They say "The Trend is your Friend - until the End". But how do you know when a trend is over?
You will know by looking at Setup, Sequential and Combo Signals. Some traders speak of these as the ‘Holy Grail’ of investing. Said to be close to 90% reliable, these indicators show you when to buy into weakness and sell into strength - identifying when a trend (both Bull and Bear) is becoming, or has become, exhausted. The indicators have an impressive record of identifying and anticipating turning points across the stock, bond, commodity and currency markets.
In this article I'll show you some amazing bull/bear market turning points signaled to the very day! Utilizing an Excel financial Add-In, I've created a spreadsheet that provides Setup, Sequential and Combo signals on a daily, weekly and monthly timeframe.
You can order this Excel (.xls) spreadsheet from the Research Offers page. You'll also need to install a free Excel Add-In to retrieve financial data from Yahoo Finance historical quotes - see instructions and the attachment at end of this article.
These indicators are discussed on my Demark page. For more detailed information, I recommend reading Demark Indicators by Jason Perl.
As a bonus, in the spreadsheet I included several lesser-known aspects of the signals. One is the 'Aggressive' versions of Sequential and Combo (comparing Highs and Lows, instead of Closes). The other is a special rule about the 13th count, where the Open can be substituted for the Close. These end up being vitally important.
-If a Setup breaks thru resistance, then look for continuation to Combo or Sequential
-If a Setup comes in close proximity to resistance but does not break thru, then the Setup can be traded.
-A Setup that continues to 18 bars is cancelled (called Recycling)
Let's take a look at some calls:
S&P 500 (SPY) on a Monthly basis (enter ‘m’ in cell c11):
February 2003 – end of bear market signaled by the ‘Aggressive Sequential’ (cell AE127)
May 2007 –end of bull market
signaled by a 9-month Sell Setup (cell M78)
February 2009 – end of bear market
signaled by 9-month Buy Setup (cell L199)
Now let's look at the same symbol (SPY) on a Weekly basis-
S&P 500 (SPY) on a Weekly basis: (enter ‘w’ in cell c11)
Note: You check the Monthly basis to see the larger trend, generally don’t bet against the larger trend until its well extended – has at least reached Setup phase.
July 10, 2000 –end of bull market called by Aggressive Sequential (cell BH395)
(click image to enlarge)
Oct 1, 2001 – short term buy
(Aggressive Sequential) cell AE58
Jan 27, 2003 – end of bear market
(note this is in coordination with Monthly therefore stronger signal) cell AE127
Oct 15, 2007 – end of bull market called by Aggressive Sequential
(click image to enlarge)
March 2, 2009 – end of Bear market called by Aggressive Sequential
On a Daily basis you’ll get even more signals. Plenty of nice short-term trading signals. This works on individual stock, ETF's and mutual funds. It will work on any financial symbol within Yahoo Finance (the spreadsheet pulls in data from Yahoo Finance). A reader recently emailed me about his success with an Australian bond fund of all things.
Trading - I’ll mention that there are 3 ways I have found to trade:
1) Trend Exhaustion: Enter a stock symbol (cell c4) and either (m)onthly, (w)eekly, or (d)aily in cell c11. From there, you can trade Setups, Combo and Sequential signals as given in the spreadsheet.
2) Trade with the Trend: Look at the Monthly signal to see what the Bull/Bear trend is. Knowing what the primary trend is, look for a Daily signal in the Opposite direction. This is often a great entry point into the primary trend.
3) Short-Term Weakness: Simply looking to buy a new stock? Take advantage of short-term weakness to get yourself a better price. Look for a completed Setup, Combo or Sequential on a daily timeframe for a great entry point.
Spend some time with the spreadsheet and you will be amazed as I am. Remember not to trade every Setup, you have to look at Resistance and Recycling.
The Stock Market Functions (SMF) add-in is an Excel Add-In that allows you to retrieve financial data from web pages such as the Yahoo Historical quotes database. To use an add-in, you need to download it to your computer and install it (a simple process).
This Add-In is available for free as a .ZIP attached to this article. Click on the download link at the end of this article. It is supported by an active Yahoo Group at:
This is a Yahoo Group created
to support this Add-In.