SevenSentinels.com

Primary Trend: Bear Market/ Intermediate Term: ~Seven Sentinels~ Buy Mode/ Short Term: Down, 100% Cash

The Primary Cycle officially moved from Primary Bull Market to Primary Bear Market at the end of September 2011:

While the Seven Sentinels moved into buy mode - IT uptrend - in early October, we have recognized the markets as extremely dangerous and unstable overall, and have remained mostly on the sidelines. As we quoted from our home page on October 23:

"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."

Implicit, though, in that mandate is perhaps an even more crucial objective of keeping subscribers and ourselves "out" of grave danger - to keep readers, to the very best of our ability, from losing money during periods when we regard risk as unacceptably high. For the most part, NOW is such a period. Risk is unacceptable..." 

Last Wednesday night, EU news sent markets straight up in what we regarded at the time as capitulation on Thursday, as we said then:

"...we reached the most overbought level of the year today as markets powered into resistance.... a level of overbought that has initiated a strong pullback in every incidence over the last several years. Some of those tops were short term, several were Intermediate Term, but each was a significant high point from which markets receded:"

We had observed several sentiment indicators on October 31 which confirmed this capitulation, showing a shift to extreme bullish sentiment across the board.

... as we observed the similarity to this same relative position in 2008 after the Primary Bear Market had been signalled in March. Then (per below chart), as now (as shown in above chart), markets had a sharp Bear Market rally which temporarily punched through the 200-day moving average, having said in the weekend report:

"Meantime though we are closing in fast on the next down-leg of this Bear Market - one which we expect to be very powerful AND extremely profitable for traders who get on the trend and stay with it. Here is the set up leading to that down leg and that decline itself in the last cycle, with the period we regard as very similar to now circled. Notice that both times, the 200-day MA was surpassed briefly on the Bear Market Rally."

Additionally, we observed:

"We look for the next Sell Signal to be very important.... and profitable. Looking at the chart for 2008 above, notice two boxes labeled "A" and "B". The current market shares characteristics with each. "A" was a ST top that lead to a ST buy opportunity ahead. The second, "B" was the final IT top. We believe that the current market is at one or the other approximate position.....a top leading to a solid trade, or "the top" leading to the best trading op in years."

After Monday and Tuesday's market action and the breakdown of market internals over those two days, we strongly suspect now that the box market "B" will approximate the next few days leading to a Seven Sentinels Sell Signal. We'll enlarge that area in the box below to take a closer look following several observations. The drop in NYMO from Thursday's close of +93.06 to today's close of -11.17 in just three days has been perhaps the fastest complete melt down from a closing high we've ever observed. And we've been observing for over 40 years. Same with NAMO's meltdown from +79.94 to -13.27 in that same period.

In fact, looking at all Seven of the Sentinels, we note the following:

BPCOMPQ, TRIN and TRINQ are all on sell mode now:

Meantime with NYMO having dropped to -11 and NAMO -13 per above, we note that NYSI and NASI are very close now to sell mode:

and finally.... NYMO and NAMO 13/34's are moving rapidly in that direction:

We are rapidly approaching now that key Seven Sentinels Sell Signal which we expect to produce the most profitable trades we've yet seen since we've been providing this service. But how might it unfold from here? In a straight down move into the SSSS? Possible. But much more likely it will unfold in a similar fashion to the end of the March-May 2008 Bear Market Rally. Here is that enlargement of "Box B" referenced above:

In that portion marked "Initial Sharp Sell-Off", the Sentinels, just as now, started moving rapidly towards SELL MODE. But then the market rebounded one last time and then finally produced the Seven Sentinels Sell Signal of May 21. What followed was this:

Worth waiting for? We certainly think so! One final caveat though. The pattern here will not repeat the above pattern per se. They never do precisely. Perhaps the rebound and sell will unfold faster, considering the extreme nature of these markets. Perhaps the shape will be different. And perhaps we won't even get the expected rebound but will move directly into the sell mode. We'll let the market make those calls. But we will be listening carefully and ready to act accordingly. If we get the right set-up, we'll take a trade for the rebound. If not, we'll wait for the SSSS. But as we've been saying, "it's now just a matter of time".

EOM