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Market Direction Model - Market Bottom In Place?

The MDM remains on a sell signal as the market tries to find a major bottom. The market is showing uncommon weakness as it can barely muster a proper bounce even after the CBOE Options Put/Call ratio spiked to 1.29 at Wednesday's close when the NASDAQ-100 fell  -4.63%, its worst closing performance since August 2011. The put/call then spiked to 1.32 on Friday which still did not mark a major low as it spiked to 1.29 yesterday as the major indices and many leading stocks found new lows. This cluster of spikes in the Put/Call ratio often marks major lows in the indices such they did early this year but if something more serious is afoot, markets can become more and more oversold.

So far, despite the intense selling, the market has failed to stage any meaningful rally. This is how bear markets begin.

It is also of note that the MDM which well outperformed the majors in 2016-2017 had issues earlier in 2018 as the major indices could not find a sustained trend, but instead remained choppy, the bane of any trend following strategy including the "market wizard" calibre trend followers interviewed in various books. So far this year, they are collectively down as exhibited here: http://www.automated-trading-system.com/trend-following-wizards-september-4/ 

Nevertheless, the MDM has been almost spot on in its market calls since the "tone" of the general market changed to one of less noise thus greater predictability. This suggests institutional investors are stamping their unmistakable footprint on the markets as they exit. As the impact of quantitative easing fades, the MDM may revert back to its earlier performance history which was fairly consistent in terms of outperformance.

While yesterday's end-of-day rally during the last 15 minutes was met with huge volume suggesting a possible bounce, we will continue to monitor the situation in real-time as it unfolds. Continue to monitor your watch list for Wyckoff undercut & rally patterns, volume dry-ups, pocket pivots, and short-selling opportunities as highlighted in recent reports sent to members as well as in our webinars.

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