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Market Timer Insights

Week of October 23 - October 27, 2017

Cooler air floods the Boston area with the change of season. A welcome change what with the anticipation of the holiday’s and lighting up the fireplace for the first time!

This week also saw a change in the market.

Ok, let’s dig into the signals:

a change in the market. Ok, let’s dig into the signals: Monday : We got light

Monday: We got light selling coming in on the first day of the week. The DOW closed lower by 54 points Monday to start the week but the MTSD Index only indicated light sellin g wi th a - 3 reading and a DOW/MTSD R atio of - 2* . The BoP was also starting to see the shift from the Bullish side to the Bearish side and MTVolatility (MTVol) jumped from 85% on Friday to 89% Monday – a 5% jump in the MTVol is somewhat significant. When a really strong bear/bull market starts the jump /decline from one day to the next of 10% or more in the signal is typical. We didn’t get that kind of a jump but it was still a good one. Adding these three together: MTSD negative, MTVol up 5% and BoP herd turning to the bearish side told us a potential down trend was getting started so we marked “DOWN” in the SIGNAL/TREND column.

Tuesday: The light selling on Monday gave the bullish herd confidence to move in and take the market higher. They did by 167 points. Since we got the DOWN signal after the close on Monday it gave reader the perfect entry point for a short market position today. At the end of the day we saw that the DOW/MTSD ratio was - 13! The bulls may have come back, but they did so without force. We also noticed no follow- through on the BoP signal which is positive for the market but also of significance was the absence of a mark on the bullish side of the BoP! We found that to be confirmation of our call and we suspected that the DOWN Trend we identified on Monday was still the right one. Another sign we called the market correctly was the Average Volume per Share (AVS) increase on the decline. We don’t weigh it in our reading of the market but we like seeing it when we are calling for a market decline.

Wednesday: The DOW declined 112 points and we were feeling pretty good about our DOWN trend but we aren’t out of the woods yet. We noticed the selling herd was not in full force and the MTSD Index registered a very “light” - 2 on a 112 point DOW decline for an DOW/MTSD ratio of - 9 (very light selling!). But we noticed that we got two columns registered (herd moving) on the BoP bearish side

AND MTVol jumped another 5% from 90% to 95%! We debated keeping the “DOWN” Trend signal but with the jump hi gher in the MTVol and the BoP filling out on the bearish side we decided to stick with our call.

Thursday: Fist fights broke out in the Strong Market conference room after today’s market session (jk ;- ). Arguments for and against keeping the “DOWN” tren d signal raged . The largest issue was the 71 point gain in the DOW which indicates strong buying. Or does it? What we do here at Strong Market is look at what the market herd is doing and so while the market was up 71 points we noticed that the alphas of th e bullish herd weren’t really following along. First, the MTSD was a paltry +3. The DOW/MTSD Ratio was - 4 as a result. It indicates weak buying which we saw on Tuesday as well. Second, and once again, there was the absence of a mark on the bullish side of the BoP. And while we did not see any follow- through of the herd on bearish side of the BoP we didn’t see any on the bullish side either. Finally, MTVol increased again from 95% to 96%. MTVol is getting close to that critical 100% level when most sharp market declines start…. so we decided to keep the “DOWN” trend signal.

Friday: This was the toughest call of the week. The DOW was up another 33 points, the MTSD was +7 and the DOW/MTSD Ratio was +4 which indicates good buying. However, we still have MTVol at 96%! In the 2 days after the 112 point decline on Wednesday we did not see MTVol decline at all, in fact it increased. And once again, there was no herding on the bullish side of the Balance of Power (boP). We decided to keep the “DOWN” trend signal.

Weekly Wrap : There was enough evidence in the Market Timer signals to stay with our “DOWN” trend call but we still do not have bearish herding on the BoP side so we remain cautious. In the end, it’s all about moving with the herd. We will watch the herd and give you a heads up when it changes direction.

MT Charts in Focus

you a heads up when it changes direction. MT Charts in Focus MTVol (daily closes) :

MTVol (daily closes) : Rising since 9/20 but not hitting that critical 100% level. We see a couple of sharp jumps and it looks like it’s heading to 100% but we are not there yet.

AVS vs DOW Ch ange (daily closes) : Average volume per share (AVS) on the

AVS vs DOW Ch ange (daily closes): Average volume per share (AVS) on the NYSE has been rising but look where it’s rising from. Similar to volatility it tells us that the market has been too calm for too long. The AVS from July 3 rd to Friday’s close is the lowest average for this time period in years. Notice that the up and down spikes in the DOW change started just as AVS started to rise which also indicates the potential for increased volatility across all market sectors.

Model Portfolio

ENTRY DATE

SYMBOL

POSITION

Points ( + gained/ - lost)

10/24/17

$DJI / $INDU

SHORT

+ 8

==================================== * 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 it’s 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 it’s 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 it’s 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.

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

Client Lead: Rakesh Bahl | rakesh.bahl@strongmarket.com 1700 Huntington St, Suite 1703 | Mail Stop #15291 |

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