*** Market Timing Indicator:
The Market Timing Indicator (MTI)(see Note 1 below) is at 1.2398 (moderately above the neutral value), but given the state of other indicators most of our signals are playing it safe in Cash.
*** PREDICTION for the Next Trading Day:
For Friday we say: "Although our Market Timing Indicator (MTI) remains above the neutral value, and even rose slightly as a result of Thursday's market activity, most of our signals are staying safely in Cash. We believe that the downside risk is rather considerable at this point, and that this is a good time to protect the profits that we have made and sit on the sidelines as things work themselves out. We expect that the Dow will once again fail to cross the 12000 barrier (or will fail to stay above it if it does cross), and that the market will be lucky to hold at current levels."
*** Scoring of Previous PREDICTION:
For Thursday we had said: "The Market Timing Indicator (MTI) has fallen back a bit to 1.0299, thus staying just slightly above the neutral value (1.0). Our signals for DIA and QQQQ, at least, had been right for Wednesday (QQQQ = BUY, DIA = CASH), although we had underestimated the S&P strength. Still, the State of the Union speech and FOMC announcement made back-to-back no doubt buoyed the market a bit. Anyway, despite the MTI value (and our continued BLUE Market Color Code), we think that the market will give up some ground on Thursday. Most of our signals will thus stay in Cash. Clearly, if the Dow can't close above 12000 and stay there, then investors will begin to pull some money out of the market".
How did we do? The Forecast for Thursday was again too pessimistic; one thing after another manages to keep this uptrend going, despite negative news announcements and an arguably overbought situation. We were right about the Dow, however; it is resisting moving above 12000, and if more time elapses before it can break through, then even 'tech' strength will be unable to keep things moving upward.
*** Note 1: 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 on a day-by-day basis.
Schulenberg 2X-Hedged IWM (^IWM2)