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STRATEGY FOR THE MONTH
Prepared by Market Systems Newsletter
Mutual Funds
In both our January and our February 1997 Newsletters, we forecast a major top to occur mid-February, ideally on February 14, 1997.
A 10% correction did follow the February 14, 1997 major top, with the final lows occurring on our forecast April 11 high energy turning point date. From our March through June 1997 Newsletters, we continued to recommend standing aside.
In our July Newsletter, we cautiously re-entered the market on the long side for intermediate-term and long-term investors using a tight 5% trailing-stop strategy. This stop-level was reached during the August 15–250-point Dow Jones one day sell-off, generating a small loss, the first loss in several years.
In our October Newsletter, we decided to again enter a long position using a wider 10% trailing stop as new highs were being reached, and it appeared that the bull market would continue. However, the market failed to continue the rally and was trading sideways when it suddenly over-reacted to the overseas markets with a record breaking 550+ Dow Jones one-day drop, which hit our protective stop-loss level.
The recent volatility due to the selling pressure of the overseas markets, was the primary reason for the recent declines. A similar event occurred in 1994 when Mexico devalued its currency. However, the market recovered and started a strong gain in equity prices in 1995.
With low interest rates and commodity prices stable (fundamentals), increased inflation is not likely in the near future. Therefore, higher stock prices would be expected for 1998. Interestingly, the 8th year of each decade has been a bullish year. Thus, whatever corrective action occurs over the next few months, higher prices are highly likely by the end of next year. For now, we will stand aside until our next major turning point date on December 16.
Turning Point Dates And
Short-Term Trading Strategy
The best turning point dates or high energy dates for short-term traders occur on November 18, 24, and 28; December 9, 12, and 16.
Following the November 14 minor turning point date (full moon and Producer Price Index report) we would expect the market to trend into November 18 when the Consumer Price Index is announced.
From November 19 we expect a short-term reversal to occur going into November 24. Expect increased volatility on November 24 with a potential turning point on this date. If this is a low, then expect a rally bounce into the Thanksgiving Holiday on November 27.
November 28 will be a low volume day, however, significant moves have occurred on the day following Thanksgiving. The market direction on the November 28 is not highly predictable.
The first week of December does not have any harmonic indicators for turning point dates, thus, the market should be trending or in a consolidation pattern. If a trend is present, then it should accelerate between Friday, December 5-9. December 9 is a high energy date and a likely turning point date.
The short-term trend should reverse from November 9 into November 12. November 12 is the scheduled date for the Producer Price Index and the following day is the Full Moon, thus, a high probability for a change in the short-term trend.
The time-frame between December 15-17 is the most important time- frame for the month of December. We have a cluster of harmonic alignments which suggest that one of these 3 days should be a major turning point date, with December 16 the best date.
November 13, 1997Market Systems Newsletter
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