I ran across this article today and was taken aback. I may have found an even fuzzier and longer term leading indicator than the SI Indicator! This commercials’ Eurodollar position shifted by 1 year was conjectured to suggest the stock market direction.
Source: Commercial Traders Foretell Market’s Movements by Tom McClellan.
… It just so happens that this indication of a big top due in early June coincides with the end of positive annual seasonality in June every year, and also the end of the Fed’s QE2 program. So the market is going to have two bullish factors (seasonality and POMOs) expiring at the same time that this chart’s indication of banking liquidity flows says that the stock market is about to enter an illiquid period. Yikes!
The good news for the bullish case is that once that October low is put in, this eurodollar leading indication says we should see a really strong rally into the end of the year. But we’ll have to get through some rough months this summer before it is time to play that year-end rally.
I am not exactly looking for yet another indicator; however, I am intrigued by how similar it is to the SI Indicator in terms of its nature as an indicator (long lead time, fuzzy, hard to trade off it — would the big Jan drop be considered micro-trend and therefore to be ignored, as the June high makes the overall trend as up?!!). Anyways, I am taking note of the fact that this indicator is suggesting some big correction between now and October. This is consistent with the SI Indicator which, assuming a 10 week lead time, has been pointing down till September so far.
As I don’t understand the internal mechanics of how either indicator correlates with the broad market, it’ll takes precisely some blind faith if any action is to be generated based on either of them. But if the market indeed sell off soon, and the SI Indicator starts to bottom out in the next few weeks, I will be having some serious goose bumps.