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Thursday, February 26, 2009

As some of you know that I trade emails with, I have been saying that I think we will get a bounce at the beginning of March. Here you can see the seasonal pattern that has been pretty reliable in recent years.



It is accompanied by a huge amount of divergence in the Pro Go oscillator, which is one of the best accumulation/distribution indicators out there. Ideally we would be undervalued and sentiment would be bearish, neither of those two conditions exist. In fact sentiment is actually pretty bullish the way I measure it, which is bearish for the market. As a result this is far from a perfect setup.



One of my mentors Larry Williams has called for a sharp rally to start about now due to a valuation model that he has that measure bond yields against stock yields. I do not use that but it is a nice tool. When I take all of this into account what I come up with is that I think we will get a rally here possibly into May which if we do could set up a tremendous shorting opportunity. For those of you that have not bailed out of retirement equity positions, this could provide a chance to switch into cash in those accounts.

I will post at some point in the future, where I think we are going bigger picture, which is much lower. However, there is plenty of time for that for now I think we are close to a decent bounce.

2 comments:

oillio said...

What is the Pro Go oscillator? I did a search and couldn't find any reference for it.

Chris Johnston said...

It is a indicator developed by Larry Williams. Many software trading packages have it. You probably can't find the formula on the web. It is designed to measure what the professionals are doing vs the public, which is why it works so well. I cannot divulge the code to it legally.