*** PREDICTION for the Next Trading Day:
For Wednesday we say: "So now we have the Portugal issue to contend with. We expect that the market will have higher volume on Wednesday, and that it will close at least modestly lower with weakened financials and 'techs'. Our Market Timing Indicator (MTI) is once again down at 0.4297. This is below the 1.0 neutral value, and this is coupled with a RED (Danger) Market Color Code and more pessimistic projections from our neural networks. We have a lot of shorting signals for Wednesday, although the Dow component signals are predominately in the Cash state . Our long-term signals remain in the BUY state, however, and this suggests that any weakness will be short-lived and limited in severity".
*** Scoring of Previous PREDICTION:
For Tuesday we had said: "Our predictions last week were unusually inaccurate, and our losses were magnified by outsized market movements occurring with relatively low volume. This market surge (which probably alleviated much of the oversold condition) was partly due to growing confidence that the Greek crisis was resolving satisfactorily. Let's hope this situation continues to settle down because global factors are extremely difficult for a timing model to account for.
For Tuesday we see a weak continuation of the upward movement, and consequently many more of our signals are in the BUY state, but there is no real sign of major lasting strength in this market. In other words, we remain only 'weakly Bullish' going into Tuesday, and much of last week's strength may have been already dissipated. In any event, the market should make some further headway on Tuesday. The fact that our long-term signals (MFTI-A, B, C, D) remain BUYs lends support to our recent statements that the market does have a 'floor' under it, and thus that market weakness will generally be of short duration. Now we have to see if the recent strength can be maintained. The Market Timing Indicator (MTI) is at 0.4436, and thus remains below the 1.0 neutral value. We also have a RED (Danger) Market Color Code once again, and thus that market is not yet in a truly bullish mode."
How did we do? The Forecast for Tuesday was (for a change) pretty good; we had predicted a mixed Close, or a modest 'up' day, and that's what we got.
*** 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)