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August 7th, 2007

A cuppa MagicT anyone? No, it's nothing to do with tea (or mushrooms!) It's short for "Magic Trough".

It is a trading signal I developed as part of my TrendSensor trading system. It can identify very early when panic selling is exhausted and a new rally is kicking off. It catches the end of the nastiest, most precipitous declines and delivers a buy signal early in the new, strong rally that usually follows.

If you're into the geeky stuff, MagicT combines time series analysis of price volatility, a statistical analysis of trend duration to identify excessively long trends, and a simple chart pattern to confirm the start of the strong bounce.

Paste the URL below into your browser and you'll be taken to a chart of the DAX Index (Germany) covering 14 years, two bull markets and a bear market. The 16 buy signals are the work of MagicT and you'll see 15 of them are nicely nestled near the bottom of market troughs (low points).

www.trendsensor.com/Charts/DAX-LT-MagicT.png

The first buy signal in 2002 ain't great, but the other 15 really nail the lows in the DAX, including most of the precipitous slides south.

I chose to show the DAX because it's primed to trigger a MagicT signal again soon, and it has more historical signals than most markets - 16 in 14 years. Many markets only serve up a MagicT buy signal once every two or three years. So the fact that right now I can identify 14 global stock markets or sectors that are primed to trigger a MagicT buy signal is remarkable and bullish. A few of these may not fulfill all the signal requirements within the time frame allowed, but there are 10 markets that appear very likely to throw MagicT buy signals within the next week or three. These 10 markets are evenly split between Europe and USA:

* Europe: ATX (Austria), BFX (Belgium), CAC40 (France), DAX (Germany) and FTSE100 (UK).

* USA: BIX (S&P Banking Sector Index), HGX (Philadelphia Housing Sector Index), NYA (NY Composite), SPX (S&P 500) and SXX (Philadelphia Semiconductor Sector).

Yes, the last really attractive buying opportunity for a long time is about to unfold in the US markets. I'm a bit peeved that my systems didn't throw a short signal leading into the recent decline - but after this next push higher they may get a second chance.

This opportunity is a heads-up for all my trading signal clients - and an invitation to catch those rare MagicT signals via my free 5 week trial offer for others reading this.

This Stock Market article is provided by Articleteller - The Free Article Directory http://www.articleteller.com

Murray Nickel is a mathematician, statistician, and professional trader. He offers a free trial of trading signals for market indices and index ETFs, spot Forex, and spot Gold. He also mentors traders aiming to build consistent success at trading global markets.
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