Market Direction | Moon Run

Market Direction

When it comes to market timing and market direction, the common theme from the buy and hold crowd is that The Market Can’t Be Timed. Time in the market rather than market timing is preferred, as no one has really figured out trend reversals in the macro sense. Market timer preference for One Size Fits All for identifying bear market tops and bull market bottoms is that it makes life simple if there is only one way.

My approach to determining market tops began with using an intermediate time frame timer to determine buy and sell signals, then following up by finding out if the market is weak or strong. Strong markets are prime targets for shortable corrections (that is, between a 10% and 20% decline) and weak markets are prime targets for bear markets (greater than 20%).

I have not been able to find only one way to determine market tops. After a few years’ experience, I honed in on four setups:

1) The market stalls out and the internals begin to weaken. (Tsunami Indicator)
2) The market is too high and the number of new lows is expanding (Fifty New Lows Rule)
3) The market is accelerating to the downside (Accelerating New Lows)
4) The market shows weakness but does not decline until later (Series of Tops)

My market timing is based on Quantitative Analysis, using math to determine timing systems. I do not trust visually looking at charts because that way does not reveal the internal strength or weakness of the market. Also, I can get an exact date as to when the signal appears. There is a great advantage to knowing this.

My book, Before the Bear Strikes, outlines all the math involved in determining bear markets I have identified. It is a complete document, nothing is proprietary. It is advantageous to subscribe to Metastock to get a nightly feed and a place to receive signals and show indicators. Otherwise my website provides the information at a reduced cost.