently, but we will wait out the Seven Sentinels themselves:

10:30... Earning of AAPL and now AMZN have shown blow-out numbers, and to some degree this has made analysis of market internals much more difficult than it would normally be. On the one hand we have seen spectacular rises on each of those stocks which have carried all markets much higher. On the other hand, we still have to question whether these moves inspired by massive I-pad and Kindle sales are really a game changer - or whether we are witnessing a one-off spike. The jury will not be out on that much longer, as our trend measuring Sentinels are at a critical juncture right here, and will soon tell us whether there is a true trend change - or whether we are embarking on a further slide to new lows. We will let the market and only the market tell us that.

Currently TRIN has been heading back up, and breadth and NYMO/NAMO thus far, back down. We watch closely:

9:15... Markets are again looking to open strong Friday, and we watch closely for a buy signal. We'll assess market internals and trends after the first hour.

Overnight Developments

• Global stock and commodity prices are mixed with June E-mini S&Ps up +1.50 points and the Euro Stoxx 50 up +0/22%. The euro rose from its worst levels and European stocks recovered from early losses after Italy sold 4.92 billion of 2017 and 202 bonds, close to its maximum target, while earnings results from Vinci SA and Sandvik AB beat analysts' forecasts. 10-year Treasury futures climbed to an all-time high and stocks and commodities slumped earlier after Standard & Poor's cut Spain's long-term credit rating by 2-steps to BBB+ from A with a negative outlook on concern it will have to provide further fiscal support to its banks as the economy contracts. Stocks fell further and the yield on Spain's 10-year bond rose to 6% after Spain's Q1 unemployment rate rose +1.5 to 24.4%, an 18-year high. After S&P downgraded Spain's sovereign-debt rating for the second time this year, Spain's Economy Minister Luis de Guindos said Spanish banks won't need external aid, nor will Spain need a bailout from its European partners. The British pound rose to a 7-1/2 month high against the dollar and a 22-month high against the euro on increased safe-haven demand on concern the European debt crisis is spreading. Other negatives for European stocks and the euro were the unexpected -0.2 point decline in the May German GfK consumer confidence survey to a 6-month low of 4.6 and the sharper-than-expected decline in Mar French consumer spending which fell -2.9% m/m and -2.0% y/y, weaker than expectations of -1.9% m/m and -0.2% y/y.
• Asian stocks today closed mostly lower with Japan down -0.43%, China -0.20%, Australia -0.30%, South Korea +0.73%, and India +0.02%. Most Asian stocks settled lower on concern that the European debt crisis will worsen and slow global economic growth after Spain had its credit rating cut by S&P. The yen rose to a 1-1/2 week high against the dollar, which undercut exporter stocks, despite the action by the BOJ to boost its asset-purchase program by 10 trillion yen ($125 billion), near the high side of expectations, after industrial production rose less than expected. Mar Japan industrial production increased +1.0% m/m and +13.9% y/y, weaker than expectations of +2.3% m/m and +15.5% y/y. Chinese stocks finished lower as well, as slumping corporate earnings overshadowed speculation the PBOC will ease monetary policy to boost economic growth.

By   Sat, Apr 07, 2012

Primary Cycle: Bull Market

Intermediate Term: ~Seven Sentinels~ Sell Mode

Short Term: Down

Open Position: 30% DXD (13.5), 20% QID (34.24), 20% SDS (16.59), 10% TZA (17.92), 20% Cash

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Thursday we noted:

10:30... "We have been remarking recently about the similarity between current markets and the late April/Early May 2010 markets. Here is a comparison between the RUT chart today and that of May 5, 2010 which we find very interesting. Notice especially the CCI readings. That similarity runs through all of our Sentinels as well..."

So what followed that May 5, 2010 chart? This....the blue down arrow was May 5, 2010:

As said Thursday, all of the Sentinels through April 5, 2012 have carved out nearly identical patterns as they had through May 5, 2010, with internals having led the way down for weeks, setting the stage for a very substantial decline in price. If "price is king", then the king shall bow to the true leader... internal market breadth.

