While our thoughts and prayers remain with the folks in Houston this morning, geopolitical tensions have returned to the center stage. With North Korea’s boy-leader firing a missile over Japan last night, the concern is that retaliatory measures could be taken and the situation could easily escalate. Where this goes is anybody’s guess, but as far as the market is concerned, it appears that traders are taking a defensive stance in the early going today.

But before we get carried away with speculation, let’s turn our attention to our objective review the key market models and indicators and see where things stand. To review, the primary goal of this weekly exercise is to remove any subjective notions one might have in an effort to stay in line with what “is” happening in the markets. So, let’s get started.

The State of the Trend

We start each week with a look at the “state of the trend.” These indicators are designed to give us a feel for the overall health of the current short- and intermediate-term trend models.

Executive Summary:

  • The short-term Trend Model is currently neutral, due at least in part to the recent sideways action. 
  • The short-term Channel Breakout System is currently positive but a break below 2417 would flip it back to negative. 
  • The intermediate-term Trend Model has improved but remains negative. 
  • The intermediate-term Channel Breakout System will require a move to new highs in order for the signal to go back to positive. 
  • The long-term Trend Model remains in pretty good shape. 
  • The Cycle Composite continues to point lower with only intermittent rallies through the middle of October. 
  • The Trading Mode models agree that stocks are back in a mean-reverting environment.

    • The State of Internal Momentum

    Next up are the momentum indicators, which are designed to tell us whether there is any “oomph” behind the current trend…

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