Sunday, August 25, 2019

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.

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.