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PREV (the Matrix)
Yesterday's trading action was dominated by foreign exchange. The Matrix has been telling us that the foreign exchange sector (Fx) has been highly focused for several days. This focus, a byproduct of intense international capital flows from the periphery economies to the United States, sent the Euro crashing through near term support @1122. A weekly close below 1122 open the door to downside targets that include a retest of the 2017 low @1034. Don't waste your time looking for explanations of why things are happening, as you'll likely be distracted by the dollar's perma bears that still populate the search feed & headlines; Jim Pauslen and his bearish dollar call since 2017 is an easy find. The dollar is headed higher mostly because of alignment and accumulation described by its DI a few weeks ago. The DI setup (energy) is now being released in the form of rally which few are talking about; this tells me the rally will go higher than people expect or want. The only thing we're interested in at this point is whether or not the dollar and gold will link up or display a positive correlation during the rally. If ρ hovers around 0 or above during an upside breakout in the dollar, it's a clear sign that something is up (line 62 column Z). That something is deteriorating confidence which should be picked up by the confidence oscillator in the coming months (line 103). Bullish confidence is not perpetual, but may believe it is because that what the political slogans say.
Small cap and financial stocks stocks have generated a weak alignment. So many talking heads 'like' financials, yet the group lags during rallies and is the first group to enter downside alignment during declines. It's obvious that the invisible hand doesn't like financials, but mainstream media either can't say or see that. This inevitably leads me to the same conclusion, the Matrix is a better read of the markets than any talking head.
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.