Sunday, October 29, 2017

Volatility Returns

SGS  Market Timer Status:  LONG 
LONG as of the close of September 8, 2017
SGS is a Long-Term (weeks to months) Timer

Why Market Timing Is A Must

SGS has been putting in lower lows since the beginning of October as major indices have been putting in higher highs.  This type of divergence is not promising but backtesting has clearly shown that so long as SGS remains above 50 the bull run is intact and significant (3% or higher) dips should be bought.

In the last five or six months, as shown in the chart above, VIX has been trading at low levels that have not been seen since late 2006 and early 2007. Chances are high that VIX starts to elevate in the next 12 to 18 months as one political crisis follows another both nationally and internationally.

We likely would see a substantial rise in VIX if Democrats win in the upcoming elections in Virginia and Alabama.  Republicans are planning to jam Trump tax cut through as soon as possible.  If they are successful we would see major indices go substantially higher but a Democratic win in Virginia or even a close loss in Alabama would be a major set back for the Republican's tax legislation plan.

As shown above, SPX and other indices have been trading a very well-formed rising weekly price channel.  The bull market is intact.

My Plan

SPY is moving higher in a well-established price channel on its daily chart shown above. Per my plan, I opened my first of three long positions in SPY last Monday.  A little bit of bad timing on my part as SPY dropped to the bottom of its price channel by Wednesday but I know from experience that trying to be perfect in trading is nothing short of a fool's errand.

My plan is to open my 2nd long position in SSO (2X SPY) on a 3% or higher pull back, hopefully sometime soon.

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.