Trend Reversals

Treasury Bonds are currently have a strong chance of reversing their downward trend. Both the 20+ year Treasury Bond Index and the 7-10 year Treasury Bond Index entered into downward trends on September 16th, 2010 according to the model. Shortly after both started their downward trends. The model has recently signaled a high probablitly of these ending their downward trends.

The US Dollar futures Index, represented by the ETF UUP has already conformed to what the model is telling us. We are in a market climate that is heavily characterized by trend reversals. On 8/25/10 the model signaled a continuation in the down trend for UUP. On 10/20/10 we recieved a signal that the downtrend should come to an end. Around 11/8/10 the downward trend in the dollar came to an end and the dollar started to trend up.

The below chart indicates the date the model signaled a downtrend marked by the red line and then signaled the uptrend, marked by the green line.

The dollar should continue in its upward trend untill we recieve further signals indicating a reversal.
The below chart coincides with the price chart above for UUP. The model has signaled that the first part of the dollars move is complete. We are now waiting for the blue line to signal the move is fully exhausted. There is also a chance the red line indicator could move back to its upper range signaling the dollar will resume a downtrend. We are watching this carefully.

Strong chance of trend Reversal: Short Plays
USD: Dow Jones Semiconductor Index
USO: Crude Oil
EFA: MSCI EAFE Index
GLD: Gold Bullion

Correction Begins

Below are the main readings from the model. When the market is strong the top blue line will be above 40 and the bottom red line will be below -20. On September 20, 2010 the red line crossed above its threshhold, shortly after the blue line crossed below its threshhold. This indicated the market would experience a correction.

On October 18th the blue line reached a turning point and started to correct, signaling the market would also correct. On November 9th the S&P 500 Index started its correction falling about 3.5% before it resumed its upward climb. The market however will not be done correcting untill "indicator 2" the red line returns to its normal range. On December 7th the red line started to retreat and will return to its normal range. As this happens the market will also experience a correction.

In the above chart I have highlighted instances where "indicator 1 and 2" have rose and fell out of their normal ranges. As you can see as the indicators reach their maximum point and begin to normalize the S&P 500 undergoes a correction. As soon as the indicators reach their normal ranges the market resumes its trend.

Currently we are waiting for "indicator 2" to reach its normal range. Untill it reaches this range the market will likely fall. As soon as the model has any further developments I will post them.