Let's look at the similarity of the patterns carved out by each of our Sentinels then and now, and look at what followed May 5, 2010. Look closely at the pattern of NYMO (including moving averages) leading up to May 5, 2010 and April 5, 2012...

May 5, 2010....

Now notice what price did after May 5, 2010, following breadth's lead:

Same three for NAMO...

And for BPCOMPQ...

An NYSI....

And NASI...

And TRIN...

And finally, TRINQ...

The lead downward by breadth and volume based market internals in April 2010 was one of the longest leads we've been able to identify over the years, but that long persistent lead downward finally led to one of the most severe market breaks we've seen in the last decade. That is no coincidence. The lead downward here in March 2012 has been even longer, deeper, and more persistent, and we believe the magnitude of the market decline that has already begun following that lead will be no coincidence either.

We are not looking for an exact replay of May 6/7, 2010, but we are looking for the same general pattern coming off the recent top, now as then. We expect weakness Monday after the "very cold" NFP report of Friday, but look for markets on this extreme weakness to become oversold in the next day or two, then bounce...but to move very substantially lower over coming weeks. Here was/are the SPX:VIX patterns then and now:

Market price is now chasing market intenals which in turn have been declining for weeks. But as said Thursday, those internals are now moving down even more rapidly so that price has some catching up to do over the near term. We are 80% short and sitting tight. If we reach some exreme short term oversold this week, we may temporarily reduce our position and wait for a bounce.

EOM

By   Sun, Mar 04, 2012

Primary Cycle: Primary Bull Market

Intermediate Term: ~Seven Sentinels~ Buy; New Signal Close

Short Term: Neutral

Open Position: 10% DDM (66.8), 90% Cash

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According to Plutarch, a seer had foreseen that Caesar would be harmed not later than the Ides of March and on his way to the Theatre of Pompey (where he would be assassinated), Caesar met that seer and joked, "The ides of March have come", meaning to say that the prophecy had not been fulfilled, to which the seer replied "Ay, Caesar; but not gone."^[3] This meeting is famously dramatized in William Shakespeare's play Julius Caesar, when Caesar is warned by the soothsayer to "beware the Ides of March."^[4][5]

A special thanks to a subscriber for sending us the following chart - which shows the perecntage of issues on NYSE above their 20-day moving averages (41.18%) on Friday's close, even as SPX closed at new 2009-2012 highs this Thursday and retested that level on Friday:

To put that into perspective, on April 30, 2010 as the SPX was testing it's highs, this percentage had dropped to 46.96% - as internals had collapsed just before the flash crash/summer meltdown {the external collapse} of 2010:

External follows internal as night follows day. We are NOT predicting a meltdown of the proportions of the decline of May and June 2010, but we ARE noting a very rapid breakdown in market internals here that ultimately will, in all likelihood, lead to a very significant correction. We do not claim to be "soothsayers" but our observations on the rapid deterioration of market internals DO suggest that we could be just hours to days away from the onset of that move. External follows internal. It did in May 2010 as can be seen in the charts below, and it will, ultimately, in March 2012.

NAMO - despite all major averages making new highs this week - closed Friday at it's lowest level since November 24, 2011 when SPX closed 1159, some 200+ points lower than now; NYMO it's lowest since December 19th.

Internals are collapsing as can be seen on these three-year charts. Compare the below readings for each indicator to the end of April, 2010. The comparisons are striking. Again, when we DO get the decline it may or may not be of the magnitude of the May/June 2010 decline. But we DO believe it will be very significant.

