Another Long Term View

Another piece of my long term models picture revolves around the combination of two indicators (shown below within the square). I am not going to mention which one's they are but will say that it is not too hard to find them if you go looking on the web. Anyhow, the two indicators on the lower end of the chart rise and fall together..except for one difference and it sits with the top indicator. When there is a band break in it and a turn back upward (as shown), the market generally finds bottom and turns higher. We saw this in 2002 and again in 2009. The market was almost overbought to the upside but missed it barely in the early part of 2007 leading to an ultimate confirmation of the move late in the year. These two indicators tend to trend over periods of years and not months which tells me that while we have had a violent hiccup in the last three months, the uptrend is still in place for now and the long term. This piece if you take it in conjunction with the renko charts and the NDX/VIX model, argue that the shorts might be stretching this move to far to the downside.

Now one word of caution or a warning sign of a possible trend change; that would revolve around the 13 month ma which the market is under heading into trade today. As you can see from the chart, from 2002 through 2007, the market was supported by this moving average and it became resistance during the move downward in 2002 and 2007-2008. Thus for the bulls to feel confident, the market needs to climb over this moving average and ideally speaking move higher than May's close - over 1100 should encourage some buying and conversely, lead to some selling in the US treasury market...a market that is so very overbought.

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