Correction Probably Will Not Exceed 20%

SGS  Market Timer Status:  NEUTRAL 
NEUTRAL as of the close of Friday Aug 23, 2019 - corrected
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

Since the 2008 "Sub-Prime Crash", as shown on the chart above, four times central banks did not let any SPX correction become greater than 15%-20%. I don't know exactly why the past four  central bank interventions happened at those correction levels.  My guess is that in the US, as a correction gets near the 15% to 20% threshold, the Fed starts to worry about a sudden popping of the US corporate debt bubble and a massive liquidation of equities by large funds and investors.  For that reason, I expect the Fed to intervene again once the current correction reaches around 15% to 20%.  Of course, there is always the probability that the Fed fails to shore up equity markets and the sell-off continues well beyond 20%.  

SGS advanced last week confirming the sell-off.  SGS changed status to NEURAL.

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

My Plan

I'm long (2/3) in SDS. I'm waiting to see if we breach recent lows before opening my 3rd and final long position in SDS.  Tomorrow (Monday) is very likely going to be ugly and it could become extremely ugly if China significantly devalues renminbi (aka yuan) tonight.

Current Long-Term Portfolio (2019)
Past Long-Term Portfolios (2018-2008)

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Contact: 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.

Another Game Of Chicken?

SGS  Market Timer Status:  SHORT 
SHORT as of the close of Friday Aug 16, 2019
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

Since March of 2009, equity markets worldwide have been playing a game of chicken with central banks.  In the US for example, as shown on SPX monthly chart above, every time SPX had corrected more than 15% from its peak, the Fed intervened to shore up US equity markets by announcing a bigger and better round of QE. Last December, when SPX dropped 20%, the Fed announced that they would end their QT. The Fed ended their QT in early August. 

It seems that the Fed will not let SPX drop more than 20%. I'm not exactly sure why but my guess is that the Fed is worried about a sudden popping of the corporate debt bubble which is at its all time highs according to the chart above.  

A sizable correction in the stock of a company with a large outstanding debt will eventually push the company into bankruptcy.  It is a vicious cycle, as the stock of a company with a sizable outstanding debt sells-off, the chance of its bankruptcy increases which pushes its stock even lower, e. g. GE.

There is a good chance that the sell-off that started on August 1 continues.  Once the correction reaches around 15%, the Fed very likely cuts rates by 50 basis points.  I doubt if rate cuts would stop the selling.  If it continues to around the 25% correction level, the Fed very likely would announce a sizable QE plan.

SGS declined last week confirming the sell-off.  On Friday SGS changed its status from NEUTRAL to SHORT.

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

My Plan

Anticipating SGS going SHORT, I opened my first two of three long positions in SDS last week.  My plan is to open my final position in SDS once the recent lows in indices are breached.

Current Long-Term Portfolio (2019)
Past Long-Term Portfolios (2018-2008)

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Contact: 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.

The Trade War With China Has Its Consequences

SGS  Market Timer Status:  NEUTRAL 
NEUTRAL as of the close of Friday Aug 9, 2019
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

Trump has been told that a recession is coming in 2020 and he would lose the presidential election unless "the 2020 recession" is averted.  He is also been told that the only way to avert the 2020 recession is for the Fed to start cutting rates "aggressively now".

The Fed has stated several times that the Fed was closely monitoring the trade dispute with China and its effects on the US economy.  Trump was disappointed on July 31 when the Fed cut rates by only 25 basis points and not 50 as he was demanding.  Someone probably told Trump that if he wanted his rate cuts, he'd better escalate the trade war with China.  So in the middle of trading day on August 1, the day after FOMC announcement, Trump tweeted that he was planning to impose a 10% tariff on all remaining Chinese goods starting on September 1.  That started the on-going sell-off since August 1.

Unfortunately, Trump does not understand that a trade war is always a lose-lose and dicey proposition.  For example, the Chinese government could start importing Iranian oil again which would probably cause a 10% to 20% correction in the price of crude oil.  That alone would send SPX down by at least by 5%.  Chinese could also let Renminbi depreciate significantly against the US dollar, causing a global currency war, which would push stock markets worldwide down between 20% to 30% in a very short time, perhaps a couple  of weeks to a month.  If that happens, the very recession that Trump is trying to avoid, would surely be upon us.

SGS declined last week confirming the sell-off.  On Friday SGS changed its status from LONG to NEUTRAL.

Support and resistance levels for SPX for this week are shown above.  Should the trade war escalates this coming week, I expect SPX to test its early June low around 2730.

My Plan

I was planning to open long positions last week but on Sunday (8/4) late at night Chinese warned that they might let Renminbi depreciate significantly against the Dollar.  That was the first shot in a possible global currency war.  That's a game changer in my opinion. 

I'm in cash and watching SGS.   Should SGS decline below -50, my plan is to open my first of two long positions in SDS.

Current Long-Term Portfolio (2019)
Past Long-Term Portfolios (2018-2008)

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Contact: 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.

Selling Is Very Likely Done

SGS  Market Timer Status:  LONG 
LONG as of the close of Friday Jun 14, 2019
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

There is a good chance that selling that started last week has run its course. This is based on several facts including breadth, internal data, and lack of panic selling in individual stocks. 

SGS declined last week confirming the sell-off but didn't declined significantly which would have signaled continuation of selling.

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

My Plan

I'm planning to open first of two long positions in IWM (25% of total capital), in TWTR, APG, SE, TQQQ, and MSFT (5% each for a total of 25% of total capital) sometime early this week.

Current Long-Term Portfolio (2019)
Past Long-Term Portfolios (2018-2008)

twitter
Contact: 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.