10/7/2014 6:14:26 AM
Good morning Traders,
The markets tried to bounce on Monday, but the selling pressure reversed any gains. The trend of lower highs and lows continues, which increases the likelihood of a move lower, even if it's just to retest the recent lows.
We remain in Sell Mode, but the barometer is starting to tick up. When this occurs, we call it Sell Trend Mode.
We've been modeling financial markets for over a decade, and have sound there are different levels of energy based on timing (fractal). The evolution of the barometer algorithm started as a very short term indicator, which attempted to catch every swing. It was a very active style of trading, but the market only tends to make 4-7 midterm trending moves over the course of a year. So the above barometer was designed to help position for those moves, while leaving us relaxing a bit more during the chop.
So consider the above a mid term measure of market energy. And below a more short term:
This short term measure is back up towards its peak, which is bearish.
And another measure of what we call market efficiency as calculated for the Nasdaq:
Sure, this indicator can climb higher, but it's not at a point where I would consider it to be bullish and it leaves open the potential for a move lower.
So we're still very cautious on the market. The bulls moved back into this market very quickly at the last low, which is actually bearish. I'd rather see the market rally on increased fear, but as we measure it, the market is quickly moving to complacency, which is concerning.