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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 holidays and lighting up the fireplace for the first time!

This week also saw a change in the market.

Ok, lets dig into the signals:

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 selling with a -3 reading and
a DOW/MTSD Ratio 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 didnt 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 dont 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 arent 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 higher 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 todays market session (jk
;-). Arguments for and against keeping the DOWN trend 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 the bullish herd werent 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 didnt 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,
its 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

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 its heading to 100% but we are not there yet.


AVS vs DOW Change (daily closes): Average volume per share (AVS) on the NYSE has been rising but
look where its rising from. Similar to volatility it tells us that the market has been too calm for too
long. The AVS from July 3rd to Fridays 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













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* 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 its 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
its 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 its 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.









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

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