Daily Market Analysis

Daily Market Analysis for 27 Oct 2011 Close

Welcome to Objectively Defined Non-Ambiguous Market Timing Analysis.

Market Timing Direction: LONG since Oct 27 Close. 

Analysis  Direction  Note
Market Breadth Pattern  Bullish Yes, there was a follow-through with very high number of stocks considered accumulated, the largest ever since I collected the data. So, it is fair to say that we are in a rather uncharted territory.

First change is the fact that our market state has switched to Strong market state. Well, with the kind of accumulation that we have witnessed, there is no way to say that we are not in strong market. In fact, since Oct 4, there was very little distribution going on. If only the distribution were a little higher, we would have switched two days ago. But I suppose the outcome of the EU summit can go both ways and this time it happened to be on the bull side. To wait and see was a sound posture.

Secondly, we have a break resistance pattern. This signals a bullish movement going forward. I know the move is already very significant. But we follow what the market say. A correction may soon follow. Some people will wait for a pull-back. However, there is a possibility that the pull-back just will not happen, leaving behind those waiting for the pull-back.

The past few days I have thought a lot about the best way to resume a position generated by a major signal which is followed by failure of minor signals, e.g. 1Bar reversal followed by stopped at resistance which subsequently failed and breadth keep improving. A slight change to the system may be in store. Truth be told, prior to Oct 27, I had a strong feeling that we would break to the upside, simply because of the relatively strong breadth numbers leading to the summit.

Primary Breadth Trend  Bearish The primary market breadth is very close to switching into bull market.
Monetary Conditions  Bullish Monetary base started to decline. However, short-term interest is still much lower than longer term interest rate. Thus, Interest Rate Pump factor continues to rise. Monetary policy is still extra easy.

Note: Any change from previous day summary is highlighted in blue.

Below is the forward-looking market timing track record since the blog started. Next day opening price of SPY is used to calculate gain/loss so that we can take advantage of it in a realistic setting. SPY is used for reference only. You can use other instrument of your liking, e.g. TNA, options, futures. For historical back-testing results, please read the last section of Market Breadth Pattern guide.

Date Action SPY Next Day Open Gain/Loss In Percent
2011-Apr-20 BUY (Long) 133.79

2011-May-09 exit 135.17 1.38 1.03%
2011-May-11 SELL (Short) 135.67

2011-May-26 exit 133.00 2.67 1.97%
2011-May-31 BUY (Long) 134.51

2011-Jun-01 exit 131.96 -2.55 -1.90%
2011-Jun-01 SELL (Short) 131.96

2011-Jun-23 exit 128.27 3.69 2.80%
2011-Jun-23 BUY (Long) 128.27

2011-Jul-13 exit 132.09 3.82 2.98%
2011-Jul-21 BUY (Long) 134.52

2011-Jul-26 exit 132.59 -1.93 -1.43%
2011-Jul-27 SELL (Short) 130.60

2011-Aug-09 exit 115.26 15.34 11.75%
2011-Aug-18 SELL (Short) 112.96

2011-Oct-04 exit 112.62 0.34 0.30%
2011-Oct-04 BUY (Long) 112.62

2011-Oct-17 exit 120.14 7.52 6.68%
2011-Oct-17 SELL (Short) 120.14

2011-Oct-21 exit 124.17 -4.03 -3.35%
2011-Oct-27 BUY (Long)


current*









Winning %
70.0% 70.0%

Win/Loss Ratio
1.8 1.8

Profit Factor
4.1 4.1

Count
10 10







SPY Point Compounded Trade End



Return Max Drawdown
Market Timing
26.25 21.86% 3.35%
Corresponding SPY
-6.36 -4.75%

Market Breadth Pattern

Click on the Chart itself to see the bigger version.


Primary Market Breadth

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Monetary Conditions

Note: The following charts are updated once every month. The chart was last updated on Oct 21, 2011.

Industry Rotation

Click on the Chart itself to see the bigger version.

Color legend:

  • BLUE: 1 year leader and 1 month leader,
  • LIGHT BLUE: 1 year leader,
  • LIGHT GREEN: 1 month leader,
  • RED: 1 year laggard and 1 month laggard,
  • MAGENTA: 1 year laggard,
  • ORANGE: 1 month laggard.

Earnings Cycle

Click on the Chart itself to see the bigger version.


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About timelysetup

Timely Setup Owner

Discussion

4 thoughts on “Daily Market Analysis for 27 Oct 2011 Close

  1. Interesting analysis and good move to go long. This rally has puzzled many. Equal cases can be made for both bull and bears in this market. Waiting to see, how you modify the system.

    Posted by iahmed | October 28, 2011, 10:00 am
    • Hi Ahmed,

      I suppose only time will tell whether or not it is a good move.

      As for the system modification, I simply plan to add a “resume” pattern (which is basically a trend continuation pattern) for cases where trend reversal anticipatory signals failed and trend resume. This is one missing component of the system.

      Another missing component which I want to address is a “trend sweeper”.. Currently, most decisions are based on identification of certain patterns. There are bound to be cases in the future where a new trend developed without identifiable patterns already stored in the library. So far, this has not happened yet. All major turning points since April were found in the library. But it will surely happen. This is where a simple but lagging and potentially whipsaw-prone trend identification method will come in handy. Renko chart of BPNYA may fit the bill. Simple method like vbbee also falls under this category. I have a lot of things to play with now.

      Posted by timelysetup | October 28, 2011, 4:54 pm
  2. timely do you think that tweaking your system at this point would have any impact on the results of your backtesting and forward testing?

    Posted by mike | October 29, 2011, 9:12 am
    • Yes, it has some impact on backtesting and I have taken backtesting outcome into consideration. As for forward testing, the impact remains to be seen. But I believe the two additions are conceptually sound and necessary to close some gaps in current implementation.

      Posted by timelysetup | October 29, 2011, 11:15 am

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