Monday, February 17, 2020

Measuring Fear And Complacency

SGS  Market Timer Status:  LONG 
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

sgs-st Market Timer Status: 
 neutral 

sgs-st is a Short-Term (hours to days) Timer

Similar to VIX, SGS market timer is a good yard stick to gauge how fearful or compliant market participants are, and when plotted over time,  SGS  shows how their fear or complacency is changing.  The value of SGS and its trend is also a good predictor of the future direction of major indices.

SGS advanced last week and confirmed major indices rallying higher.  

Reviewing values of SGS since 1980, I found its record low and when that record low occurred highly significant.  SGS put in its lowest value (-1965) on October 10, 2008 which was one of the most fearful days, if not the most fearful day, in financial markets since 1929. Interestingly, the second lowest value of SGS (-1741) happened on December 26, 2018.  I believe had not been for the intervention of the Fed on that day (which was later acknowledged in the unrepresented news conference given by Powell and his immediate predecessor Yellen, and Bernanke on January 4, 2019) financial markets worldwide would have crashed and SGS would have put in a new all-time record low.  On January 4, 2019, the Fed unequally said that the Fed had subscribed to the Modern Monitory Theory and "the Fed put" for the US financial markets was in and would remain in for the foreseeable future.  So long as that policy remains the law of the financial land, indices have no place to go but higher.

From 2015 to 2017, I dived deeply in the Elliot Wave (EW) analysis in search of a leading market timer.  I paid the price for relying on EW, getting ahead of the market, and going too deep into the weeds with Elliot Wave for my trading.  
I realized later that EW is useless and could to lead to substantial losses when used for trading.  EW, however, is insightful when it is viewed from "30,000 feet", i.e on monthly and weekly charts.


Many EW true believers are now looking for a 40% to 60% correction.  They are looking for  what they call "Cycle 2 of Super Cycle 3".  I believe, as shown on the SPX monthly chart above, the Cycle 2 correction they're waiting for, occurred in late 2018 when SPX corrected 23% and SGS put in its second lowest value of the last 40 years.  That correction would had been much deeper had not been for the Fed intervention.


Support and resistance levels for SPX for this week are shown above.
My Plan

sgs-st is stilll neutral and
I'm in cash and waiting for the next sgs-st signal.


Current Long-Term Portfolio

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SPX: S&P 500 Index    SMA: Simple Moving Average
DJI: Dow Jones Industrial Index    EMA: Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ASL: Active Support Line
OEX: S&P 100 Index    ARL: Active Resistance Line
NDX: NASDAQ 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line
TLR: Trend Line Resistance   TLS: Trend Line Support

Disclaimer: The views expressed are provided for informational purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Sunday, February 9, 2020

Answers to Frequently Asked Questions (2020 Update)

What is Balance Trading Blog?

Balance Trading Blog is my trading notebook. It's a place for me to record my thoughts, ideas, and long-term (weeks to months) trades.  I'm sharing it with anyone who cares to read it.  Please kindly note that my notes, thoughts, and ideas are not trading recommendations or investment advise. They are simply notes, thoughts, and observations of an x-aerospace engineer who changed his career in 1997 and became a full-time trader who trades for a living.

What is SGS?

SGS is a proprietary mathematical long-term (weeks to months) trend following market timer.  SGS is not a price-based timer.  It is  a smoothed and normalized aggregate of the number of new highs minus the number of new lows of a pool of around 4000 liquid stocks and ETF's (traded on NYSE and NASDAQ) for five discrete time periods (daily, weekly, monthly, quarterly, and yearly). 

Everyday shortly after close, a new value for SGS is calculated.  In order to reduce whipsaws, only the value of SGS calculated on a Friday is used to determine the status of SGS.  If the Friday value of SGS is greater than +50, then the status of SGS is LONG. If less -50, then the status of SGS is SHORT.  For any SGS value between +50 and -50, the status of SGS is NEUTRAL.

What is sgs-st (short-term)?

sgs-st is a proprietary mathematical short-term (hours to days) trend following market timer.  Similar to SGS, sgs-st status can be long, short, or neutral.  Additionally, sgs-st could change its status from long to neutral if an overbought condition is triggered or change its status from short to neutral if an oversold condition is triggered.

The status of sgs-st is determined by (1) the size of the total area between between 13 and 39 hourly EMA's of SPX measured in price-time; and (2) by the growth rate of that area measured in price-time per hour.  The value of sgs-st is calculated every trading hour during the regular session (9:30 AM to 4:00 PM). The status of sgs-st is determined by its hourly calculated value.

How SGS and sgs-st are used for trading?

Since October 22, 2019, I've been tradeing SPXL and SPXU using the status of SGS and sgs-st as summarized in the table below:



Sunday Feb 9, 2020

SGS  Market Timer Status:  LONG 
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

sgs-st Market Timer Status: 
 neutral 

sgs-st is a Short-Term (hours to days) Timer

SGS advanced last week and confirmed major indices rallying higher.


