We are safe... for Now. Backtested Dow Analysis

DJCFD:DJI   Dow Jones Industrial Average Index
Have we topped out? Or are we just getting going?

From a fundamental perspective I feel much more comfortable today than I did in 2007; we don't have any major industry bubbles, P/E's are not to high and we seem to have passed the major congressional issues without sending ourselves back into a recession.

After testing the majority of available indicators I have isolated a trading system that has covers the major market moves. For the last two years 100% of the time ROC has broken below its 2.37 support the market pulled back, and 4/5 times Stoch hit its lower boundary the market rallied (the other time it came close... close only only counts in horses and hand grenades). Furthermore whenever Stoch went from being overbought to its normal purple trading range the Market also pulled back(in line with ROC ). For the last few years this combination has proved highly effective, and lets hope it continues this way in the future.

So what now? For now it seems that we are safe. ROC has not broken 2.37 and the Stoch has not yet returned to its normal territory. How long this will last I can not say, but it seems that in the next few months we are at least due for a minor pullback, though given, the positive housing data I don't think it will be that bad.


Good look at ROC compared to Stoch
I think as a whole the economy is one big bubble. More specifically the PE are too high as most companies are shrinking not growing. The profits they are seeing are due to "streamlining" not due to increased revenue. When you least expect it something happens, when you most expect it nothing does. I work in an industry that leads the market slightly. Quite frankly we're seeing the makings of a bad quarter (YoY, QoQ) if not our worst including during the recession, that will only be seen in the next earnings reports (and the PE is currently good, but will drop shortly). Proceed with caution is what I say.
FXGOD mojeauxgrey
what is not a bubble in this 21 century when everything is essentially digital. Maybe not vaginals and penises but yea..
Thanks for the input! While I agree that weekly charts are not the best for precisely identifying the market tops, I was more trying to showcase one of my intermediate-term system indicators for getting in and out of the market in a timely matter during turbulent times.
Rock is a lagging indicator as is the stochastic. I have studied market tops quite a bit, and generally when tops form, there is a structure on a daily time frame. I fear you aren't looking at the real issues that constitute a bubble. The markets themselves are bubbles, in that they are being artificially inflated via QE. P/Es become irrelevant when cash cost nothing.