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Palladium and majors (gold shares) have realigned. The gold shares primary trend broke out to the upside at the end of February. Early alignments tend to flip from consolidation to alignment under compression many weeks after the primary trend breakout (BO) signal. Why? The shift in sentiment is not immediate. As long as the primary trend remains upside alignment, the rally must climb the wall of worry for many months. This wall of worry manifests itself in the form of volatility. Volatility introduces doubt day-to-day, but only a shift in money flows can maintain the primary trend.
The Precious Metals Composite, a measure of money flows directed towards precious metals, has flipped to bearish. The bear phase, however, is not robust. 2 out 3 of the PMC sub components are bullish. Again, the transition from bear to bull phase in precious metals money flows is a process, not a flip of switch. Sentiment towards precious metals is bearish after years of consolidation. A deterioration of confidence is redirecting capital flows, but the masses still don't believe anything has changed.
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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