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As of the Wednesday, July 6 close we are beginning to see market toppy signs. This topping is likely to last another week or two, thereby finishing out the short time duration T at cycle low number nine (#9) in today’s Daily Chart.
A warning that this topping had begun at this relatively early stage came from Parker’s chart posted earlier, of the Arms ratio on a weighted basis. Whenever this daily indicator drops to very low numbers, like 0.8 to 0.5 over a five-day stretch, an Arms Sell Warning is developed. This implies “too much” money has been spent in an emotional buying panic resulting in an unhealthy condition. Typically this warning produces a couple of weeks of churning in a top pattern. This is what I would expect going into mid-July.
This warning implies that a real top is forming. Therefore we should expect that in time a new decline will result into a new oversold condition during August. It wouldn’t hurt to start thinking about how one might take advantage of this upcoming change in trend.
A new project we are working on is forecasting equities based on commodity cycles. One conclusion we have reached is the stock market decline may be very sharp in line with its ongoing negative view. We are working to resolve the “How and Why” of this technology but it appears that a low should occur in the first half of August.