In our article July 13th, 2014 we warned that a ‘significant decline is coming to the stock market.’ In that article we presented evidence of several Bearish divergences we were tracking between prices and key indicators for our subscribers at A Significant Decline is Coming to the Stock Market.
The Industrials topped on July 17th at 17,151. Soon after that top, four days after our article was published here, the Industrials fell 818 points to 16,333 on Thursday, August 7th. The S&P 500 topped on July 24th at 1,991, and then fell 87 points to 1,904 on August 7th, 2014.
Well, again we see new Bearish Divergences forming all over the place. This places us on high alert this weekend for another decline. Will it be a plunge? Let’s explore.
Our key trend-finder indicators, the combination of the Purchasing Power Indicator, the 30 day stochastic, and the 14 day stochastic, are designed such that when their individual signals are all in agreement, then the market has triggered a short-term investing/trading signal. These are momentum indicators. The theory here is that an object in motion tends to stay in motion, and in the case of the stock or precious metals markets, stay in the same direction. So, if we get a new Sell signal in these three individual indicators, then the key trend-finder indicator in its entirety becomes a Sell Signal. It means that market momentum to the downside is now strong, which means the odds of further decline are very high. That becomes an excellent place to enter a short trade, or buy an ETF that is short, or buy put options on the market.
Our key trend-finder indicators generated a new Sideways signal on September 2nd, and have remained on a Sideways signal ever since. In other words our key trend-finder indicator was telling us that we were in a period of time where the stock market would lack a strong powerful tradable trend, and further, that the previous trend which had been a three week rally was pausing or ending. This guidance was terrific and that is exactly what has happened. Stocks have oscillated up and down for almost two weeks, a lousy trading environment. In our Platinum Trading program at http://www.technicalindicatorindex.com , we chose not to enter a new position during the past two weeks for this reason. Prices moved in a very narrow range over the past two weeks.
This post was published at Gold-Eagle on September 14, 2014.