*** PREDICTION for the Next Trading Day:
For Wednesday we say: "We have been wrong two days in a row, but we believe that the market will be very lucky to hold near current valuations on Wednesday. It is of course a pre-holiday summer week, and thus more volatile because of low volume, and predictions are made more difficult by two other factors: (1) the never-ending Greek crisis, and (2) mutual fund activity at the end of the quarter. Still, we can see no good reason to be Long at the present time, and for those subscribers who are more risk averse, staying in Cash is undoubtedly the best option. The Market Timing Indicator (MTI) remains very low (at 0.3994), and thus continues within shorting territory (much below the 1.0 neutral value). We have a RED Market Color Code for Wednesday, and the bulk of our signals remain Short. Our long-term (mutual fund) signals remain in the BUY state, continuing to suggest that a sharp dip is unlikely ... unless, of course, the Greek parliament votes against austerity measures".
Remember always that a continuous Short will generally be profitable as long as the MTI is below 1.0; such a continuous Short, however, will result in drawdowns that most subscribers will not care to deal with... And, of course, we recommend never shorting with more than 50% of equity, and less if you are risk averse.
*** Scoring of Previous PREDICTION:
For Tuesday we had said: "The market showed some modest strength on Monday, but we expect the situation to worsen on Tuesday. The Market Timing Indicator (MTI) is fractionally higher (at 0.3508) but remains well below the 1.0 neutral value and thus keeps us in Shorting territory. We have a RED (Danger) Market Color Code for Tuesday, and our neural networks show more negativity than they did for Monday. The bulk of our signals remain Short."
How did we do? The Forecast for Tuesday was (like the one for Monday) very poor. Although the day was marked by low volume (either because it was a pre-holiday week, or because 'smart money' was staying on the sidelines), hopes for a successful solution to the Greek crisis helped lift the market again ... buoyed also probably by the usual 'window dressing' as mutual funds near the end of a quarter.
*** 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)