True, the STS only signals once every 10 to 20 years. However, evaluating the investment merit of a given asset class requires a minimum time frame of 10 years, so it is critical to correctly identify secular context. Cyclical trends only last from 2 to 5 years and are certainly suitable for long-term trades. We have a separate indicator that identifies cyclical inflection points:
The signals have occurred in real-time since the software was created in 2000 (everything prior to 2000 was generated using back-testing). Keep in mind that these signals indicate secular inflection points only. Therefore, the sell signal that occurred in late 1999 indicated that a secular bear market was about to begin. That secular bear market is still in progress and the next buy signal will not be issued until the next secular bull market is immiment. The dip below -80 in 2010 is not a signal, it simply indicates that the secular bear market from 2000 is still in progress. Let me know if that still isn't clear.
Stocks Struggle to Break Out of Trading Range [View instapost]
Thanks, Tim. A large percentage of our new subscribers are referrals, so we appreciate your spreading the word. The market has been tracking our long-term computer model since peaking in late April and continues to do so.
The Big Picture Remains Bearish for Stocks [View instapost]
Hi Tack,
Yours is the typical, conventional perspective when it comes to interpreting and analyzing market data. However, if it were true that market behavior provided no statistically significant predictive data, it would be impossible to forecast cyclical market turns with a high degree of reliability and our CTS has identified more than 90% of those long-term turns since 1940. The system details are provided at the following article at Advisor Perspectives if you are interested in learning more about it.
Stocks Struggle to Break Out of Trading Range [View instapost]
Thanks, I'm glad you are finding our service useful.
"I noticed that PMI used to have a section on the gold mining index but is not longer there in the daily e-mails and on your new website. I ask because I am interested in this sector, will you be no longer be tracking the gold mining index or only provide updates when important turning point signals are triggered?"
Our service is now focused on providing better coverage of the five primary markets that we monitor (stocks, 10-year treasury note, US dollar, gold and oil), but we will continue to provide GDM updates whenever significant technical developments occur.
Stocks Struggle to Break Out of Trading Range [View instapost]
There is always a bit of luck involved whenever you call the start of a cyclical move on the exact day it begins, but properly applied chart analysis will tell you when it is time to pay close attention. The historic nature of the oversold condition achieved in March 2009, across all time frames, was a once-in-a-generation development that was fairly easy to identify if you knew what to look for. I suspect the next cyclical low will be more difficult to call. We will see.
Stocks Struggle to Break Out of Trading Range [View instapost]
"But even then, it becomes a question of what level should LT investors start buying into much cheaper risk assets? Just wish one could get a good estimate on that, but seems that such is almost impossible to do."
That's why we use a combination of technical and cycle analysis to identify likely inflection points. With one focused on price and the other on time, you can construct relatively narrow windows for turning points across all time frames with a high degree of statistical confidence. The 12 to 18 month and 30% to 50% windows are based on "typical" cyclical downtrends that occur during secular bear markets, but they are only rough estimates. When the time comes for the next cyclical bottom to form, properly applied chart analysis will once again ring the bell, just as it did back in March 2009:
An Historically Weak Economic Recovery [View article]
Our computer models have actually been predicting that the bull market from 2009 would end with this type of violent decline for several months, but the severity of the sell-off surprised even us. As for bottoms, that all depends upon the type. Stocks are extremely oversold on a short-term basis, so a violent oversold reaction could develop at any time. With respect to the long-term view, if a new cyclical bear market has indeed begun, we're looking at 12 to 24 months of declines and a good chance of returning to the 2009 low.
An Historically Weak Economic Recovery [View article]
For the record, the SA editors changed the headline, adding the "Outright Economic Contraction Imminent" clause. My analysis does not suggest that and I am working on getting the original headline restored. I have no idea why they would choose to make such a change without consulting me first, as it grossly misrepresents the article.
A Trading System That Challenges the Efficient Market Hypothesis [View article]
Hi George,
The CTS does not predict corrections within cyclical uptrends (or reactions within cyclical downtrends), but intermediate-term cycle analysis does a very good job at identifying those turns. Once the time frame under scrutiny decreases to weeks or days, only IT and ST cycle analysis provides reliable signals.
A Trading System That Challenges the Efficient Market Hypothesis [View article]
Exactly right, Isaac. The mainstream media tend to focus on the day-to-day machinations of the market, and it is easy to get sucked into their myopia along with them. That's why it is so important to analyze weekly and monthly charts on a regular basis. Maintaining focus on the big picture enables you to see the forest while the sound bite crowd on CNBC stare incessantly at individual trees.
The Challenge Of A Secular Bear Market [View instapost]
http://bit.ly/wovgbt
The Challenge Of A Secular Bear Market [View instapost]
Taking Issue With Amazon Coverage [View article]
http://seekingalpha.co...
Given AMZN's extreme valuation, it will likely experience a massive decline next year as the cyclical bear market that began in May proceeds.
Stocks Struggle to Break Out of Trading Range [View instapost]
Best,
Erik
The Big Picture Remains Bearish for Stocks [View instapost]
Yours is the typical, conventional perspective when it comes to interpreting and analyzing market data. However, if it were true that market behavior provided no statistically significant predictive data, it would be impossible to forecast cyclical market turns with a high degree of reliability and our CTS has identified more than 90% of those long-term turns since 1940. The system details are provided at the following article at Advisor Perspectives if you are interested in learning more about it.
http://bit.ly/uxufRp
Best, Erik
Stocks Struggle to Break Out of Trading Range [View instapost]
"I noticed that PMI used to have a section on the gold mining index but is not longer there in the daily e-mails and on your new website. I ask because I am interested in this sector, will you be no longer be tracking the gold mining index or only provide updates when important turning point signals are triggered?"
Our service is now focused on providing better coverage of the five primary markets that we monitor (stocks, 10-year treasury note, US dollar, gold and oil), but we will continue to provide GDM updates whenever significant technical developments occur.
Best,
Erik
The Allure Of Coincident Indicators [View article]
May 2011.
Best,
Erik
Stocks Struggle to Break Out of Trading Range [View instapost]
Stocks Struggle to Break Out of Trading Range [View instapost]
That's why we use a combination of technical and cycle analysis to identify likely inflection points. With one focused on price and the other on time, you can construct relatively narrow windows for turning points across all time frames with a high degree of statistical confidence. The 12 to 18 month and 30% to 50% windows are based on "typical" cyclical downtrends that occur during secular bear markets, but they are only rough estimates. When the time comes for the next cyclical bottom to form, properly applied chart analysis will once again ring the bell, just as it did back in March 2009:
http://bit.ly/sqNwOU
Best, Erik
An Historically Weak Economic Recovery [View article]
An Historically Weak Economic Recovery [View article]
Sentiment and Valuations Supportive of Material Upside for Markets [View article]
seekingalpha.com/artic...
As for valuations, they are at historically high levels as defined by several reliable metrics such as the Shiller CAPE ratio and the Q ratio.
A Trading System That Challenges the Efficient Market Hypothesis [View article]
seekingalpha.com/insta...
seekingalpha.com/insta...
A Trading System That Challenges the Efficient Market Hypothesis [View article]
The CTS does not predict corrections within cyclical uptrends (or reactions within cyclical downtrends), but intermediate-term cycle analysis does a very good job at identifying those turns. Once the time frame under scrutiny decreases to weeks or days, only IT and ST cycle analysis provides reliable signals.
Best, Erik
A Trading System That Challenges the Efficient Market Hypothesis [View article]