First chart is $SPX for reference, closing at a 3-year high on Thursday:

NYMO new lows for year:

Common stock only McO new 2012 lows:

SPX McO 2012 new lows:

Total Market Mco new 2012 new lows:

Small Cap Mco lowest since October:

DJ Sector buy signals new 2012 lows:

Percentage NYSE stocks over 50 day moving average at 2012 new lows:

NYSE Common Stock Only advance decline line flat to down throughout February as averages made continual new highs almost daily:

Decision Point's Intermediate Term Breadth Oscillator in downtrend for 4 weeks now as averages making new highs:

Same with Net new highs:

There are more examples we could show but the point should be clear by now. Internals are declining rapidly just as they were in April 2010... as price makes new highs. How long these this biforcation goes on can not be known. Perhaps the markets have already peaked - perhaps they will move up for a few more hours or days or even into the next week. But ultimately the piper must be paid - and he surely will be. External will follow internal. We are just 10% long and will be looking to go from net long to net short shortly - but not until the market gives us the signal. Five Sentinels are on sell; the remaining two are close. The market will tell us when the IT uptrend is over and the decline is underway, at which point we'll trade accordingly and report in real time, as always.

EOM

By   Sun, Feb 05, 2012

Primary Cycle: Primary Bull Market

Intermediate Term: ~Seven Sentinels~ Buy

Short Term: Up

Open Positions: 5% EDC (95.45), 20% FAS (74.38), 20% QLD (88.56), 20% TNA (49.1), 10% UPRO (68.29), 25% Cash

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The Primary Bull Market which started in March 2009 from a low of 666 versus SPX is still alive. We do not make that pronouncement lightly, as the implications are enormous. During the holidays, on December 26th, while markets had just given us a Seven Sentinels Buy Signal but were giving is very mixed signals for the short term, we had said:

"Are these mixed signals the product of seasonal influence....or is it the product of a real sea change at the very heart of this market...a paradigm shift of some sort? That is the critical question, and those who get that RIGHT will likely have their best year of the this decade in 2012. Those who get it wrong, though....

So which is it? Frankly we flat don't know....JUST YET. But we will, soon... probably right after the first of the year. Either markets truly are experiencing a sea change from Primary Bear back to Primary Bull....OR they are ready to begin another 2008 style melt down. Our Seven Sentinels will tell us which it is in no uncertain terms....in due course."

Market internals have spoken - in no uncertain terms, and 2012 is already proving to be big, very BIG  as our tracking account and two very active trading accounts at Collective2 are at or very near all time highs since we initiated those accounts in 2010 and 2011. We had expected this as we'd said repeatedly in December that we viewed 2012 as potentially our biggest trading year of the decade.

Has something changed? Today we will detail the answer to that question - which is a resounding "YES". What has changed is the Primary Trend which in September 2011 had gone from Bull Market mode to Bear Market Mode in what we call the "whipsaw of the decade". We could even call it the "whipsaw of the Millennium" we suppose, because not only is the first time since this new Millennium began that this has happened (a downturn in Primary Trend followed by a quick reversal) as the last such occurrence was in 1997:

In September 2011 the 13 month ema of SPX price was moving down, MACD monthly went to sell and the Monthly CCI dropped below zero, confirming a Primary Bear Market. This last occurred in 1987 (Primary Sell that was quickly reversed) and in 1997 two of these three criteria occurred before a quick reversal. In both cases the trading crowd stayed ultra bearish for months and years afterwards, as those who read the new Primary Bull Signals correctly had some of their most profitable trading periods of their lifetimes.

And that brings up back to today. In January 2012 these Primay Signals re-confirmed the Primary Bull Market of 2009 (from SPX 666) with the 13 month ema of SPX going to new 4-year highs and with monthly MACD giving a new monthly buy signal. CCI at +90 is confirming the strength of that move and we watch whether it can cross above +100 confirming the all out pedal-to-the-metal mode of this Bull Market. Recall that in 2009/10, it took until early 2010 to reach that level.

Other confirmations? They are myriad, starting with the much ballyhooed "Golden Cross" ( the Bull Market Signal which occurs when the 50 dma of SPX crosses above the 200 dma) in January:

...then the upside breakout in NYSI:

....and New Highs:

....and of course the very sharp run-up into new all high territory by the NYSE advance-decline line:

The Primary Bull Market of 2009 is still in play. The implications are enourmous. But rather than use hyperbole at this point, let us just simply say that we believe 2012 will prove to be a year similar to 2009, and to what followed September 2010, as both ushered in legs to this Primary Bull Market will long sustained advances. We look a very minimum for a move beyond the 207 highs around 1575, and probably significantly higher as this third leg moves into full bloom in months ahead.

