The Sextant Report
Four Factors
1. Price Action (Waves)Elliot Wave Theory is a form of technical analysis named after Ralph Nelson Elliott. He concluded that market prices unfold in repetitive cycles that give rise to specific patterns. Essentially, the market is alternating between five and three waves at different degrees of the trend. Bull moves unfold in 5 waves, 1-2-3-4-5. Corrections unfold as 3 waves, A-B-C.
2. Internals
The internals of the market are akin to the vital signs for a human being. While a person can appear healthy on the outside, a calm exterior may belie an unhealthy interior. Deteriorating vitals tend to provide an early warning that something is amiss. The same can be said for the market. Market internals can reveal hidden strength or weakness long before it becomes apparent in the headline index.
3. Sentiment
The market rarely accommodates the majority. As a result, the herd is always leaning the wrong way at important tops and bottoms. Put-call ratios and newsletter surveys are a useful gauge of investor sentiment.
4. Time
“Time is more important than price; when time is up price will reverse.”
-- W.D. Gann, legendary trader.