Stonehengeanalytics.files.wordpress.com



This presentation is solely for informational purposes and not a solicitation to invest. Stonehenge Analytics offers and publishes forecasts of future likely price movements of various financial assets. These are opinions formulated from our cycles-based historical analytical research. They are not, nor are they represented to be investment advice. Individuals or institutions choosing to act on these opinions are doing so at their own risk. Stonehenge Analytics does not warrant or guarantee that acting upon its published opinions will produce financial gain. Past historical performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Individuals and institutions should consult a financial advisory professional before making any investment.Weekly Market Update AddendumSeptember 7, 2016Cycles Analysis for NYSE-Arca Broker/Dealer Stock Index ($XBD) Featured in Sept. 4 “Weekly Update” using iShares Dow-Jones Broker/Dealer Stock Index ETF, ticker IAI This past Sunday’s “Weekly Update” featured a 2-year chart analysis of the NYSE-Arca Broker/Dealer Stock Index whose ticker symbol is $XBD. This analysis concluded that the recent rise in this index and in the KBW Bank Stocks Index ($BKX) whose 2-year chart was also featured was likely to be short-lived and therefore should not be “chased” by either shorter-term trading-oriented accounts whose forward time horizon is 3 months and less or by longer-term investment-oriented accounts whose forward time horizon is longer than 3 months. A “Cycles Addendum” for the $BKX Index was posted to the Stonehenge Analytics blog site back on June 21 of this year and is still valid today. It concluded that the probability of a significant downward price movement into an expected intermediate-term price low point likely to be made in February of next year was sufficiently high that longer-term investment-oriented accounts should defer considering purchase of individual bank stocks in that index or ETF’s based upon that index until that time. Today the Stonehenge Analytics team will present a cycles analysis for the iShares Dow—Jones Broker/Dealer Stock Index ETF whose ticker symbol is IAI that will draw a similar conclusion. The price history of this ETF is extremely closely correlated to the price history of the $XBD Index whose chart was shown this past Sunday. The price history of the IAI ETF from July 15, 2008 through August 31, 2016 was used by the Stonehenge Analytics team to identify 28 price cycles of varying time lengths that were at least 30-trading days long from price low to price low or price high to price high. We selected 6 of these 28 cycles based upon their superior total returns over this time period and their superior percentage of winning trades, both long and short. A composite cycle line was constructed using these top 6 performing cycles. Cycle lengths used ranged from 31.4 trading days through 228 trading days. Directly below is a picture of the 6-cycle composite line with the IAI price history for the past 3 years. Positioned directly beneath that is the 2-year chart of the $XBD index from this past Sunday’s “Weekly Update”. Below both of these charts is a picture of the individual cycles used to construct the 6-cycle composite line. All dates on the chart immediately below refer to inflection points of the 6-cycle composite line. We wish to first call attention to the forecast cycle low for May 23of this year that is highlighted in red. This forecast cycle low was in fact inverted by the IAI ETF that produced a short-term price high point on May 31 at $39.76/share. Cycle inversions are an occupational hazard in cycles analysis that can be extremely useful tools for forecasting the probability that future cycle inflection points will be highly likely to come in as advertised by the 6-cycle composite line. In this case a forecast deep low was inverted to a price high point instead. This means that the probability that the next forecast deep low point on the 6-cycle composite line has an extremely high likelihood of coming in as advertised and on schedule. That next deep low is forecast to arrive on or about March 27 of next year. This forecast low date is approximately one month later than the 6-cycle composite line low due on February 10, 2017 for the $BKX Index that was published on the Stonehenge Analytics blog site on June 21. We should expect that since both the $BKX Index and the IAI ETF are tracking prices of financial industry stocks that their price cycles forecasts should be similar. With both 6-cycle composite lines showing price declines into deep low