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Tom Ellis View profile Power Trend = On Buy Switch = On Restraint = Off Exposure = +7 100% Distribution = 2 Days How

does the institutional selling today affect our MEM? Monday we collected a Follow Through type Buy signal, taking our count from +6 100% to +7 100%. 7 is the maximum count during a Power Trend This means that we would need 3 sell signals to reduce our exposure to the market below 100%. Our exposure would go from +7 100%, to +6 100%, to +5 100%, to +4 90%. Even with these three sell signals we would still be 100% invested. Let's review the signals we may run into over the next few days. DISTRIBUTION COUNT We have one day of distribution and one day of stalling for a total of 2 distribution days currently. The distribution day will fall off on 4/11/2012 or if the Nasdaq goes above 3144.90 (Yesterday we got close at 3134.17). The stalling day will fall off 4/26/2012 or if the Nasdaq goes above 3259.84. We cannot count an additional stalling day until we get two more days of distribution. For the distribution count to increase we need real distribution, not stalling. Distribution will not affect our count until we get to 5 days of distribution. If we get a distribution day today we will go to 3 days of distribution. We would still need to get an additional 4 days of distribution to reduce our exposure to the market. 5 days of distribution would decrement out count from 7 to 6 to 5 to 4. The effect of this would be to reduce our exposure from 100% to 90%. My point here is that distribution will not be the likely thing to reduce our exposure to the market. The market needs to go down in order for our exposure to be reduced. SELLS SIGNALS THAT MAY AFFECT US The first sell signal we may run into would be a break of the 21 Day EMA. For us to do this the Nasdaq would need to go down 2.7% on the day. This would decrement our count from +7 100% to +6 100%. The next sell signal we may run into would be a break of the 50 Day SMA. For this to occur the index would need to go down about 5.7% on the day. This along with the 21 day break would take us from +7 100% to +5 100%. If we get a break below the 50 DMA, we would also get an additional sell signal for the price going down more than 2.5% in one day and a close below the 50 DMA. This would take our count from +7 100% to +4 90%. The next sell signal is if we go below the marked low on 3/6/2012 of 2900.28. This would decrement our count further and reduce our exposure as well.

HOW TO GET OUT You may be saying to yourself how the heck does the model get me out of this rally if it really goes bad? Don't fret there is an answer. We have a Circuit Breaker Rule. What would need to happen for us to go to a count of 0 is for the index to close 10% below the intraday high of the rally.

Yesterday we had a high of 3134.17. If the Nasdaq penetrates 2820.75 then we would reduce our exposure to zero and the rally is over as far as the MEM is concerned. OTHER MUSINGS None of the above are likely today. The reason I go through these scenarios is to know how I will respond if the market choses to do these things. The more likely scenario would be a more prolonged pullback where we would gather some sell signals from distribution and other sell signals I have not included in the above examples. -Tom Ellis 707-347-9550 mrtomel...@gmail.com