Fed jump likely short lived
Thank goodness that Jackson Hole stuff is done! From my daily scores I anticipated that any little hint at further easing would cause the market to jump. It was primed to do so, and it did.
For those that may be new to the blog, the chart above is my daily scoring system, I developed it to take some of the emotion out of reading charts. I input some numbers into an excel formula I built and it returns these scores which are color coded based on previous wave tops and bottoms. Green indicates a bottom is near, red indicates a top is near. The time horizon of the expected move can be determined by looking at which chart the numbers are referring to. Scores in the "Daily Chart" category tend to show where we will go over the next week or so. Scores in the "4 hr Chart" category do a nice job of predicting where we will go over the next couple days. The "RumWave Score" is the scoring system (excel formula) applied to my proprietary "Reversion to the Unified Mean" market theory, which is a whole other analysis tool. Referring to the chart above, we can see that the Daily score and the 4 hr score were both green yesterday, indicating that the market was ready to move upward. Note, however, that the RumWave score was still yellow. I think of the RumWave as a "lie-detector" for these moves. Right now, it is telling me that this "Fed jump" is likely to be short lived and that now is not a time to start a new bullish position.
|DJIA 4hr Chart|
Here is the 4 hr chart that I like to look at. For those that may not be as familiar, each candle represents 4 hours of time. Nothing too remarkable here, except that the Slow Stochastic (one of my favorite oscillators) is at low levels. When the no-kidding bottom does get here, the move up will likely be swift.
|DJIA Daily Chart|
Above is the Daily chart for the DJIA. Each candle (in the top section) represents 1 day of time. What is striking to me is that yesterday's market climb did not turn the candle green. For those that are unfamiliar, I like to use the Heikin Ashi candles. I find them easier to interpret and can give some interesting info that standard candles cannot. I do, however, always switch back over to standard candles, just to see if there is some easily recognizable candlestick pattern (Hammers, Doji, Tweezers etc) as those can also be good information.
|DJIA Weekly Chart|
Finally, here is a Weekly chart of the DJIA. Last weekend I mentioned this chart and that I thought we were due for a multi-week decline. This week caused the red line of the slow stochastic to turn back down a little. I think next week will likely be another week that is sideways to slightly down based on what I see on this chart. This correlates with historical patterns for the first two weeks of September, which tend to be negative. In fact, I already saw CNBC calling it the "September Swoon".
So, the bottom line is I'm standing by to buy in the near future.
Just for fun, above is a snapshot of RumWave reader locations from Google Analytics for the month of August. It is amazing to me how this has spread. There is still plenty of room to grow, so if you enjoy this blog feel free to send one of your market-savvy friends a link!
GOOD LUCK NEXT WEEK! U.S. readers enjoy your long weekend, and the start of College Football Season!