William Congreve wrote in 1697:  "Heaven has no rage like love to hatred turned/ Nor hell a fury like a woman scorned." Ask some of the old timers who have traded for decades and we suspect that the best of them will tell you that "Markets have nor fury like the upside they unleash after a false sell signal". The after math of 1987 proved that. 2012 is not likely to provide the exception to that rule.

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Turning quickly to the week ahead, markets are very short term overbought as discussed Friday. After the surge Friday we suspect that we will see further attempt to rally Monday ending in perhaps a doji and followed by a good dip by about Tuesday. Again we will be buying dips- not selling them as we move forward.

EOM

By   Wed, Jan 25, 2012

Primary Cycle: Primary Bear Market; under review

Intermediate Term: ~Seven Sentinels~ Buy Mode

Short Term: Down

Open Positions: 20% FAS (74.38), 20% QLD (88.56), 20% TNA (49.1), 40% Cash

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We have said frequently that we believe 2012 will be huge for traders - especially if they trade in sync with the Primary and Intermediate Term trends. We make no secret of the fact that the fourth quarter of 2011 was an extremely difficult period to navigate, as the market produced a Primary Trend Bear Market Signal on the monthly domestic and world charts - a signal which is now very close to reversing. That signal may turn out to be the whipsaw of the decade. But 2011 is behind us and we move forward. As we do so, we note that the market truly "turned the page" as we entered 2012. And 2012 looks to us to be ushering in the trading environment of the decade.

2012 is not 2011. It is a whole new market environment. We'll examine below some of the factors that lead us to that conclusion. Then we'll review, briefly, the short term trend which remains down, as we watch for opportunity to accumulate additional longs at lower prices.

This most recent Primary Bull Market began from March 2009. By 2011, though, markets ran into trouble technically and fundamentally. We won't spend time here reviewing the problems - we all know what they are. But here is the how that weakness was reflected in NYSI and NASI. These measures demonstrate the deterioration in markets over the year - UNTIL they bottomed in late 2011, after which markets began building strength internally. They are currently breaking out as they did in March 2009:

The NYSE A-D line entered all time new high territory early in 2012 and has been making new highs almost daily since:

And it's not just our markets, as the $DAX, for example, the leading economy in debt swamped Europe is breaking upward as well: 

...and the weekly DJ World index is on MACD buy mode, CCI at a powerful +160 {uptrend tends to push forward as long as CCI remains >+100}, and the 8 week ema is very close to crossing above the 34.

Meantime copper, gold, silver, oil are all confirming the move:

We watch closely for final confirmation of the continued Primary Bull Market to be evidenced by

1. 13 month EMA hitting new high above 1258

2. MACD Buy signal

3. CCI > +100

The IT uptrend is powerful and the Primary Trend is close to confirming. Thus our leveraged long position. We look to build that long position further as opportunity presents itself.

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Our immediate concern, though, is the short term, and we read the market as in the early stages of a correction, one which may lead to a short quick retreat this week. Reviewing some of our short term indicators, we see the SPX:CPCE {dumb money PCR} ratio MACD down-trending with the 3 ema falling sharply below the 8 day ema:

Then we set up the same parameters for SPX:CPCI {smart money PCR}, but inverted the scale, and we get the same picture for the short term trend:

Our TRIN and TRINQ Sentinels are now on sell mode as well:

We got a sell from stochastic on Friday:

Our Targets remain roughly 1280 to 1295:

2012 looks to be one of the best years of the decade for traders. We patiently take it a day at a time.

