POLAR PACIFIC / Financial Markets Analysis by David Bensimon [MONTHLY]

This section presents a timeline Review of SPX across the full set of Monthly Reports. The technical analysis and discussion of fundamental factors in each issue were generally focused on positioning with a longer-term perspective than the intraday emphasis of the Daily Reports.
The purpose of this Review is to illustrate positioning strategies. It is not meant to be an exhaustive listing of every forecast, expectation, or contingent scenario presented for SPX, and a variety of other markets from a total of four asset classes -- equities, commodities, exchange rates, interest rates -- were also covered in the Monthly Reports. Amongst those other forecasts it is fair to say that some did not fulfil their targets while some produced exceptionally profitable trading signals, but none at all are included here for the sake of brevity.
A detailed review of actual forecasts for NDX with a similar timeline fashion and duration is provided under Performance of Posts (2000). For additional examples highlighting accuracy in price, direction, and timing on a more active intraday trading basis for SPX, NDX, and six other markets see Performance of Newsletters (Daily).

SPX

Background

In SEP00, the large-scale technical context was that SPX had entered a fourth wave corrective sequence at the peak in MAR00 -- as predicted in public posts during the first quarter of 2000. This multi-month sharp sequence was expected to alternate from the flat consolidation of the second wave, and be of a scale consistent with retracing the substantial gains achieved in the multi-year third wave. The overarching structure, however, involved seeing past the correction to an eventual fifth wave rally.

Thus, the outlook and strategies presented in the Monthly Series generally had an optimistic tone, looking forward to an eventual impulse recovery rather than reflecting a view of the decline in 2000 as the start of permanent stagnation and collapse of equities. A sense of "Bullishness", however, is not the same as "Buy Now and Never Sell", and this stance allowed for capturing movements in both directions while remaining cognizant of the larger frame and hence on the lookout for levels likely to produce the key reversal.
Accordingly, the forecasts in each Report identified downside objectives for alternative scenarios in which the market continued within a somewhat larger retreat as well as making the case for key inflection points likely to represent interim troughs. These triggerpoints served as a guide for protective exits of core positions as well as for useful entries for more aggressive swing players using futures and options.

Report #1
*Forecast*	The assessment of Monthly, Weekly, and Daily charts favoured an upside reversal, but included several explicit cautions: "The trendline illustrates very clearly how critical the current juncture at 1420 really is." ... "A break below the intersection of these three lines would be very bearish." ... "An eventual breakout will lead to another 100 points."
*Outcome*	The market breached the cited triggerpoint two days after publication and went directly to a low Hourly Close at 1320 (brief extreme at 1306) -- exactly the 100 points forecast for the downside -- before recovering to finish OCT only 7 points down from end of SEP.
*Benefit*	A pro-active position-taker following this break-out strategy could have earned 100 points on the way down and possibly another 100 points on the way up from the lower target. A long-term investor with previously-acquired Longs would have been able to avoid the pain of the 100-point decline.

Report #2
*Forecast*	The rally in mid-OCT was described as having "five clear components, making it either Wave 1 of (5) eventually up to 1618, or only the first of three legs in a large X-wave preceding a final capitulation in Part C of (4). The key determinant will be what happens at 1442 and 1400." Two explicit scenarios were presented, with the Bearish case stating that "a failure near 1442* which then falls back through 1400 would probably continue on down to a marginal new low around 1300".*
*Outcome*	The market followed this scenario very closely, reaching a High within a couple days of publication at 1438 -- just a few points under the cited target at 1442 -- before the anticipated capitulation pushed all the way to 1295 -- just under the cited target at 1300.
*Benefit*	While the preferred Bullish case did not materialise, the Report again provided exceptionally accurate information for a pro-active position-taker to earn at least another 100 points on the short-side, and for a long-term investor to avoid the pain of a 10% reduction in value.

