Seven Sentinels Explained

Decades ago it occurred to me that there really is only one thing that matters to a trader, and that is what Livermore called the line of least resistance- the current direction of the market. In simplest terms, a trader’s job is nothing more or less than to be long when prices are advancing, out or short when they are declining. Period. If you have this aspect right, then everything else becomes secondary, assuming, of course, that you employ effective money management.
Early on in my trading career, this philosophy led me to intense study and identification of the controlling secular, cyclical and intermediate-term market trends and then years later to the development of the Seven Sentinels themselves. 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 internal proceeds external.
The Seven Sentinels are internal measures of money flow into or out of markets. External price movement follows this money flow, just as birth follows pregnancy, exhaling follows inhaling, a volcano follows the build-up of gases below the Earths surface or a Tsunami follows a major earthquake. By observing one (“internals”), we can accurately identify and trade the other (price trend). We adamantly maintain that this understanding is the single most powerful trader’s edge in existence.
The secular, cyclical and intermediate-term trends are explained elsewhere on this site, with a cover story for each that takes you to a somewhat detailed explanation. Each is critical, in the opinion of this analyst/trader, to an understanding of current market direction and trading success. But none is as critically important as the signals given by the Seven Sentinels, which are seven separate measures of the market trend, that when aligned, define the prevailing line of least resistance – and by implication, the appropriate trade position required to be in alignment with the prevailing trend.
Below are each of those seven. An explanation follows below regarding what constitutes a signal on each, what constitutes a full Seven Sentinels market/trading signal, and how we use them to guide our market trading. A separate page entitled “Seven Sentinels Current Signal” will show the current signal and latest signal date at any given time, and a link to each lead story goes to the latest reading for each of the Seven, individually. We have learned over time that trying to “front run” the signals is seldom wise. It virtually always pays to wait for a signal rather than try to anticipate one.
Charts courtesy of StockCharts.com

First the individual buy/sell signals for each of the seven: {We are Updating These Currently):
1. BPCOMPQ is in “buy mode” when the BPCOMPQ 8-DAY ema reading is above the 13-day exponential moving average (ema) shown on the chart; it is in “sell mode” when below the 13-day ema.
2. NYMO is in “buy mode” when the 13-day EMA of NYMO is above the 34-day exponential moving average (ema) shown on the chart; it is in “sell mode” when below the 34-day ema. 
3. NAMO is in “buy mode” when the 13-day NAMO reading is above the 34-day exponential moving average (ema) shown on the chart; it is in “sell mode” when below the 34-day ema. 
4. NYSI is in “buy mode” when the NYSI reading is above the two-day exponential moving average (ema) shown on the chart; it is in “sell mode” when below the two-day ema. 
5. NASI is in “buy mode” when the NASI reading is above the two-day exponential moving average (ema) shown on the chart; it is in “sell mode” when below the two-day ema. 
6. SPY:TRIN is in “buy mode” when the TRIN 8-day ema reading is ABOVE the 13-day exponential moving average (ema) shown on the chart; it is in “sell mode” when the 8-day EMA is BELOW the 13-day ema. 
7. XIV is in “buy mode” when the XIV 8-day EMA reading is ABOVE the 13-day exponential moving average (ema) shown on the chart; it is in “sell mode” when 8 day EMA BELOW the 13-day ema.
The Seven Sentinels Buy or Sell Signals themselves, as derived from these seven:
A Seven Sentinels Buy Signal is triggered when ALL SEVEN individual indicators are in “buy mode” at the close of any session and STAYS in effect until it is superseded by a new signal. 
A Seven Sentinels Sell Signal is triggered when ALL SEVEN individual indicators are in “sell mode” at the close of any session and STAYS in effect until it is superseded by a new signal.
Charts courtesy of StockCharts.com