EOM

By   Mon, Jan 23, 2012

Primary Cycle: Primary Bear Market; under review

Intermediate Term: ~Seven Sentinels~ Buy Mode

Short Term: Up

Open Positions: 20% FAS (74.38), 20% QLD (88.56), 20% TNA (49.1), 40% Cash

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We have firmly believed for decades that "context is everything". Seven Sentinels.com is all about context, as readers know by now. Last weeks daily reports covered the unfolding Intermediate Term Trend in detail, as will the daily reports next week. Today we'll set aside the IT (which is in solid uptrend, but overbought and due for correction short term) and focus on the Primary Cycle.

Let's look at some of the unfolding indicators... Last week we looked at copper and noted it's uptrend. This week that trend has accelerated as it made a five-month high...

NYA made a six-month high:

The NYSE advance-decline line made a series of new all time highs:

Silver made two-month highs....

....as did gold ETF's:

While $DAX made a 5-month closing high....

....as did $SPX:

But the real defining elements will be found in the monthly SPX chart and derivative indicators:

By   Fri, Jan 20, 2012

Primary Cycle: Primary Bear Market; under review

Intermediate Term: ~Seven Sentinels~ Buy Mode

Short Term: Up

Open Positions: 20% FAS, 20% QLD, 20% TNA, 40% Cash

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We'll touch on three subjects very briefly tonight. First just in passing we want to refer back to the subject of last weekend's analysis- the Primary trend. We note the following: The downtrend in the monthly SPX price chart is being challenged; MACD is approaching a buy signal; CCI is approaching +100, also a buy signal, and the 13 month EMA is close to making a new 4-year high. We'll discuss this in more detail in the weekend report.

Secondly as we quickly review the strength of this Intermediate Term up-trend, we note a number of very substantial confirmations of the strength of that trend through today's close, starting with the NYSE advance-decline line charging forward deep into new all time high territory:

NYMO is still making new highs, indicating that this trend has a considerable ways to go both in time and price:

....and now NYSI is pushing into new high ground, confirming the power of this trend....

...and interestingly, even the DAX, at the very center of the Euro situation that has had traders and investors on the defensive for months, is making new closing highs today: 

The Seven Sentinels collectively and individually are all in powerful uptrend mode, and we see new confirmations of that trend nearly every day. But the third aspect we want to touch on tonight is the short term and the very short term trend. Both are overbought.... the VST trend (hourly) to extremes and the short term (daily) to a lesser but very real extent. 

First the VST sell signals:

...and then a look at the short term (daily) overbought indications:

In summary, we find ourselves currently in the early stages still of a very powerful Intermediate Term advance. Meantime though the short term indicators are very overbought, so that we look for likely consolidation or pullback in the days to come. We are 60% long and sitting tight, and expect to stay long now for several weeks, perhaps months. In the short run, we watch for buying opportunities ahead as markets consolidate.

EOM

By   Tue, Jan 10, 2012

Primary Trend: Bear Market

Intermediate Term: ~Seven Sentinels~ Buy Mode

Short Term: Up

Open Positions:  20% QLD {88.56}, 20% TNA {49.1}, 60% Cash

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While market pundits and participants are focused on the Euro and watching for it to pull our markets down to new lows, market internals today removed any doubts that we'd harboured for the last two weeks that the true line of least resistance - the Intermediate Term Trend - is UP. All Seven Sentinels are very firmly on buy mode and making new highs. We absolutely do NOT want to suggest that the problems surrounding the Euro are not serious - because they are. We are simply noting that the market is marching to any number of drummers, not just one. Markets sort through all of the influences and from all of that, trends emerge. And the trend of SPX is currently UP.

In fact everything we needed to see in order to join in the trend in progress, with confidence that we are now trading with the wind at our back, can be seen in this singular chart:

The move to new highs by NYMO above is perhaps much more significant than meets the eye. That move signals to us a whole new leg of advance here, as NYMO's breakout will likely lead to much higher readings in both NYMO and NAMO, and thus a long sustained advance. Even if we were looking at a peak in NYMO here (which we do NOT believe it will be), new highs in NYMO today indicate by historical standards at least another couple of weeks of advance by SPX. In other words, once NYMO DOES peak, we still have quite a bit of advance to go. And chances are very high that NYMO is nowhere near a peak at this point.

