432 11
2014 Forecast:
The market has not built enough time up here to sustain a long term rally. But with more time at lower levels then accumulation can develop and the bull market can continue. However, from current levels the market is not on sturdy ground. The market is stretched up at 165 and support is down at 149 and implies a downside risk of 10%. The time of the last consolidation was 12 weeks and we are in the 12th week of the rally. So, time has run out. Since the market has needed 20 weeks of accumulation before each previous rally, it is bearish to me that it only took 12 weeks in this latest accumulation.
The factors driving the market until now have been clear (stock buybacks, earnings growth, Fed driven low interest rates, equity fund inflows), but we are ahead of rational long term valuations and I would not recommend committing new funds to this market.
I think this year will be at best a sideways to down year as investors still have very few choices on where to invest and stocks will be a focus, primarily because money has flowed into equities and out of bonds and corporations have repurchased stock and issued debt. Corporate leverage is up. Margin buying is at record levels. Investors are optimistic again. Analysts seem unanimous in forecasting higher prices.
This is a great time to do the opposite and walk away.
I also republished this at the highs this summer to point out that I felt we had 10% down potential going into year end.
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Very nice !
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So we are currently at about 105 correction. Is there more to come (another 5 oe 10%) or just a slow sideways grind into year end?
ttraider ttraider
I meant 10%...
timwest ttraider
I see it moving lower. The weight of the stronger dollar and the de-margining of the leveraged investors in the stock market and the drop in economic indicators suggests longer term, lower prices.
timwest ttraider
I see rallies of 5%-7% that should be sold. Use any strength to liquidate. The bounce from here will be similar to the bounce after 9/11. The bigger picture points down: Flat earnings - no inflation - corporations buying back stock to drive earnings growth - money flooded into corporate bonds is now stuck in corp bonds - Fed reduced balance sheet buying.... Plenty of negatives. Short term, an oversold bounce.
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Many thanks!
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2use timwest
This comment is better than the chart now :D Plus i keep your original chart as a reference now - great job on he top picking, the price basically follows the range you outlined. I wonder how you do it
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I use the "time at mode" concepts that I have outlined in the many charts I have posted here at TradingView. Thanks for the nice comment 2use.
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2use timwest
What is the accuracy of this method as per you? More hits than misses i am sure, but in a general % wise?
I think it varies like any method. The part I like about it is that since I understand it and I believe it is useful, it helps me stay relaxed and follow my ideas. I don't doubt myself and I don't over-trade, so in the end I manage my trades properly I am ahead of the game. This methods suits me. It helps pick tops and bottoms and it picks sideways moves. It's the only methodology I am familiar with that allows you to trade trend and to trade chop with the same system. Here's an interesting point: If you look at "What is the probability of a Heads in a Coin Flip"? In 1000 flips (repeated many times), the Probability of a Heads will vary between 65% and 35% in the best and worst 100-flip zones. Using a random number generator, it is easy to run simulations of this over and over and it stays pretty tight within those guidelines. So, the expectancy of any system will always vary widely around an expected level. Coin Flips are 50% Heads, +/- 30%. If you flipped a coin and had only 35% heads after 100 flips, you might think something was wrong with your coin. You'd think that is was top weighted or that something extraneous was influencing the outcome. But in reality, it is common to have that low rate of heads. It is also common to have a long streak of losers or "Tails" when flipping a coin. 9 or 10 is very common. Imagine trading and losing 10 trades in a row. Would you be devastated? I wouldn't. It's just what happens in reality which is far more than what is commonly thought. Sorry for the long, winding response. But probability is my specialty, thanks to Van Tharp and IITM. Cheers. Tim
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