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View Full Version : 4-16-12 Morning Comment



Mike
04-16-2012, 10:19 AM
Today was the first day of a possible advance where we were looking for a follow-through day. A short term low occured on 4/10/12 and the next day we closed up, Day-1. Today was Day-4 potential rally count, the earliest count that can be used to mark a follow-through day. The count got reset today because we undercut the 4/10 lows.

It is interesting to note the divergence of IBD and the MarketSchool model. IBD put the market in correction on 4/5/12 and the MarketSchool model is still long with an exposure count of +3 (75% invested). The difference comes from historical probabilities. After a powerful rally like the one we have witnessed 70% of the time the market shrugs off a small pull back (5% or less) and continues the upward trend. Thus the MarketSchool exposure model struggles to stay engaged in the market. We are just now trading under the 50-day moving average, if we close below that level the count will drop to +2 and turn the PowerTrend Switch off. Another day of distribution could drag us down to +1. Both look likey to happen today as volume is running higher so far and AAPL appears to be entering a correction. If the MarketSchool model is to signal a correction it could likely come from S7 sell signal (Trending below the 21-day). The earliest time that could happen would be Thursday close in the case the NASDAQ intraday highs stay below that level. A drop of 2.5% today would also take us out of the market with a S10 Bad Break sell signal.

Since the rally count is reset it appears we will have to wait for some form of future capitulation and rally beggining. It is anyone's guess when that could occur, perhaps months... We may be working on the 30% probabilities of a significant top has been put in.