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Market Timer Insights

Week of November 5 - November 11, 2017


What a difference a week makes. The temps here in Boston dropped from 40 overnight to 20. While
we love the cooler weather, we usually dont see those numbers until January. Ill remind Mother
Nature its only mid-November! Arghhh

Ok, lets get to this weeks events in the market:

Monday: MTSD was positive on Monday at +5. The DOW only rose 9 points but MTVol declined 5%
from 105% to 100%. What are we to make of this? The +5 MTSD, the decline in MTVol both add up to
a higher market so we changed the signal from DOWN to neutral. A Neutral signal does not mean
the market cannot decline from the previous DOWN signal, it just means to be cautious so our
Model Portfolio remained SHORT.

Tuesday: The market did rise by another 9 points as indicated by Mondays positive MTSD but
Tuesdays MTSD showed a -1, indicating light selling on the advance. One of the most reliable signals
we see in Market Timer is the Selling on advance and Buying on a decline on MTSD these
indicate the market is highly likely to reverse in the near future.

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Wednesday: Another small advance on the DOW of just 6 points but also another -1 on the MTSD and
selling on the advance. There was also an increase in the MTVol from 100% to 103%. There was
obviously some light selling on the small advances and the beginning of some negative herding. But it
wasnt enough to change the signal to DOWN so we kept it Neutral just because the selling was
so light. The two days of -1 MTSD signals and the increase in MTVol though alerted us that any
surprises would likely be to the downside.

Thursday: The small negative herding we saw on Tuesday and Wednesday turned into a stampede
today and the DOW declined over 260 points intra-day. However, now we see a +1 MTSD and DOW
climbing back 160 points to end just 100 points lower for the day. The light buying at +1 MTSD on the
decline indicates there was actual buying on the decline an indication that the bullish herd was
active. Thats why we love the MTSD signals it quantifies supply and demand for stocks as opposed
to guessing or smoothing or fitting the data to get the results you want, like most market analysis
does.

Friday: Today was interesting you could see the tug and pull of the bearish herd trying to push
stocks lower in an attempt to follow-through on the previous days decline and the bullish herd
moving in and buying every dip. At the end of the day we were off the lows, still down, but not by
much and an MTSD reading of +17. A positive +17 MTSD reading on a day in which the DOW declined
is a very clear signal that there was strong buying on the decline. Rarely do we see a clearer signal
that the bullish herd will likely take the DOW higher over the next few trading sessions. It doesnt
mean the decline wont continue, but the probabilities are high that we will see at least one day of
significant rising prices next week. Our Aggressive Model Portfolio (AMP) closed SHORT positions and
entered a LONG position at the close.

Weekly Wrap: The DOW lost -115 points net and the MTSD was +21 net indicating strong Buying
on the decline for the week. We closed our AMP SHORT and went LONG at the close. But we would
not be surprised to see a final attempt by the bearish crowd to take the market lower Monday on the
open, at which time the bullish herd will step in and take the market higher or they could just step in
at the open we dont micro-manage the market, we quantify it, measure it and track it and right
now it appears the bullish crowd has enough interest in seeing the market move higher that it will do
whatever is necessary to make that happen. And when bullish crowd wants to take stocks higher its
best if you stand aside and let them have their way or risk getting trampled. But we will measure
MTSD on Monday and get more feedback on the potential positive or negative herding coming up for
the week.









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MT Charts in Focus

MTVol (daily closes): Rising since 9/20. We reached 105% but are starting to see it leveling off and
not reaching beaish herding territory. Thursdays decline should have sent it higher, but that didnt
happen indicating it may be topping here or just pausing. After a while, if MTVol stops going higher
and flattens out, like it did this week, the negative herding is probably not going to happen but its
still a possibility.

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NYSE Average Volume per Share (top line) vs DOW Daily Price Change (bottom line): The take away
on this chart is the increase in volume as stocks advanced (left arrow) and the decline of volume as
stocks declined (right arrow). Typically, if the decline was herding the volume would increase on the
decline. It did not and indicates a potential rebound next week.

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DOW Cycle Points Gained /-Lost: The chart above shows the divergence between a shorter price
cycle (21 day SUM) verses the longer price cycle (27 day SUM) on the DOW. Updated through Fridays
close, the divergence we showed in last weeks chart has been closed with the -115 point DOW
decline this past week. As of Friday the 21 day SUM shows a slight leveling off but theres no clear
direction for the coming week based on this chart. However, if previous peaks are any guide, we may
expect a ^ shaped top (observe ^ peaks at points 33, 217 and 265) before we see any significant
decline in the DOW and other markets.

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Model Portfolio (Aggressive)

ENTRY DATE EXIT DATE INDEX POSITION Pts Profit (+gain/-loss)
10/24/17 10/31/17 $DJI SHORT +93.02
10/31/17 11/01/17 $DJI LONG +86.27
11/01/17 11/10/17 $DJI SHORT +9.12
11/10/17 --- $DJI LONG ---



Model Portfolio (Conservative)

ENTRY DATE EXIT DATE INDEX POSITION Pts Pts (+gain/-loss)
07/27/15 08/24/15 $DJI / $SPX SHORT +1902.09
02/16/16 05/20/16 $DJI / $SPX LONG +1330.31
06/13/16 06/27/16 $DJI / $SPX SHORT + 592.24
11/22/16 03/16/17 $DJI / $SPX LONG +1977.31
04/25/17 11/2/17 $DJI / $SPX LONG +2746.29

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====================================
What is the DOW/MTSD Ratio?
Positive and negative notations in the NOTES Column:

There is a relationship between the DOW change and the MTSD Index. We take the DOW Change and
divide it by 10 (the DOW/MTSD Ratio). This is how its measured:

Example: The DOW is up 160 points.

160/10 = 16 (The DOW Ratio)

MTSD = +3.

So if we subtract the MTSD from the DOW ratio we get: 3-16 or -13

The DOW and the MT Supply /Demand Index have a relationship that should be 1:1 or better, when
its negative (-3, -5, -7 etc), when the DOW is higher, means there was too much supply in the market
and there was selling into the advance and is a negative sign for the market. When the ratio is +3, +5,
+7 etc. then its a positive sign and indicates strong buying.

When the DOW is lower and the MTSD is positive or less than the DOW Ratio it means there was
buying on the decline and is a positive sign for the market. Or when the ratio on the decline is 1:1 or
better then it indicates strong selling.

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CEO & Insights Editor: Jace Greyson | jace.greyson@strongmarket.com
Support Lead: Jill Holland | jill.holland@strongmarket.com
Entity Client Lead: Rakesh Bahl | rakesh.bahl@strongmarket.com

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