As of Friday, October 12, 2018 EquitySurge™ has generated a BUY signal for stocks.
Finally after having a Strong Sell signal for US equities since the Summer, a liquidity break has occurred and a substantial sell-off has exploded in stocks this week.
After a big correction the market really only has a couple of ways to recover – if that’s what it’s going to do, and in this case we think the market WILL recover, and fairly soon. The much more common recovery is the formation of a “W” bottom, whereby prices decline initially to form the left side of the “W”, and then retrace higher for a period of time, usually days or even weeks, before coming down again to form the right side of the “W”. The other recovery (which is much less common) is the formation of a “V” bottom, whereby prices decline into a low and then quickly reverse higher right back up to where the decline initially started.
We think in this case we’ll see a “W” bottom. And as of today’s close it looks likely that the left side of the “W” has completed and prices will now retrace higher to find where resistance is before coming down again.
There is however still a chance that we see a “V” bottom, so stay tuned here as we’ll be monitoring the stock market closely.
The indicators in the RRG® graphs are now moving smartly into the Leading quadrant with green tails, which is a strong signal to buy US equities. We will closely watch these indicators to see if and when they decline into the Weakening quadrant, which would be a sign that the upper middle of the “W” has been reached and prices might be ready to decline again.
Current RRG Graph:
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