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Changes to Matrix:
Long Term Cycle Output updated. Help links added. LT Cycle tab removed - no longer necessary.
The Matrix shows no new signals. Smart money is watching the evolution of natural gas, palladium, cotton, and cocoa. The tape or trading discipline keeps smart money ready to act but watching from the sidelines.
The backdrop for US stocks, a setup defined strictly by the alignment of VIX and sentiment model, has remained consolidation since 07/26 (line 62). Consolidation could be challenged this week as the market retests the lows. History says that the majority, a group growing more pessimistic with each down tick, will be on the wrong side of the trade when the two models agree.
Consolidation is not a prediction of a bear market but rather cause building within the cycle of Accumulation and Distribution (see below). Rising interest rates is being blamed for cause building in October, but the misalignment of sentiment (sentiment model) and risk (VIX model) suggests that the invisible hand was warning us of this outcome as far back as July. Disciplined investors watch the reversals for guidance (see rev tab). Closes below bearish reversals (below) generally suggests continuation to lower reversals. Closes above bullish reversals suggest the opposite. Consolidation is bound between 25575-25633 and 25106-25112 (see weekly reversals). US stocks could easily be trapped between these zones until after the US mid-term elections.
BuST & BrST > 0, observations made in the daily, weekly, or monthly time frames, warn investors where upside or downside alignments are pushing against the cycle of time. The computer defines these alignments as Early, Mid, or Late. Late cycle alignments are vulnerable to reversal. A daily BuST or BrST > 2, for example, suggests a growing probability of consolidation ahead even in Early and Mid cycle alignments.
Using the Matrix
The value of the Matrix is far more than a study of price. Trends are a function of price, volume (force), volatility, and TIME. The order of their importance is as follows: (1) TIME, (2) volatility, (3) volume & price alignment. Volume and price alignment, a setup that triggers action, favors Grade A & B, early cycle markets under high compression (↓COM). ↓COM suggests extremely low volatility, a quiet trend ready to explode into high compression (↑EXP). Weekly and monthly breakout signals are not finalized until the end of the week and month, respectively. Signals generated before that could be temporary. Keep this in mind when reading alignment.
Suggested Reading: The Cycle of Accumulation and Distribution (CAD), Leverage Oscillator (LTLO), Diffusion Index (DI), Volatility Bandwidth (BW), Compression (COM), Expansion (EXP), Alignment, Upside Alignment, Downside Alignment, Sentiment Model, Intermarket Trends, VIX Model, Economic Activity Composite, Long Term Cycles.
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Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.