NAMO is even stronger than NYMO, as Nasdaq leads SPX, another bullish indication....

....and new highs in both mean acceleration in NYSI and NASI.....

As well as BPCOMPQ....

....in addition to the persistent strength in TRIN and TRINQ....

...and today we saw that the broader Russell 2000 moved out ahead of all of the narrower indices, yet another sign of the renewed strength that today's breakout provided:

We note, too, that today's surge was CONFIRMED by volume on SPX, DJIA, NYA, COMPQ, NDX, and RUT, yet another indication that we are now trading with the wind at our back.

It all started with NYMO, but we wanted to show as we've done above, how all of the Seven Sentinels are inter-related and how they all are giving us a consistent message - and that message is that we are early in a sustained advance.

That all being said - now a word of warning. Though the trend is UP, and though our indicators tell us that the true drivers of this market are OTHER than the factors which are constantly dogging this market and frightening traders and investors.... the fact is that in the short run we need to be braced for volatility and fear based declines along the way. Europe and the Euro specifically are in deep trouble. That's NOT going to change any time soon. And that negative will hang over markets for some time to come.

So while we are positioned for the advance ahead which has been clearly identified by our market trend indicators - the Seven Sentinels - we fully expect a bumpy road and scary declines along the uptrend. We will be constantly evaluating and updating our position this week, and will review the longer term aspects this coming weekend. For now we are 40% long and will ride out the scary hours and days ahead.

EOM

By   Fri, Apr 27, 2012

Primary Cycle: Bull Market

Intermediate Term: ~Seven Sentinels~ Sell Mode Overall/2 of 7 on Sell 

Short Term: Up ~Hourly Sentinels~ Buy Mode Overall/5 of 7 on Buy

Sell Target Areas: > COMPQ 3016, NDX 2710, INDU 13007, RUT 805, SPX 1381

Downside Target Areas: COMPQ 2900, NDX 2604, DJ 12544, RUT 752, SPX 1328

Open Position: 20% DXD (13.5), 30% QID (34.24), 25% SDS (15.86), 25% TZA (18.95)

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Markets are again looking to open strong Friday, and we watch closely for a buy signal. We'll assess market internals and trends after the first hour.

By   Wed, May 16, 2012

Primary Cycle: Bull Market

Intermediate Term: ~Seven Sentinels~ Sell Mode Overall/7 of 7 on Sell 

Short Term: ~Hourly Trend Trackers~ Buy Mode Overall/4 of 8 on Buy 

Open Position: Cash 100%

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9:20... Extremely oversold markets are rebounding here, and thus far have not been crushed by any new Euro news. We'll assess market targets and trends after the first hour.

Overnight Developments

The E-mini S&P this morning is little changed despite the fact that European stocks are down another 0.62% on the Greek political impasse. Commodity prices are mostly lower again this morning with July crude oil down 1.7%, gold down 1.4%, copper down 1.7% and most agricultural commodities trading lower. The dollar index is mildly higher by +0.26% and EUR/USD is trading slightly lower by -0.13%.

Greek political leaders will meet later today to name an interim government that will call new elections, likely for either June 10 or 17. The anti-bailout party Syriza is likely to gain a few percentage points of votes in a new election and the traditional Pasok and New Democracy parties are likely to lose 1-3 percentage points of votes. Syriza right now has 20.5% support in the polls versus 19.4% for Pasok and 11.8% for Pasok. However, the political situation will not be much different after the election than it is now, meaning that there is no obvious path forward for Greece at present unless Radical Left Syriza leader Tsipras eases up and agrees to join a government. The only good news was that Greece yesterday paid in full its 435 billion euro floating-rate note debt, thus preventing a default cascade from the trigger of cross-collateral default provisions in other Greek notes not covered by Greek law. The debt payment at least bought Greece some time to figure out how to get through the next couple of months of political turmoil. Greece has only enough cash to survive through early July without another bailout tranche payment from the Eurozone.