Report #3
*Forecast*	A recommendation to immediately "go long* index futures and options"* was accompanied by an explicit caution about the Bearish scenario in which "a breach of 1300* on a Weekly Closing basis would increase the potential for a nearterm meltdown experience targeting 1200/1100".*
*Outcome*	The market rose immediately following publication to a peak nearly 100 points higher at 1389 before dropping sharply to an intraday trough at 1254 and then recovering to finish the month at 1320 (for a net gain of 25 points).
*Benefit*	A position-taker acting on the entry recommendation and using protective trailing stops would have been able to keep at least part of the nearly 100 points in initial profits. The Bearish case predicated on a Weekly Close below 1300 was not invoked, and a long-term investor using the signals indicated would have captured the small net gain by not exiting on the downspike.

Report #4
*Forecast*	The end-of-year Report was a 20-page tour-de-force focused exclusively on Equities. One Subscriber described it as "a masterful piece of work" and added "If you're wondering if it was worth the effort ... it was. If you're wondering if anyone appreciates it ... I do. Thanks very much." See Accolades for a selection of other compliments. Technical elements across six charts (arithmetic and logarithmic) ranging from Daily to 100-year horizons were assessed, with the specific expectation for "a recovery of a size at least sufficient to exit the downtrend since September", and an imminent upsurge to "take place on the 8th* trading day after the low, meaning Thursday 04JAN".*
*Outcome*	The market powered up 5.7% on 03JAN when the Fed acted to lower interest rates. Within a couple days from publication the market dipped back to the 1276 level prevailing before the Fed, and then it rallied throughout the month to a peak on 31JAN at 1383. In the week just prior to this High, a special alert was sent to Monthly Subscribers advising that "the wavestructure, chart patterns, and other technical signals have not fully confirmed the key reversal" and "investors should consider taking some profits off the table [as] a rapid decline to a double bottom at 1250* is a distinct risk".*
*Benefit*	Once again, a pro-active position-taker following the excellent and timely Entry and Exit recommendations could have captured yet another 100 points during the month.

Report #5
*Forecast*	Released a bit later than usual, with data through 09FEB, the assessment continued to favour viewing the decline from MAR00 as a corrective sequence followed by a rally. The report explicitly cautioned, however, about "the potential for failure at 1300* leading directly to a double-bottom or divergent low at 1254-1238".*
*Outcome*	The market did breach the 1300 cited trigger a week after publication and promptly dropped directly to a low at 1215 -- 2% below the lower end of the downside target zone and 100 points from the 1315 level on 09FEB -- before Closing the month at 1240.
*Benefit*	*Although the preferred* scenario did not materialise and the particular forecast that** "a sharp retreat during February is not expected to end the month below 1315" was wrong, once again the backup plan would have enabled a pro-active position-taker to earn 60-100 points, and a long-term investor to again avoid some pain with a protective stop at the cited inflection point.

Report #6
*Forecast*	The Bullish scenario included a projection for an initial drop to key support at 1200, and warned explicitly that "from a risk/reward perspective a decline through the 1998* peak at 1190 should be considered a good stop-and-reverse point".*
*Outcome*	The market quickly dropped through the cited inflection point and continued directly to a trough several weeks later at 1081.
*Benefit*	The stop-and-reverse strategy would have yet again provided a pro-active position-taker with more than 100 points of profit, and helped a long-term investor avoid another 10% reduction.

Summary

Despite premature optimism and the market's decline from MAR00 stretching further than originally anticipated (though still within the parameters appropriate to the scale of wavestructure), the analyses and forecasts for SPX throughout the Monthly Series provided traders and investors with accurate inflection levels and timely action signals in both directions. As described above, disciplined execution of these positioning strategies could have produced benefits on the order of about 600 SPX points over the course of the six months.
Note: Individual traders and investors represent a diversity of risk profiles, financial objectives, capital resources, position horizons, and trading experience. These factors and the effect of brokerage fees, margin requirements, and execution slippage would likely impact on actual performance and produce results different than the estimates presented above.

Past performance is not a guarantee of future performance

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