The Madison Scoring System
When our Madison Score is at zero, the market is in neutral,
that is, we view it as neither a BUY nor a SELL. As the
market moves, our numbers also move, and what becomes
important is the direction of the numbers. As the numbers
rise towards +20, we are aware that the advance is getting
"long in the tooth" and will reach a climatic level from
which it will begin to head lower. We refer to this as the
Likewise, as the market begins to sell off our numbers will
begin to drop off towards -20, sometimes quickly. So do you
"load the boat" as soon as we hit +20 (sell zone) or -20
(buy zone)? Not necessarily.
Once these levels are hit, we know that our buy or sell zone
will begin to take hold -- but the potential always exists
to have a blow off to the downside, or a parabolic final up
move. That is why use our proprietary Trend and Volume
measures to confirm the buy or sell zone.
When we enter our zones, we will produce another signal that
will alert you to our extreme buy or sell zones. These
extremes are hit at +35 or -35. It is very important to pay
careful attention to our commentary in the days following
such a signal as we will attempt to time the entry or exit
in a precise manner.
The extreme buy or sell zone is usually triggered by a
geopolitical event or market event that causes a panic.
Although these are particularly turbulent times for market
participants, we can deal with this event with a level head,
as our scoring system can handle these anomalies often
referred to as the Black Swan event. You may only see such
a signal once every year or two but they do appear. Be
prepared with our work.