Sunday, November 4, 2018

Tick Tock ...

SGS  Market Timer Status:  SHORT 
SHORT as of the close of Friday Oct 5, 2018
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

I have been trading full-time for over 20 years. Over the course of those years, I have noticed that the stock market starts to sell-off at least a few weeks before a major event that causes a significant (greater than 15%) price correction.  Below are some examples:
  • Jun 2015 Rise of ISIS & Terror in Europe/US - Indices started to sell-off in May 2015
  • 2008 Financial Meltdown - Indices started to sell-off in Nov 2007
  • Mar 2003 Iraq War - Indices started to sell-off in Oct 2002
  • 911 in 2001 - Indices started to sell-off in Aug 2001
  • 2000 Presidential Election Crisis - Indices started to sell-off massively in Sep 2000
  • Oct 1998 Long-Term Capital Debacle - Indies started to sell-off in Aug 1998
The recent sell-off just before the mid-term election is troubling. It is very likely predicting one of three scenarios listed below:
  • Scenario A (Bad): Reps lose the House, keep the Senate but lose most of state gubernatorial and local races.
  • Scenario B (Worse): Reps lose the House, the Senate, most of state gubernatorial, and local races.
  • Scenario C (Ugly): Chaos engulfs all close House, Senate,  and gubernatorial races.  Long lines due to equipment and computer breakdowns on the election day, prevent thousands from voting.  All close election results are contested by both parties.  Numerous federal law-suits are filled by both sides, contesting results and demanding recount.

SGS advanced last week but it is still deeply in SHORT territory, signalling that selling will resume and any counter trend rally would be short-lived.

Supports and resistances for SPX for the upcoming week are shown above. At the high of the day on Friday (2756), SPX had retraced back about 45% of its decline from it all-time high (2940) to its recent low last week (2603).  Retracements after a big sell-off are typically around 40% to 60%, so there is a good chance that the counter trend rally is done.  SPX very likely starts to sell-off again on Monday to test supports around SPX 2600, 2559, and possibly mid 2400's sometime this week. 

My Plan

Per my plan, I opened new long SPXU positions on Monday and Tuesday last week.  Looking back, I was a little too early and shorting via SPXU was not a good move.  SH and SDS are better choices to short SPY.  I expect a panic selling sometime later in the week.  My plan is to close my long SPXU positions into that panic. 

Current Long-Term Portfolio (2018)
Past Long-Term Portfolios (2008-2017)

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.