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PREV (the Matrix)
Friday's big decline in stocks has the bears growling loudly. While growling is an easy sell after big decline, it still doesn't jive (match) the message of the market. The sentiment and VIX model are still bullish and above their initial entry points from 2732-2776. This is not to say I'm bullish. The computer is still bullish as trading desks turn bearish. Dollar traders know this setup. The bears were screaming sell minutes after the FOMC meeting. They proved their point by citing sentiment (a loopsided trade) and the UDX's close below its 200 day moving average. Fast forward a few days, the dollar has rallied unexpectedly and the bears have gone silent. Maybe stocks follow the same path. The trouble for stocks is that the economy is slowing (rather quickly) and investors can't figure out where to park. For now, it's bonds, but few recognize them as instruments of destruction during the coming public sector meltdown. Europe's bond market ass kicking will open a few eyes around the world. Stocks may not rally up, up and away from here, but they could catch a bid as recognition of where the crisis lies grows.
The invisible hand is not blind to unfolding crisis. 10-year and Treasury bond DI's are approaching -100% (see Matrix). This is maximum distribution. Maybe the commercial traders have it wrong, or maybe the public/retail trader is blind to the coming crisis. It's never wise to position yourself with the public. Subscribers need to watch these trends in the Matrix.
Treasury Bond DI
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.
Subscribers are encouraged to submit comments or questions about the Matrix/Insights.
Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.