The MTR-TM issued a Market Down signal today. This followed a bearish divergence pattern for the market that started late last week.

As discussed on this web site the MTR-TM was based partly on the 4% timing model by Ned Davis.

If you chose to take action on the signals of the MTR-TM read the post about the model, risks, and returns. When trading stops should alway be employed to protect capital.  As discussed in the disclaimer on this web site we are not a certified financial advisor. This model is based on a concept we use to trade and post it for educational purposes. It helps to keep us in tune with the market and focused on being on the right side of the trade. If you chose to take action on any signals you do so at your own risk. We encourage everyone to do their homework and make sure your style of investing fits your risk tolerance.

The signal today represents a fully out-of-sample signal. The March 13, 2009 Market Up signal was issued based on back-testing data from January 1998 to Mid 2008, and represents well over a year of tweaking the logic. The March 13, 2009 was out-of-sample since our data in the test sample ended mid 2008.  The model went live after the March 13th signal on this web site. The Market Down signal today, 6/18/2009, is the first market signal that was issued and posted real-time. It is a "moment of truth" signal for the model and we are eager to monitor the results.
  

When the book "Trading For a Living" was first published by Dr. Elder I picked up a copy like many other aspiring traders/investors.  His book was the most eye opening look at technical analysis that I have seen to date. Dr. Elder's recent book "Come Into My Trading Room" is equally impressive. 

Elder uses a "Triple Screen" technique to analyze the markets. He tells readers that primarily look at daily charts to use a "factor of five" and go up to the next level of charts. In this case a weekly chart.

One feature that I have always used after reading trading for a living was the fact that Elder emphasized that Indicator Divergence from Price is very powerful signal, especially on a weekly chart and this signal may only happen once a year. This can be an early signal to go LONG or SHORT. In other words when prices reach a lower low, but an indicator (RSI, MACD Histogram, Stochastic) reach a higher high it is time to go long. The reverse is also true.

Late 2007: When the stock market in late 2007 reached an all time high there was a Bearish Divergence between price and RSI. This signaled the uptrend was about over. 

Recent Bear Market Lows of March 2009: Here we see a Bullish Divergence pattern emerge. Prices reached a lower low while RSI and MACD Histogram trended higher. What came next? We all know a very powerful rally.

More recently we can see there was a Bearish Divergence on the S&P 500 Daily chart showing that a pull back was in order. The weekly chart though still shows the trend was up. This may indicate that the recent pull back may return to new highs. If that is the case we can be on the lookout for a Bearish Divergence and may be a good shorting opportunity.

Pick up a copy of Come Into My Trading Room. It is well worth the price.

There was a uptick in real-wages of .5%. There was a slight up tick in wages for the number of people employed but employed year over year continued to fall from -4.69% to -4.9%.

The model overtime shows that real sustained recovery takes place when year over year employment and real-wages for all workers turns up.  This means there is still risk that the consumer will retrench and limit spending. We expect to see another down turn in real-wages for June 2009 because of higher fuel and energy prices. Real-wags dropping has negative implications for the stock market.  This data will be publish on or after July 16, 2009 when data becomes available.

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