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Changes to Matrix:
Revising the Reversal output for faster recognition of resistance and support zones. Updates to programming improving speed, accuracy, reliability.
No new setups.
Cocoa and the Yen have entered alignment driven by the primary trend. These are Grade A early cycle setups worth watching.
DI, a measure of energy underneath the trend, suggests notable concentration in the Cocoa and Gold. Neither position should be purchased against triple downside alignment.
Intermarket Flows Rotation within the market is severe enough to warrant further comment. The Russell 2000 (small cap stocks) have crashed relative to the Dow, SP 500, and Nasdaq. The computer warning to sell small cap stocks four weeks ago was solid advice. Expect this trend to continue. The average duration of underperformance is 15 weeks. Also, notice the Dow Industrials vault to the top. This suggests international capital inflows that are buying against rising pessimism domestically. I expect this pessimism will fuel the stock market rally in 2019.
The backdrop for US stocks, a setup defined strictly by the alignment of VIX and sentiment model, while neutral/consolidation is quickly approaching bullish. The bear will be forced to go silent when the two models agree. Bottom line, ignore opinions and follow the models - the have a better track record than most experts. Consolidation was never a prediction of a bear market but rather and indication of short-term cause building within the cycle of Accumulation and Distribution (see below). Nearly all stock indices, expect the Dow Industrials have broken out. The Dow is very close to an important weekly bullish reverse. Please check the Matrix. S&P 500 & VIX have entered triple upside (downside) alignment several days ago, so the bullish message is growing in intensity, as the experts try to talk down the market. Watch the public, a group worse than bad at market timing, turn optimistic (bullish) and chase rally if the breakout becomes obvious to the experts.
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. Markets vulnerable to 'unexpected' consolidation would be Coffee and Bitcoin. While most in the Bitcoin (crypto) community are seeking out buy, buy, buy would, I still recommend playing it by the Matrix only. Emotion needs to be removed from trading/investing.
Headlines distractions such as Turkey, Argentina, and Italy are all part of an ongoing debt crisis that's spreading throughout the periphery economies. The public, however, neither understands or cares to understand them. The Fed or Trump will save them, right? The ongoing debt crisis has firmly established safe haven capital flows between countries, so resumption of mark up in equities is growing more likely as weekly and daily bullish reversals fall to the rally. We watch the timing models, alignment, and focus of the alignment across the US equity sector to time the return of mark up.
While technology (Nasdaq 100) continues to lead the market higher, it's leadership is slowly deteriorating as the cycle of TIME (BuST) exceeds 2. BuST > 2 have been warning of a reversal for months. This reading has been forecasting technology underperformance since the summer, an outcome we are watching right now. Technology remain in the leader until LTCO falls below zero. The S&P 500 leads if all LTCO < 0.
Using the Matrix
The value of the Matrix is far more than 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.