Support and resistance levels for SPX for this week are shown above. 

My Plan

Last Monday morning at 10 AM sgs-st status turned from short to neutral and I closed my SPXU position (33.3% of capital) with a loss.  Then at 2 PM sgs-st changed its from neutral to long and I opened a SPXL position (100% of capital).  On Tuesday sgs-st triggered an overbought signal and changed its status from long to neutral.  I closed my SPXL position.  


I'm in cash and waiting for the next sgs-st signal.

Current Long-Term Portfolio
Past Long-Term Portfolios

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opader@gmail.com


SPX: S&P 500 Index    SMA: Simple Moving Average
DJI: Dow Jones Industrial Index    EMA: Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ASL: Active Support Line
OEX: S&P 100 Index    ARL: Active Resistance Line
NDX: NASDAQ 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line
TLR: Trend Line Resistance   TLS: Trend Line Support

Disclaimer: The views expressed are provided for informational purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Sunday, February 2, 2020

Selling Is Very Likely Done

SGS  Market Timer Status:  LONG 
LONG as of the close of Friday Oct 25, 2019
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must


sgs-st Market Timer Status: 
 short 

sgs-st is a Short-Term (hours to days) Timer

The two week sell-off due to the Trump's impeachment trial and the coronaviurs very likely came to an end last Friday as major indices successfully tested strong supports.  The rally that started late Friday afternoon very likely continues as major indices advance to challenge their all-time highs sometime later this week or next.

SGS declined last week and finished below 400 "Overbought" level.


Support and resistance levels for SPX for this week are shown above.  Last week SPX successfully tested its W-DTL.

My Plan

Last Monday morning sgs-st turned from neutral to short.  I opened one SPXU long position (33.3% of total capital).  On Friday sgs-st almost triggered an oversold condition which would have turned its status from short to neutral.  I expect that to happen at 10 AM on Monday.

Current Long-Term Portfolio
Past Long-Term Portfolios

twitter
opader@gmail.com


SPX: S&P 500 Index    SMA: Simple Moving Average
DJI: Dow Jones Industrial Index    EMA: Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ASL: Active Support Line
OEX: S&P 100 Index    ARL: Active Resistance Line
NDX: NASDAQ 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line
TLR: Trend Line Resistance   TLS: Trend Line Support

Disclaimer: The views expressed are provided for informational purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Sunday, January 26, 2020

The 2020 Triage Dance Continues

SGS  Market Timer Status:  LONG 
LONG as of the close of Friday Oct 25, 2019
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must


sgs-st Market Timer Status:  neutral 
sgs-st is a Short-Term (hours to days) Timer


Last October I posted "The 2020 Triangle Dance".  It's time to review where things stand now in this 3-way political dance:
  • DNC - DNC is still trying hard to make sure Biden is their nominee for the 2020 election but hopes will be dashed in upcoming primaries as the Democratic base resoundingly will vote for Sanders.  DNC will not make the same mistake they made in 2016 and, barring an unforeseen health related event, Sanders will be Democratic nominee.

    As for the 2020 presidential election, as predicted, Democrats impeached Trump but still do not want him removed because they consider Trump as the weakest Republican nominee they could possibly face in November.  Also, with Trump at the top of the Republican ticket, Democrats not only have an excellent chance of winning the White House but also have a good chance of flipping the Senate.  To that end, Democrats will try to prolong Trump's impeachment trial in the Senate by forcing Republican senators to vote on introducing new documents, introducing new witnesses, and a host of other resolutions and amendments.  If Democrats manage to find four Republican senators to vote with them for the introduction of new documents and witnesses, the impeachment trial would be extended for days or possibly weeks.  Also, with the introduction of new witnesses and documents, chances of Trump's removal significantly increases to at least 50%.

  • RNC - With Trump as the head of RNC, the situation for Republicans has turned from bad to worse.  Their plan is to quickly sweep the entire impeachment under the rug and hope that people would forget about the whole thing by the election in November.  That won't happen because between now and November new Trump's impeachment related damning stories, books, documents, and leaks will surface every week if not every day.

  • Trump - No change. Knowing the erratic and chaotic nature of Trump, it's hard to predict what he would do between now and the election.  Assuming Trump survives the his pending removal by the Senate, there is a good chance that he would resign if he sees that he is going to lose his second term election in a landslide.  If he chooses to resign, Trump being Trump, he would do it in a way that it would inflict maximum pain and damage to the Republican party and their replacement nominee.  That is not going unnoticed by Republicans.

SGS advanced early last week but declined with the sell-off on Friday.

