Sunday, January 31, 2016

Bear Market Rally Is Over, Selling Very Likely Resumes

SGS Market Timer Status:  SHORT 
Short as of close of 12/11/2015
Current Portfolio (2016)
Past Portfolios (2008-2015)

Long Term Outlook (Weeks to Months):

The recent bear market rally that started on January 20, came to a spectacular end last Friday as SPX rallied about 2.5% on the back of massive short covering caused by BOJ adopting negative interest rate policy and oil market stabilizing.

On its weekly chart, shown above, SPX found resistance at one of its old Primary Downtrend Lines (PDL-1) on Friday.  Chances are excellent that SPX starts to sell off this coming week to test its Tentative Uptrend Line (TUL, pink line) and its recent lows (1812) in the next couple of weeks.

Should support at TUL fail, SPX very likely would sell off more to test its Primary Uptrend Line (PUL-0, thick black) around mid 1700 sometime in mid to late February. My guess is that the Fed would intervene at that point by giving back its December 0.25% rate hike and going back to ZIRP again.

It's doubtful if going back to ZIRP would end the bear market.  Eventually, trying to stop a recession, the Fed would be forced into starting another round of QE later this year (sorry Donald, you will lose in the general election to the devil that BM knows well).

Short Term Outlook (Days to  to Weeks):

Shorter term, SPX very likely starts selling off early this coming week, very likely on Monday.

MY Plan:

I'm still 100% in cash and planning to open first of 3 short positions in SPY sometime on Monday.


SPX: S&P 500 Index    D-SMA: Daily - Simple Moving Average
DJI: Dow Jones Industrial Index    D-EMA: Daily - Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ADL: Active Downtrend Line
OEX: S&P 100 Index    AUL: Active Uptrend Line
NDX: Nasdaq 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line  

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