Sunday, May 31, 2020

When Technical Analysis Fails

SGS  Market Timer Status:  LONG 
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

Major indices are only a few percent away from their all-time highs while all macro economic data are at historic near depression lows. I have no idea how long this divergence is going to continue but under these conditions technical analysis fails to predict the future direction of indices.

My Plan

I am going to take the summer off from trading and resume blogging after labor day. If something major happens between now and then, I would post my thoughts and plans.

I'm in cash in my long-term accounts and planning to stay on the side line.  Have a great summer :).

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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.

Monday, May 25, 2020

Critical Week Is Ahead

SGS  Market Timer Status:  LONG 
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

sgs-st Market Timer Status: 
 long 

sgs-st is a Short-Term (hours to days) Timer


SPX is advancing to back-test its 200 D-SMA. A weekly close above 3000 would be bullish. Also a monthly close below its M-DTL (13 M-EMA) around 2930 would be extremely bearish.

SGS continued its advance last week and on Friday changed its status from NEUTRAL to LONG.


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


My Plan


I'm in cash and planning to stay on the side line this week.


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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.

Sunday, May 10, 2020

Selling Likely Resumes

SGS  Market Timer Status:  NEUTRAL 
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

sgs-st Market Timer Status: 
 long 

sgs-st is a Short-Term (hours to days) Timer


Last week in my post, I showed that SPX is in a back-testing stage of its Monthly Dynamic Trend Line (M-DTL, Monthly 13 EMA). Last Friday, SPX closed right on its M-DTL. If indices are to sell-off again to test their March lows, then that selling should start this week.

SGS continued its advance last week and its value on Friday calculated to by +21.  The status of SGS remains NEUTRAL.


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


My Plan
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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.

Sunday, May 3, 2020

The Second And Final Leg

SGS  Market Timer Status:  NEUTRAL 
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

sgs-st Market Timer Status: 
 short 

sgs-st is a Short-Term (hours to days) Timer


As shown on the SPX monthly chart above, both "Sub-Prime" and "Dot-Com" crashes had two two distinct down-legs. During the first down-leg (large red arrows on the chart), SPX crashed through its M-DTL and closed below it in a swift move from its all-time high at the time. Then SPX rallied, in a powerful counter-rend move, back-tested its M-DTL and closed below it to finish the first down-leg of the correction. The second down-leg of the correction for both "Sub-Prime" and "Doc-Com" started after SPX failed to close above its M-DTL (blue arrows on the chart) and continued for months until the correction was completed.

For the current on-going correction, there is a good chance that SPX finished its first down-leg and started on its second down-leg last Thursday when it failed to close above its M-DTL. Assuming SPX follows the same pattern as the two previous major corrections, SPX very likely bottoms somewhere between 1800 to 1700 sometime in early to mid 2021. I think at that point, maybe an effective vaccine along with a massive fiscal stimulus to rebuilt the infrastructure, will start a new bull leg in equity markets under a new administration.

There is of course another possibility that SPX continues its counter-trend rally on the back of unlimited monetary stimulus by the Fed.  Where SPX and equity markets end up in that case is beyond my understanding and past experience.

SGS continued its advance last week and on Friday closed above -50.  SGS changed its status from SHORT to NEUTRAL.


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


My Plan

sgs-st went short last Thursday and I moved 100% into SPXU.  Now with SGS turning NEUTRAL on Friday, my plan is to close 1/3 of my SPXU position on Monday.  See table below:







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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.

Sunday, April 26, 2020

Don't Know Where Indices Are Heading

SGS  Market Timer Status:  SHORT 
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

sgs-st Market Timer Status: 
 Neutral 

making changes to sgs-st
sgs-st is a Short-Term (hours to days) Timer

I don't know where indices are heading.

SGS continued to advance higher everyday last week, signaling that a bottom was reached on March 23 for major US indices. 

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


My Plan

On Friday I closed my SDS positions. I don't where indices are heading. I'm going to remain on the sideline for now.


twitter
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.

Sunday, April 19, 2020

Counter-Trend Rally Is Very Likely Complete

SGS  Market Timer Status:  SHORT 
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

sgs-st Market Timer Status: 
 neutral 

Pegging issue still not fully resolved.
sgs-st is a Short-Term (hours to days) Timer

Since 2000, excluding the current bear market, there were four bear markets during which SPX corrected at least 20%. In everyone of those four corrections, the first down-leg corrected about 15% in seven weeks. Following the first down-leg, the first counter-trend rally retraced the first down-leg by 60% over the course of four weeks. After the initial down-leg and its counter-trend rally were completed, the correction resumed at a much lower pace; and on average, SPX corrected another 22% during the following nine months.