The main point that came out of last night's Merkel-Hollande meeting was that the new Greek vote in June will be a referendum on whether Greece wants to stay in the euro. German Chancellor Merkel and French President H Hollande both made concessionary remarks of concern for Greece, but basically said that Greece will have to live up to the main tenets of the bailout agreement. Ms. Merkel said requests for measures to bolster growth will be "considered" and that the EU may "approach Greece with proposals." She added, "Greece can stay in the euro area," and "Greek citizens will be voting on exactly that." Mr. Hollande said, "The Greeks need to know we'll come with growth measures that will allow them to stay in the euro zone."

The Bank of England today lowered its growth and inflation forecasts and said that UK officials are tuning up their contingency plans for weaker growth being caused by the European debt crisis. The BOE in its quarterly Inflation Report forecast that UK inflation will remain above 2% longer than last forecast but will drop to +1.6% in two years, below the 2% inflation target. The BOE last week voted to halt its quantitative easing program and said that the inflation risks are "broadly, evenly balanced." The BOE forecast that GDP will be at +2.6% in two years.

Today's UK March ILO unemployment rate fell to 8.2% from 8.3% in Feb and was more favorable than expectations for an increase to 8.4%. In addition, April jobless claims fell by 13,700 versus expectations for a 5,000 rise. For the Eurozone, the April CPI was reported at +2.6% y/y and the core CPI at +1.6% y/y. The March Eurozone seasonally-adjusted trade balance rose to 4.3 billion euros was larger than the market consensus of 3.8 billion euros and up from Feb's revised 4.0 billion euros.

Asian stocks fell nearly across the board today: Japan -1.12%, Hong Kong -3.19%, China -1.63%, Taiwan -2.18%, Australia -2.36%, Singapore -1.58%, South Korea -3.33%, India -1.83%, Turkey +0.11%. Chinese stocks today fell 1.2% and were down for the fourth consecutive day on continued concern about weaker Chinese economic growth and weaker export prospects to Europe, which is China's biggest export market with an 18% share of Chinese exports. The market consensus shifted downward for Chinese Q2 GDP after last Thursday night's weaker than expected Chinese industrial production report of +9.3% y/y. Japan's JGBs today rallied and 10-year yields fell to 0.82% to match the lowest level since 2003 on safe-haven demand. The Bank of Japan in today's purchase program was unable to get enough offers to fill its bid since JGBs are in high demand as a safe-haven asset. Japan March machine orders fell -2.8% m/m, which was better than the market consensus of -3.5%.

By   Thu, Apr 19, 2012

Primary Cycle: Bull Market

Intermediate Term: ~Seven Sentinels~ Sell Mode Overall/5 of 7 on Sell 

Short Term: Down

Sell Target Areas: COMPQ 3040, NDX 2722, INDU 13000, RUT 808, SPX 1384

Open Position: 20% DXD (13.5), 30% QID (34.24), 10% SDS (16.59), 25% TZA (18.95), 15% Cash

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9:30... Markets respinded with a big rally overnight to the successful Spanish Bond auction, the peaked around 4:30 AM and have faded since. We'll assess market internals and trends after the first hour.

By   Thu, Mar 22, 2012

Primary Cycle: Bull Market

Intermediate Term: ~Seven Sentinels~ Sell Mode

Short Term: Down

Open Position: 30% DXD (13.5), 20% QID (34.24), 20% SDS (16.59), 10% TZA (17.92), 20% Cash

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9:15 AM... Markets are gapping down on various reports of slowing in Chana and Europe. We'll assess market internals and trends after the first hour.

Overnight Developments

• Global stocks this morning are mostly lower with the Euro Stoxx 50 down -1.06% and Jun S&Ps down -7.60 points. Treasuries and the dollar are higher and commodities retreated, with copper at a 2-week low, after Euro-Zone manufacturing and services contracted more than expected in March and a private report showed manufacturing activity in China may contract for a fifth month. The Mar Euro-Zone PMI composite unexpectedly weakened -0.6 to 48.7, a larger-than-expected contraction than the +0.4 to 49.7 expected.