Sunday, February 23, 2020

As Market Worries Indices Suffer

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: 
 short 

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

Market hates nothing more than uncertainties.  Besides the uncertainties associated with the coronavirus and how it's affecting the global economy, now with Sander's big win in Nevada, Market must worry about Sanders winning the presidential election in November.  There is an excellent chance (> 80% in my estimation) that Bernie becomes POTUS #46 in a historic landslide this November.  That is quite bearish.

The sell-off that started last week very likely accelerates on Monday.  Internal data on Monday will be telling as far as how serious and deep of a correction is coming our way.

SGS declined last week and didn't confirm major indices new all-time highs on Wednesday.  SGS value is still hovering around overbought levels and the recent divergence by SGS as indices pushed higher is bearish.


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

My Plan

sgs-st turned from neutral to short  on Friday and I opened one position long (33.3% of total capital) in SPXU.


Current Long-Term Portfolio

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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, February 17, 2020

Measuring Fear And Complacency

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: 
 neutral 

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

Similar to VIX, SGS market timer is a good yard stick to gauge how fearful or compliant market participants are, and when plotted over time,  SGS  shows how their fear or complacency is changing.  The value of SGS and its trend is also a good predictor of the future direction of major indices.

SGS advanced last week and confirmed major indices rallying higher.  

Reviewing values of SGS since 1980, I found its record low and when that record low occurred highly significant.  SGS put in its lowest value (-1965) on October 10, 2008 which was one of the most fearful days, if not the most fearful day, in financial markets since 1929. Interestingly, the second lowest value of SGS (-1741) happened on December 26, 2018.  I believe had not been for the intervention of the Fed on that day (which was later acknowledged in the unrepresented news conference given by Powell and his immediate predecessor Yellen, and Bernanke on January 4, 2019) financial markets worldwide would have crashed and SGS would have put in a new all-time record low.  On January 4, 2019, the Fed unequally said that the Fed had subscribed to the Modern Monitory Theory and "the Fed put" for the US financial markets was in and would remain in for the foreseeable future.  So long as that policy remains the law of the financial land, indices have no place to go but higher.

From 2015 to 2017, I dived deeply in the Elliot Wave (EW) analysis in search of a leading market timer.  I paid the price for relying on EW, getting ahead of the market, and going too deep into the weeds with Elliot Wave for my trading.  
I realized later that EW is useless and could to lead to substantial losses when used for trading.  EW, however, is insightful when it is viewed from "30,000 feet", i.e on monthly and weekly charts.


Many EW true believers are now looking for a 40% to 60% correction.  They are looking for  what they call "Cycle 2 of Super Cycle 3".  I believe, as shown on the SPX monthly chart above, the Cycle 2 correction they're waiting for, occurred in late 2018 when SPX corrected 23% and SGS put in its second lowest value of the last 40 years.  That correction would had been much deeper had not been for the Fed intervention.


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

sgs-st is stilll neutral and
I'm in cash and waiting for the next sgs-st signal.


Current Long-Term Portfolio

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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, February 9, 2020

Answers to Frequently Asked Questions (2020 Update)

What is Balance Trading Blog?

Balance Trading Blog is my trading notebook. It's a place for me to record my thoughts, ideas, and long-term (weeks to months) trades.  I'm sharing it with anyone who cares to read it.  Please kindly note that my notes, thoughts, and ideas are not trading recommendations or investment advice. They are simply notes, thoughts, and observations of an x-aerospace engineer who changed his career in 1997 and became a full-time trader who trades for a living.

What is SGS?

SGS is a proprietary mathematical long-term (weeks to months) trend following market timer.  SGS is not a price-based timer.  It is  a smoothed and normalized aggregate of the number of new highs minus the number of new lows of a pool of around 4000 liquid stocks and ETF's (traded on NYSE and NASDAQ) for five discrete time periods (daily, weekly, monthly, quarterly, and yearly). 

Everyday shortly after close, a new value for SGS is calculated.  In order to reduce whipsaws, only the value of SGS calculated on a Friday is used to determine the status of SGS.  If the Friday value of SGS is greater than +50, then the status of SGS is LONG. If less -50, then the status of SGS is SHORT.  For any SGS value between +50 and -50, the status of SGS is NEUTRAL.

What is sgs-st (short-term)?

sgs-st is a proprietary mathematical short-term (hours to days) trend following market timer.  Similar to SGS, sgs-st status can be long, short, or neutral.  Additionally, sgs-st could change its status from long to neutral if an overbought condition is triggered or change its status from short to neutral if an oversold condition is triggered.

The status of sgs-st is determined by (1) the size of the total area between between 13 and 39 hourly EMA's of SPX measured in price-time; and (2) by the growth rate of that area measured in price-time per hour.  The value of sgs-st is calculated every trading hour during the regular session (9:30 AM to 4:00 PM). The status of sgs-st is determined by its hourly calculated value.

How SGS and sgs-st are used for trading?

Since October 22, 2019, I've been tradeing SPXL and SPXU using the status of SGS and sgs-st as summarized in the table below:



Sunday April 26, 2020


Changes to sgs-st:


I'm changing sgs-st to follow ES (S&P Mini Futures) instead of SPX cash.  ES has substantially less gaps than SPX cash and the problem pegging is resolved that way.




Sunday, February 2, 2020

Selling Is Very Likely Done

SGS  Market Timer Status:  LONG 
LONG as of the close of Friday Oct 25, 2019
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

The two week sell-off due to the Trump's impeachment trial and the coronaviurs very likely came to an end last Friday as major indices successfully tested strong supports.  The rally that started late Friday afternoon very likely continues as major indices advance to challenge their all-time highs sometime later this week or next.

SGS declined last week and finished below 400 "Overbought" level.


Support and resistance levels for SPX for this week are shown above.  Last week SPX successfully tested its W-DTL.

My Plan

Last Monday morning sgs-st turned from neutral to short.  I opened one SPXU long position (33.3% of total capital).  On Friday sgs-st almost triggered an oversold condition which would have turned its status from short to neutral.  I expect that to happen at 10 AM on Monday.

Current Long-Term Portfolio
Past Long-Term Portfolios

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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.