points in February and March of next year this expectation is verified. Another historical cycle inversion took place in January 2014.The 6-cycle composite line forecast a price high point would be reached on or about January 30, 2014. The IAI produced an actual short-term price low on February 5, 2014 instead. This raised the probability that the next cycle high would come in as advertised. In fact, the next 3 cycle highs came in as advertised through the forecast high for December 14, 2014 which the IAI actually put into place on December 23, 2014 at a price of $43.36/share. This history in conjunction with the experience of the Stonehenge Analytics team in cycles analysis leads us to the conclusion that the probability that the IAI ETF will experience a multi-week price decline into an important intermediate-term price low likely to be made in the close vicinity of March 27 of next year is very high and warrants longer-term investment-oriented accounts deferring any contemplated purchases of either the IAI ETF or the component stocks of broker/dealers in the $XBD Index until that time. In fact, since there is forecast another deep low for the IAI ETF out in January 2018 long-term investors might wish to avoid purchasing the IAI and individual stocks in this sector until that time. The history on the chart below shows that forecast deep low inflection points have come in as advertised with the lone exception of in mid-2015. For shorter-term trading-oriented accounts there will be an opportunity to profit from the short side of the market coming up. The 6-cycle composite line will produce a peak high in the final week of October. While this may indeed turn out to be the ideal entry point for establishment of a short position in the IAI ETF or in individual broker/dealer stocks the 6-cycle composite line does not begin to fall in a sustained fashion until after November 30. The Stonehenge Analytics opinion is that the ideal entry point on the short side is likely to present itself sometime between those two dates. Trading-oriented accounts should rely upon their own technical indicators and analysis for determining the exact date of proper entry on the short side. We are reasonably confident that once entered the short position can be held through year end and well into 2017, possibly even until the March 27 date of the 6-cycle forecast low. The bottom chart that shows the 6 individual cycles used to construct the 6-cycle composite shows that there will in fact be a “nesting” of cycle lows early next year during the month of March. This accounts for the deep low forecast by the 6-cycle composite line. In fact, all 6 cycles will be on their downhill slopes after the 102-day cycle peak high on January 20 of next and until the same cycle bottoms out on April 5. This indicates to the Stonehenge Analytics team that there is likely to be rapid price decline after January 20 of next year. The individual cycles chart also shows that the longest and most powerful 228-day cycle will top out on September 30. While this does not mean that we should expect that the IAI ETF will immediately cease its current up-trend on that date it does tell us that we should not expect substantial or rapid price rise after the end of September. Short-term trading-oriented accounts that are currently holding long positions in the IAI ETF or individual stocks in the broker/dealer sector might wish to begin looking for an exit point from those positions after the end of September. Long-term investment-oriented accounts who have made a portfolio decision to re-allocate away from financial sector stocks in general and broker/dealer stocks in particular might also wish to consider the wisdom of beginning to pare those positions back during the month of October. 64084201767840Nov. 30, 201600Nov. 30, 20166892217311437594801433243772Oct. 23, 20180Oct. 23, 201891005801044036Aug. 15, 20180Aug. 15, 201882293123545696Jan. 30, 20180Jan. 30, 201876422251543685Oct. 12, 201700Oct. 12, 201768567301431290June 6, 20170June 6, 201711642781483624Jan. 30, 20140Jan. 30, 20144827923519458Aug. 20, 2013Aug. 20, 201324323621035050Dec. 17, 20140Dec. 17, 20144261162922907Nov. 25, 2015Nov. 25, 201559519391509503Oct. 28, 20160Oct. 28, 201665126563174257March 27, 2017. 0March 27, 2017. 42007773131473Feb. 16, 2016Feb. 16, 201651583093114220May 23, 2016May 23, 2016 5589629785040Sept. 30, 2016Sept. 30, 201668922182950055Apr. 5, 20170Apr. 5, 201763912751258570Jan. 20, 20170Jan. 20, 2017 Thomas J. DruittFinancial Markets Research and AnalysisStonehenge Analytics ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download