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When plotted against time (in
days) the MMSignal value changes around zero, reflecting the ups and
downs of the US broad market as indicated by the S&P 500 index. However,
whether the MMSignal value is above or below zero cannot be simply
considered as a buy or a sell recommendation even though it does
indicate whether the market is either oversold or overbought. The
dynamics of the MMSignal values detect the dynamics of the US broad
market. For instance, in the example chart below, the MMSignal drops
below zero on day 7. While it indicates that the market is most likely
overbought, the overbought market can become even more so as the
MMSignal curve continues its decline. During this decline the S&P 500
index will continue to go up. However, on day 11, the MMSignal hits a
bottom and on day 12 it has clearly started its up turn. This bottoming
process is a process in which the US broad market as indicated by the
S&P 500 index becomes from extremely overbought to less so, and even
continues on to become oversold. Simply put, a bottom of the MMSignal
curve is an indication that the investing public is at its peak of
market complacency, thus it is a good SELLING opportunity. On the other
hand, the peak of the MMSignal curve represents the highest panic level
of the general investing public, as day 21 shows. Similarly when the
MMSignal value is dropping, it is a process in which the broad market
recovers from the oversold status to less so, and even continues on to
become overbought. It does not need say that the peaks of the MMSignal
curve are the best BUYING opportunities. |
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Of course in reality, it will be
more complicated than this, but it is not too much more complicated. A
simple way, as our
research has found, to detect a tide change is to use the 5 day moving average trend-line of the MMSignal.
Click HERE to see an example.
To reliably determine the turns of
the market direction, we replies on statistical analysis of the
Signals database. Based on the strength of the market movements, a
Buy/Sell signal can thus be generated. When this B/S signal is above
zero, it indicates that the MMSignal is dropping. The larger the
mathematical value the B/S signal, the better the market condition is.
For 2006 (YTD till September 15th), our results are shown below. We
update B/S signals for all 15 market segments we covers on a daily
basis. In addition, our original MMSignal charts are also available for
members, in case they want to use a different approach to call market
peaks/bottoms. |
