Tuesday 17 April 2012

Top Is Near.

I apologies for my long absence. It has been extremely busy at work with extended hours. It never seems to finish. This is more so as we are shifting the entire client portfolio to a defensive position.

Anyway, nothing much has changed since last Thursday. One big up day followed by a big down day followed by a still bigger up day. The trends following models are giving whipsaw after whipsaw. If you remember my last post, I said, it is time to sell in to strength and remain in cash. It is not yet time to short. And I still stand by that comment.

Just a look at the daily chart of SPX should convince you that we are in a topping process.

It seems that the DMI is about to have a cross over. I keep writing that we will re-test the high and only when we fail, we can be sure of trend reversal.  McClellan Oscillator is still negative, even after the huge gain today.

It still has some more room to run which might take SPX near the earlier high.

As per my cycle analysis, the top is around April Op-Ex. It is not an exact science and it may move around a day here and there but I would not be in any long position after Friday, April 20th.  It is either SPX 1450 or April 20th, whichever comes 1st. The earning season has been good so far and that it’s keeping the hope alive but hope is not a good trading strategy. So we might see a last minute surge before the curtain falls.

How far we will fall in correction is not yet sure. But most likely, May will not be very kind to the bulls. It is important to remember the time frames. In a longer time frame, we are in an uptrend but in a shorter time frame, we will see corrections. That correction will be a buying opportunity but we need to know when the correction is over when it is time to buy again. As of now, it is time to sit on the sideline.

Thank you for all your kind emails and comments. I will try my best to be regular.


  1. Bradley dates and next FOMC meeting support your thinking, too... will be in cash on/before friday either way...thanx for your analysis and efforts!

  2. I actually bought on Friday at the close with a 1/3 position looking at a timeframe of a few weeks - few months. I admit I'm still in Buy the Dip mode looking to add if the markets continued to break down.

    Is it your analysis that this April top is for the cyclical bull market that started in 09? I think we got at least a few more months to go, but what the hell do I know lol.

    1. I think the end of bull market which started in 2009, will be in Oct / Nov. The correction may not do much damage but a better entry may be by end of May or mid-June.

    2. Hi,

      Do you offere portfolio management services?

      I would be interested. Where can I get more information?

  3. We are a small boutique firm based in Canada and our client focus is very localized. But I will definitely ask. Please send your details ( portfolio size, objectives etc) by email and I will respond.