Nasdaq and S&P Bottoms Forecast

johnasfour

Many thanks

lmkwin

In the past week, some banks/financials are starting to show some green shoots in my scans and lists. Interesting when looking at the sector rotation model graphic from above. I use the appearance of dynamic CSS patterns to make that observation.

A large amount of 7xx CSS patterns occurred during the recent market bottom process May - July but the banks were absent for the most part. This last week they started showing up. I use the constituents of the QQQ, MID and SML for my public chart list and only the appearance of dynamic CSS patterns and for this observation.

Who knows what's in the cards, the financials aren't towards the top of timeliness scale at the moment but find it interesting information to share.

markd

In reviewing the sector funds, its interesting to note the defensive sectors/industries are still doing best, or least worst. Utilities are making new highs. Also waste services. Many of the others have reached inflection points on my weekly charts. In a bull market, a longer down leg often reverses on hitting the rising 13 week lower channel. In this market, many sector and industry charts are just above or just approaching the falling 13 week channel, which would be a resistance area. I've noticed the financial press is talking about "end of the bear market", which is what you would expect at a top. So if you are already in and bullish, it might make sense to hold through the expected selling, but if your are not in and bullish, it's probably better to see how the market reacts to resistance. My bias is bearish, but I am naturally cautious, often overly cautious.

lmkwin

I look at individual charts and try to let the charts tell the story. Higher highs is good. Higher Lows is also good. Higher Highs and higher lows, even better.

Tom Bowley said to expect a weak week for the indexes as options appear to be high on the call side and the market makers manipulate the value closer to profitable for them. I don't really do options so have no valid analysis of my own. But he's been an observer with pretty solid analysis skills. Of course, his time frame is shorter than mine but I like to hear the short term indications as they play a key role in the intermediate and long term outlook.

My bias is long only, but that just puts me between two choices. Invested and cash. Cash is a very valuable asset when long isn't working. I don't look at funds per se but do keep track of the long:short relationship like SPY:SH. Weekly Slow Stoch 5,1 gets below 20 is often a good bottoming indicator on that. Taking out March Highs, or better, the December 2021 Highs is a map for getting out of the woods. We're not there yet.

lmkwin

Sector Rotation Model is a bit of a mixed bag stage

lmkwin

On Nasdaq Dorsey Wright website, they keep several statical breadth indicators based on Point and Figure charts. You may be familiar with the Bullish Percents. This is an indicator that shows the percent of securities in a universe that are on PnF Buy Signals on their chart. In my book there is a caveat or two on BP's but they are a decent short term indicator.

Another breadth indicator on NDW is PT in X's. That is the number of PnF charts that are currently on a positive trend, trading above a bullish support line.

A commonly accepted idea is that the markets tend to do better if the Banks are participating by having the PT in X chart being in X's. PTBanks just reversed up to a column of X. It had reversed to O's in July 2021.

We'll see what happens.

lmkwin

The PTBANK chart has reversed back to a column of O's in September and is at 54 currently

lmkwin

PTBANK has reversed back to a column of X

lmkwin

Yesterday showed the Bullish Percents in many areas on the move. Bullish Percents below 30 and reversing higher than that is often is an indication of a bottoming area. Above 70 and reversing lower than that is often an indication of a topping area. Bullish Percents are a scale from 0-100. They are Breadth Indicators, similar in nature to the percent above the 20 or 50 day moving average. In bullish markets they are normally above 50 and below 50 in bearish markets.

The Bullish Percents are based on the Point and Figure chart and the number of "buy signals" showing on the individual charts as a percentage of the group. In the PnF world, a "buy signal" is basically a Higher High.

Higher High is one of the requirements for an uptrend. PnF charts only reflect significant price movement. You can equate the "buy signal" to a significant move above an upper price channel on a bar chart.

lmkwin

The Sector Rotation Model seems a little conflicted. The only sectors showing a positive return last 200 days on the Perf Chart are highlighted. The components run the full gamut saying that we are in Full Recession, Early Recovery, Full Recovery or Early Recession.

markd

Possibly government interventions are throwing things off - the shut down, climate spending, fed rates. Those are not events originating from economic activity (over investment, excess lending, inventory build up), so it would not be surprising if the data are not tracking with the model.

lmkwin

I try listen to what the Market is saying as the Market is always right.

lmkwin

The Positive Trend for Banks indicator flipped back to a column of X on Friday.