Support and resistance levels for SPX for this week are shown above.  If the Senate votes to allow new documents and witnesses, then the sell-off that started on Friday would continue and SPX could possibly tests its 50 D-SMA around 3200 sometime this week or next week.  If the Senate rejects new documents, witnesses, and quickly finds Trump not guilty, then a relief rally would push indices to new all-time highs and beyond.


My Plan

Last Wednesday sgs-st turned from long to neutral.  I closed my SPXL position. I'm in cash and waiting to see which way sgs-st turns. 

So far sgs-st  has performed well and my plan is to use sgs-st along with SGS to trade my long-term money.


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opader@gmail.com


SPX: S&P 500 Index    SMA: Simple Moving Average
DJI: Dow Jones Industrial Index    EMA: Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ASL: Active Support Line
OEX: S&P 100 Index    ARL: Active Resistance Line
NDX: NASDAQ 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line
TLR: Trend Line Resistance   TLS: Trend Line Support

Disclaimer: The views expressed are provided for informational purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Sunday, January 19, 2020

Indices Grind Higher To Overbought Levels

SGS  Market Timer Status:  LONG 
LONG as of the close of Friday Oct 25, 2019
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must


sgs-st Market Timer Status:  long 
sgs-st is a Short-Term (hours to days) Timer


Money from the Fed's new QE-FE (Quantitative Easing For Ever based on Modern Monetary Theory) is injected into the financial system at an unrepresented rate,  about $100 Billion per month.  So long as the Fed continues to create money out of thing air and expand its balance sheet, indices have no place to go but higher.   Dips are buying opportunities.


SGS advanced last week and confirmed new all-time highs in most major indices.  That is bullish.

Support and resistance levels for SPX are shown above.  

My Plan

sgs-st is long but getting close to overbought levels. I'm still 100% in SPXL.

Current Long-Term Portfolio
Past Long-Term Portfolios


twitter
opader@gmail.com


SPX: S&P 500 Index    SMA: Simple Moving Average
DJI: Dow Jones Industrial Index    EMA: Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ASL: Active Support Line
OEX: S&P 100 Index    ARL: Active Resistance Line
NDX: NASDAQ 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line
TLR: Trend Line Resistance   TLS: Trend Line Support

Disclaimer: The views expressed are provided for informational purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Sunday, January 12, 2020

The Coast Is Clear Until June 2020

SGS  Market Timer Status:  LONG 
LONG as of the close of Friday Oct 25, 2019
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must


SGS-ST Market Timer Status:  Long 
SGS-ST is a Short-Term (hours to days) Timer

Fortunately cooler heads, both in the US and Iran, prevailed and an all-out war was averted last week.  Barring an unforeseen event, equities will grind higher on the back of the new QE between now and June.  Dips are buying opportunities.

SGS advanced last week and confirmed new all-time highs in most major indices.  That is bullish.

Support and resistance levels for SPX are shown above.  

My Plan

Last Wednesday SGS-ST turned from Neutral to Long and I opened one long position in SPXL.

Current Long-Term Portfolio
Past Long-Term Portfolios


twitter
opader@gmail.com


SPX: S&P 500 Index    SMA: Simple Moving Average
DJI: Dow Jones Industrial Index    EMA: Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ASL: Active Support Line
OEX: S&P 100 Index    ARL: Active Resistance Line
NDX: NASDAQ 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line
TLR: Trend Line Resistance   TLS: Trend Line Support

Disclaimer: The views expressed are provided for informational purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Saturday, January 4, 2020

The Law Of Unintended Consequences

SGS  Market Timer Status:  LONG 
LONG as of the close of Friday Oct 25, 2019
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must


SGS-ST Market Timer Status:  Neutral 
Neutral as of 1 PM Tuesday Dec 24, 2019
SGS-ST is a Short-Term (hours to days) Timer

Neither the US nor Iran wants a war but the law of unintended consequences might soon dictate one in the Persian Gulf. If an all out war breaks out, the global everything bubble that has been inflated by central banks around the world in the last 11 years, would surely pop.  That would send the US and the global economy into a deep recession if not a depression.


After reaching an over-bought level last week, SGS declined this week, signalling that the sell-off that started on Friday very likely continues for another week or two.


Support and resistance levels for SPX for the coming week are shown above.  


My Plan

SGS-ST is still Neutral.  I'm in cash and waiting to see which way SGS-ST turns.


Current Long-Term Portfolio
Past Long-Term Portfolios


twitter
opader@gmail.com


SPX: S&P 500 Index    SMA: Simple Moving Average
DJI: Dow Jones Industrial Index    EMA: Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ASL: Active Support Line
OEX: S&P 100 Index    ARL: Active Resistance Line
NDX: NASDAQ 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line
TLR: Trend Line Resistance   TLS: Trend Line Support

Disclaimer: The views expressed are provided for informational purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.