For the current correction, the first down-leg corrected a whopping 35% in seven weeks. So far the counter-trend rally from the recent low (2191 on March 23) has retraced the first down-leg by 60% in the last four weeks. Assuming the current correction continues to follow the same pattern as the last four bear market corrections, it is very likely that the first counter-trend rally of the current correction was completed last Friday. Selling very likely resumes soon, at a much lower pace, for possibly another 22% over the course of next nine months.

SGS continued to advance higher everyday last week, signaling that a bottom was reached on March 23 for major US indices. 


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


My Plan

Per my plan I added to my SDS position on Thursday and Friday last week.  


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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.

Sunday, April 12, 2020

When Pigs Fly

SGS  Market Timer Status:  SHORT 
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

sgs-st Market Timer Status: 
 neutral 

sgs-st is a Short-Term (hours to days) Timer

Since late February, the Federal Reserve has been using all available monetary tools, along with a couple of newly created ones, to soften the financial blow of a total and sudden shutdown of the economy. In a way, the Fed has been busy putting as much foam as possible on the runway to cushion the crash landing of the economy.

At the end of the day, despite what the Fed has done and continues to do, the economy is still crashing, unemployment skyrocketing, and companies going under. So, under these conditions, would indices rally, in a V-shape, to new all-time highs? Yes, but only when pigs fly.

SGS continued to advance higher everyday last week, signaling that a temporary bottom was reached on March 23 for major US indices.  If SGS levels off in the next few trading days, there would be a good chance that indices go sideways for an extended period, possibly a few weeks to a couple of months.


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


My Plan

I closed my positions in SDS & RWM last Tuesday.  Then on Thursday I opened my first of three positions in SDS.  My plan is to add to my short positions sometime this week.


twitter
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.

Sunday, April 5, 2020

In A Recession, Indices Suffer

SGS  Market Timer Status:  SHORT 
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

sgs-st Market Timer Status: 
 neutral 

sgs-st is a Short-Term (hours to days) Timer


Trading is about understanding and correctly assessing probabilities that exist between zero and one hundred percent certainties. There are not many certainties in trading, or in life for that matter, but one of those certainties is that in a recession, indices suffer. Considering the fact that the US economy has never faced a near total shut-down in the last 150 years, it is impossible to correctly predict how severe of a recession we are facing. The best case scenario, in my opinion, is that the economy goes through a typical cyclic recession, lasting about seven quarters. There is a likely chance that the US economy entered into a recession in 2020-Q1, so we could start seeing positive economic data sometime in mid to late 2021. The market is about one or two quarters ahead of the economy; therefore, indices won't bottom until sometime in early to mid 2021.

Under the best case scenario, SPX could correct 50% to 60% from its all-time high to find support around 1800 to 1700 sometime in early to mid 2021. Under the worst case scenario, aka "Financial Armageddon, The Collapse Of US Dollar", SPX could effectively become zero as financial markets are ordered closed indefinitely.

SGS continued to advance higher everyday last week, signaling that a temporary bottom was reached last Monday for major US indices.  If SGS levels off in the next few trading days, there would be a good chance that indices go sideways for an extended period, possibly a few weeks to a couple of months.


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


My Plan

Last week on Thursday, I opened my first of three short positions.  I bought SDS and RWM.  My plan is to add to my short positions sometime this week.


twitter
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.

Sunday, March 29, 2020

Where Do We Go Now

SGS  Market Timer Status:  SHORT 
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

sgs-st Market Timer Status: 
 neutral 

sgs-st is a Short-Term (hours to days) Timer


There are many predictions as far as where the US economy and markets are heading. They range from "the greatest depression ever" to "a V shape recovery in a few months". I think somewhere in the middle is where we go now. By the time that we see a light at the end of the tunnel, major indices would correct around 50% to 60% from their all-time highs. It's going to take time, maybe a year to 18 months, before we see any sign of an economic recovery, and that's very likely when and where indices bottom. Residential real estate probably won't get hurt as bad because of historically low interest rates, but a 20% to 30% correction in residential real estate market is likely in the cards.


SGS continued to advance higher everyday last week, signaling that a temporary bottom was reached last Monday for major US indices.  If SGS levels off in the next few trading days, there would be a good chance that indices go sideways for an extended period, possibly a few weeks to a couple of months.



Support and resistance levels for SPX for this week are shown above.  SPX, from its all-time high (3393) on February 19 to its recent low (2191) on March 23 corrected 35.4% at an insane pace.  Then from the low of last Monday, SPX rallied 20.3% to its high on Thursday, at an even more insane pace.  I have no firm idea where SPX is heading in the short-term. My best guess is that SPX has entered into a choppy and volatile trading range for the next few weeks to a couple of months. 


My Plan

Per my plan outlined last week, I closed my long SPY and QQQ positions last Thursday.  Short-term, I am not sure where indices are heading.  I'm going to stay in cash for now.



twitter
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.