Ideally, each cycle exerts upward pressure at the beginning of its time frame and continues to do so until it is one-half completed. At this point, the process is reversed resulting in negative pressures being applied to the market. When dealing with five cycles, the picture can become confusing. Two cycles may be in an up posture, while one may be flat, and the remaining two may be pointing down. In order to have a collective positive or negative picture of the state of the market, each cycle must be evaluated in such a way as to total their independent, positive or negative forces. This is done by assigning each cycle either a positive or negative numerical value based upon the amount of time that has elapsed since it's previous bottom. The sum of these + or - values is called the Cyclical Trend Index (CTI). This indicator reduces the cyclical status of the market to an absolute, numerical value. Readings of +1 to +21 indicate a Bullish trend in the market, whereas a 0 to -21 value signals a downward, Bearish scenario.

A major problem that can arise when employing Cyclical Analysis in forecasting the market is the determination of starting points for the various cycles. Errors in assigning an accurate count can lead to aborted readings and adverse results. This problem can occur when identifying a cycle's low and is most pronounced when more than one of the cycles are due to make a bottom. In order to rectify this problem, both a Momentum Index and a Sentiment Index have been developed and are used in conjunction with the Cyclical Trend Index to refine the Market Timing Model.

Momentum Index: The Momentum Index is designed to measure market divergence by comparing the performance of eight, non-Dow Jones Industrial Average Indices to that of the Dow Jones Industrial Average. Divergence is a technician's term that measures whether the DJIA is performing better or worse than the majority of the other market indices. Whenever the DJIA goes its own way for a period of time, whether up or down, a market turn is usually at hand. Typically, negative divergence (DJIA is up while broader indices are trending down) exists at significant market tops, while positive divergence (DJIA is down while broader indices are trending up) indicates a market bottom.

Momentum Index::...................................................+3             Bullish

Included in the Index are four additional indicators that measure the market's positive or negative breadth & momentum. An explanation of these indicators follows.

Zweig Breadth Indicator divides the number of NYSE advancing issues by the sum of the NYSE advancing and declining issues. Readings above .6 are regarded as Bullish while levels below .4 are Bearish.

McClellan Oscillator measures the difference between the number of NYSE advances and declines over a 19-day period subtracted from the number of advances and declines over a 39-day observation. This indicator is regarded as Bullish when it drops below zero and is Bearish when above zero.

TRIN 5-Day Average is computed by dividing the ratio of NYSE advancing issues to declining issues by the ratio of advancing issue volume to declining issue volume. Market Edge calculates a ten-day moving average of this index. Values above 1.24 are Bullish, while values below .75 are Bearish.

Unchanged Issue Index is calculated by dividing the number of NYSE unchanged issues by the total number of NYSE issues traded. Readings less than .186 are Bearish, while readings greater than .22 are Bullish.

Sentiment Index: The Sentiment Index, which measures the degree of optimism or pessimism prevalent in the market, is an important indicator when attempting to determine he market's future direction. Market Edge tracks nine technical indicators that measure excessive speculative or sentiment conditions prevalent in the market.

Sentiment Index . . . . . . . . . . . . . . . . . . . . . . . . . . +3             Neutral

Sentiment based technical indicators are:

Each indicator is assigned a positive, negative or zero value depending on whether its reading is deemed to be Bullish, Bearish or Neutral. The sum of these values is referred to as the Sentiment Index. Plus 3 to plus 11 readings are Bullish, while minus 1 to minus 11 readings are Bearish.