This weekend we're featuring a combined Morning Call and Weekly Wrap-up.
MORNING CALL/WEEKLY WRAP-UP
This weekend we're featuring a combined article for the benefit of our weekly readers - to show the short term nature of the daily service with the mid term nature of the weekly service.
The Dynamic Trading Morning Call features our 4 Dynamic Trading Oscillators and the VXN Momentum Chart. These Oscillators combine to give us our signals. As the market progresses through various cycles, you'll get to see the interaction of these oscillators.
Dynamic Trading remains on its Sell Signal.
DYNAMIC TRADING OSCILLATOR I
DYNAMIC TRADING OSCILLATOR II
DYNAMIC TRADING OSCILLATOR III & IV
MOMENTUM OF SENTIMENT
Summary/Outlook: Friday's bounce came close to giving us a Buy Signal, but we'll need to see more short term buying interest to give us a Buy Signal. In the short term, we still see a move lower into the middle or end of this coming week.
The Weekly Wrap Up differs from the Morning Call in that it looks at 5 intermediate term indicators and gives us an intermediate view on the future action of the market. Combining this with the Dynamic Trading Oscillators, we will trade short term moves within the intermediate term.
10/20/40 WEEK CYCLE
The following chart shows our 10/20/40 week cycles. The 40 week is also referred to as the 9-month cycle. Cycles are not short term tools for determining precise entry and exit points, they're primarily used for intermediate or longer term positioning and forecasting.
INVESTOR'S INTELLIGENCE BULL BEAR SPREAD
Each week, Investor's Intelligence polls a number of newsletter writers. The poll results in a number of bullish advisors and a number of bearish advisors. The difference between those two numbers produces the following chart. It's believed, that when a majority of newsletter writers (like us) are bullish, that the market is near a top, and vice versa. I'm also under the belief that the direction of this line is as critical as the number.
EQUITY INDEX OPTION VOLUME RATIO
The market is all about risk, and there are two primary classes of participants in the market, the individual investors and the institutions. Individuals primarily trade equity options and institutions primarily trade index options. So the relationship between the two gives us an idea of how much risk the individual is willing to take on. At tops, the individual tends to take on too much risk, making this indicator rise. At bottoms, the individual is usually washed out of the market, making this indicator fall.
QQQQ v. SPY RELATIVE STRENGTH
Risk tells us a lot about the market. This indicator looks at risk from another perspective. When market participants overall increase their willingness to take on risk, it's bullish for the market. That risk shift is shown on the above chart as a shift in relative strength from the Nasdaq to the NYSE. Note when we refer to Nasdaq, we're primarily looking at the QQQQ - since that's the focus of our service. And when we say NYSE, we look at the SPY.
This indicator looks at the flow of money in and out of various investment vehicles. For the most part, when money flow reaches an extreme, in either buying or selling, the market is at a top or a bottom, respectively.
Dynamic Trading remains on its current Sell Signal.
Our outlook for the market is for a move lower into the end of this coming week, setting up the next move higher in the market into October. Looking out a little more long term, if the market sets up this way, we'll see a larger move lower into November. But as you will find out, I don't like to predict the market too far out because a cycle could easily invert and result in a completely opposite outlook. Of course if that happens, we'll adjust accordingly. The best way to be right in the market is to forget your pride and be willing to admit when you're wrong.
Why? Because being wrong is part of the game. Any system will return a series of gains and losses. Systems are fixed and the market is variable. By fixing a system, it delivers profits during periods when the market performs within the parameters that the system is designed or tuned to deliver profits. When the markets perform outside those dynamics, the system will under perform and go through a drawdown. It's that simple. Don't get emotional about it. Emotions have no place in trading - that's why Jim Cramer is on a TV show and no longer runs a hedge fund.
The reason I combined this weekend's MORNING CALL and WEEKLY WRAP-UP is to show the overall interaction between our short, intermediate and longer term Dynamic Trading Oscillators & indicators and how they set up to establish our outlook for the market. If you don't see it yet, don't worry, it will come with time. I've been doing this for several years and find the best traders have the patience to accept the realities that are associated with trading rather than expecting unrealistic reliability.
Here's an email one of our customer service representatives received the other night that may help put things in perspective:
Thank you so much. Please pass my appreciation on to Jay on his service. I have been reading and investing based on his advice for several years. I have learned a great deal from Jay's writing and will be a life long subscriber. My personal clock will fit better with the short term swings so I am excited that he has taken over the Dynamic Trading service. I find it hard to be patient on the intermediate term swings. Rick
So I hope you enjoyed this article and have a great rest of your weekend. If you have any questions, please feel free to email me at firstname.lastname@example.org. I'm preparing a list of Q&A's and will release them in a special update over the coming weeks.
If you're interested in upgrading your subscription or subscribing to any of our other services, there are links at the bottom of this email.
Best regards and good trading!