Daily Market Analysis

Daily Market Analysis for 3 Nov 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 Thursday was surprisingly a pretty strong day breadth-wise with many up trending stocks were considered accumulated (CA = 49, UA = 443) while only a small number of stocks were considered distributed (CD = 20, UD = 22). We have steady improvement of breadth statistics since Oct 28 drop. In fact, we have not seen any serious distribution since Oct 4 low. We maintain our Long position.

This system is at heart a trend following and exhaustion reversal system. Unless we see significant deterioration in breadth numbers, we will stay Long. This time we might not get an up trend, but this is what we are after.

However, we must be cognizant to the fact that we are now in a market heavily influenced by government action or inaction. This system will not work well when there are unexpected actions by government agencies. Why? Because the system essentially is piggy-backing market actions of large segments of market players (we buy when there is broad-based accumulation and sell when there is broad-based distribution, unless we see capitulations). If they themselves are surprised, then we are also adversely affected. Given the supposedly surprising events in Europe, the system might not perform well in the near future. Therefore, I suggest anyone following this system to reduce your exposure.

We are currently in a Strong market state. 

Primary Breadth Trend  Bullish The primary market breadth has turned bullish.
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) 128.00

2011-Nov-03 current* 126.25 -1.75 -1.37%






Winning %
63.6% 63.6%

Win/Loss Ratio
1.9 2.0

Profit Factor
3.4 3.4

Count
11 11







SPY Point Compounded Trade End



Return Max Drawdown
Market Timing since Apr 2011 24.50 20.19% 4.68%
Corresponding SPY
-7.54 -5.64%

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

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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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