02-17-2012 outlook and comments

I have tried to give you sufficient advance warning as to what I feel will be a top.  So far this week is playing out much as expected with the 22TD cycle having topped and the 20 week (Wall) cycle topping offsetting each other.

The question is how much more upside is left?  I looked at the 20 week DPO to try and come up with an answer.  It appears we may have  1-1.5 points of upside left for the SPX.  Of course, anytime you try to call a top (or bottom) getting it right requires some luck.  So 1360.44 or so appears to be the upside as projected by the 20 week DPO (amplitude). Here is a picture:

BTW - I understand Pretcher of Elliott Wave fame has a projected target of 1360.

I also show the CCI, and it has fallen below +100 which I use as a "sell" signal.  Over the past few days  and tonight I have shown you:

• Cycles that appear to be topping
• MFI that is headed down
• CCI signaling sell
• DPO projection nearly fulfilled

I am sure you have your own TA indicators (RSI, MACD, Stochs) you look at, but I try to add to the more commonly used TA indicators to supplement your analysis.

GL traders.

Did you miss these sell signals?

1. On Friday the CCI broke above +100 (I believe I mentioned this as being on my radar)
2. The upper EMA envelope lines met (or crossed) - sell signal
3. The MFI projected top time was achieved (top, bottom, projected top)

Maybe you have others you would like to share.

Her is a SPX chart showing these signals and a projection of the downside:

With 3 signals (that I have found to be fairly reliable) occurring together there should have been little doubt as to the market direction.  GL traders - do your own research and share.

Combining indicators for buy/sell signals

Many people look at multiple indicators to try and determine entry/exit points for trading stocks.  I often see references to RSI/MACD and divergences, etc.  But I have never seen a set of rules as what exactly is a buy signal or a sell signal using these multiple indicators.  It seems to be more intuitive than rule based.

Now it seems to me if we are going to use these indicators we ought to have a set of rules as to what is a "buy" signal and what is a "sell" signal.  As you may have noticed I use CCI on most of my charts and indicate when it is issuing a buy signal or sell signal.  I recently introduced the MFI as another indicator that may be useful in determining a "buy" or "sell" signal.

So what if we combine the two and lay out a set of rules for their use?  I have tried to do this.  Understand I have not tested this over long time frames (a variety of market conditions) nor a large number of stocks. So it may need some refining over time.  It seems to work on a variety of stocks though.

You can help me road test this?  Here is how it works:

Try this out on some of your favorite stocks and let me know if you see problems with it.  Your help, comments and feedback will be greatly appreciated.  Oh, you want to know what the stock is an see how well it worked?   It is a stock I have posted about previously here on this blog.  But if you really want to know what the stock is check back tomorrow night or Friday morning and it will be posted.   :)

GL traders.  Enjoy the home brew.