*** PREDICTION for the Next Trading Day:
For Friday we say: “We have some divergent signals for tomorrow, and although the market looks 'safer', we have some key Shorts intermixed with a lot of Long signals. Normally, this tends to suggest that the market will close fairly 'flat', meaning that it makes little difference whether one is Long or Short. We will go out on a limb here and speculate that the market will likely open strongly, but will then fade … still closing higher, but with underperformance from the techs and the financials. In any event, our Market Timing Indicator (MTI) is at a nice (relatively) high value of 1.3228 (above the 1.0000 Neutral value), we have a BLUE ('relatively safe') Market Color Code, a 'slightly Bullish' reading from our Market Assessment (BNB) indicator … and yet there are some important Shorts that make us a bit edgy. All in all, we think that the market will close higher on Friday.”
*** SCORING of Previous PREDICTION:
For Thursday we had said: “We believe that the market will strengthen somewhat tomorrow; yes, the Market Timing Indicator (MTI) remains below the 1.0000 Neutral value, but at 0.6734 it has moved higher. And although the Market Assessment (BNB) indicator is still 'slightly Bearish', our neural network projections are looking increasingly optimistic. Although weakness in the techs and the financials is likely to continue, this is likely to transform more into flat/mixed behavior, while our SPY signal returns to a BUY and helps corroborate our continuing BUYs for the Russell (1000/2000/3000). The long-term signals remain in the BUY state as well, and overall we think that Thursday will see a much firmer market situation, if not some outright gains”.
How did we do? The Forecast for Thursday was pretty darn good; the market was certainly 'firmer', and there were a few Long gains – in particular our favorite ETF (IWM) made a modest gain.
*** Note: The MTI can range from about -2.5 to +2.5, with a 'neutral' value of 1.0. A value of 1.0 will generally be associated with a market that is either stable (holding its valuations) or rising slowly and erratically. Values greater than 1.0 signify a 'long' market, while values substantially below 1.0 (and especially zero or negative) signify shorting situations. Although the MTI is extremely useful (especially in the construction of equity-specific models), bear in mind that it has a reaction time of several days. It is thus not sufficient to use this indicator alone for trading specific equities