SmarTrend Weekly Performance Statistics
The market finally corrected after having been overbought for several weeks which sent the Dow Jones Industrial Average to its first level of support at 9600 - which we accurately predicted in the Morning Call. We also said that if 9600 did not hold, 9450 would be the next level of support. Both of these predictions came to fruition. The extreme levels observed in this report (as measured by percentage of total Uptrends), in conjunction with our proprietary market indicators, led to these successful predictions. As you can now see below, the percentage of Uptrends vs. all trends is now at 74%, down from 83% the week before. Further, the "win rate" has also moved closer to our historical averages for Uptrends - 83%, down from 87% last week and over 90% a few weeks prior. We also now see the number of Downtrends that are in-the-money has also ticked higher to 54%. These are signs that the market is at a critical point of either forming a near-term top or trying to establish a new base from which to rally. Should the market fail to hold the aforementioned support levels, we can expect to see continued outperformance by Downtrends and the average return will increase as it normally takes a few days for trends - in any direction - to materialize as there are often compensatory bounces. If the market continues to hold these support levels and establishes a base, Uptrends wil outperform. Also of importance is that in these questionable times, investors will often rotate into quality companies and so companies that remain in Uptrends are better bets so before placing any trades, it may be useful to check the trend status first.
We had a nice rally yesterday, albeit on light volume, back to the old support level of 9600. This is where we expect some inflection to occur with the bears and bulls awaiting earnings season to begin in earnest, in addition to retail sales and other economic data. This is an important week for the market as the outcome of these events should help determine whether we retest the 9450 support level or grind our way toward the 10,000 level - a target we predicted many months ago and came within 80 points of reaching on Sept 23. Current signs point toward the latter - a resumption of the intermediate term Uptrend. We will closely watch these important indicators and report them to you every day in our Morning Call report.
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