Monday, September 5, 2016

Is Volatlity Coming Back?

SGS_LT Market Timer Status:  LONG 
LONG as of close of  July 22, 2016
SGS_LT is a Long Term (weeks to months) Timer

Current Long Term Portfolio (2016)
Past Long Term Portfolios (2008-2015)

SPX has been trading in a narrow (60 point) range for the last 8 weeks.  This is very likely going to change starting this week as the US presidential election uncertainties begin creeping in.  Markets hate uncertainties and a Trump presidency, which is highly unlikely in my opinion, would significantly elevate those uncertainties.  Clinton, on the other hand, represents the status quo and continuation of Obama financial policies which have been super friendly to markets.

I see four scenarios between now and the election day:

  • (A - 40%) - Clinton starts pulling ahead of Trump by double digits.  Under this scenario every dip in indices is a buying opportunity.
  • (B - 35%) - Polls remain tight, giving a slight edge to either Trump or Clinton.  Under this scenario also, every dip in indices is a buying opportunity.
  • (C - 20%) - Clinton pulls ahead significantly. Trump quits.  Again, all dips should be bought.
  • (D - 5%) - Trump pulls ahead significantly signalling a possible win by Trump.  Markets would suffer and probably crash if Trump gets elected.

Longer Term Outlook

No change since last week.  Again on Friday, SPX tested the lower channel line of its bear flag formation
(shown in above weekly chart in pink).  Chances are high that selling continues in the next couple of weeks and as SPX tests its DTL (13 EMA) around 2150.  A close below DTL this week would signal more selling as SPX tests its PUL-2 around 2100.

Shorter Term Outlook

Again no change since last week, indices are still overbought.  Chances are good that SPX sells off this coming week to test its 50 D-SMA around 2150.  Should selling gets panicky, there is a good chance that SPX drops down to 2120 intraday.

My Plan

No change, my plan still is to open long positions in SPY.  I'm planning to open my first of three long positions in SPY sometime this week as SPX sells to tests its 50 D-SAM around 2150.

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 informational  purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.