Coolhand's Market Analysis

It's been six days since the Seven Sentinels flipped to a buy signal. That's four trading days. Three of those four trading days were down. The one trading day (Friday) that we were up, was up big early on, but actually reversed into negative territory before reversing again and posting a moderate gain for the C and S funds. Fortunately, I did not try to front run the signal last week because divergences were everywhere in the charts. It was a good call as last Thurday's trading took a nose dive at the end of the day, so I was able to buy in at lower prices.

That was the good news. But I had also mentioned at the time that the market had typically rallied for at least a couple of days before topping out and eventually falling back down. Not so last week. Instead we had weakness the day after that buy signal was flashed. Friday seemed to vindicate that buy signal, but it was a mixed day as I mentioned previously with volatility pushing the market in each direction. Market character has changed.

Through all of this we are seeing the dollar rally, and gold sell off. This is not the kind of action in those market segments that spells good news for stocks. If it's an anomoly and short lived, the market may not react much to it. But if those trends don't reverse soon we may have much bigger problems.

It's not an easy read, and I did say last week that I suspected the latest SSBS might be difficult to follow in a mixed sentiment picture. That has certainly been the case.

Today's weakness has turned the Seven Sentinels down, but not enough to trigger a sell signal. Still, the lack of sustained buying pressure over a four day trading period since that last buy signal was issued is troubling.

This market needs to turn soon or I may be forced to exit for the month. Here's the charts:



We turned all four of these signals to sells today.



TRIN has flipped to a sell, but TRINQ remains on a buy as well as BPCOMPQ. Those two signals are where relative market strength has been noted during the current selling pressure. It could be an indication that the selling will not last.




Our top 25% have pushed cash levels up modestly, but not enough to get concerned about yet.

So the Seven Sentinels remain on a buy, but the market is under attack. It could be that bullish sentiment is being punished before any real strength is seen. But is dollar strength and gold weakness part of that game plan? Is the big money bailing early as we move through a historically positive month?

I'm not comfortable. But then that's what the big money wants.