Is Current Bear Market Rally Over?

SGS Market Timer Status:  SHORT 

Short as of close of Dec 11, 2015
SGS is a Long Term (weeks to months) Timer

Current Long Term Portfolio (2016)
Updated for recent trades

Past Long Term Portfolios (2008-2015)

Is Current Bear Market Rally Over?

Very likely yes and selling should resume on Monday.  Here's why:

• Fundamentally (Global Macro View):  Economies worldwide are slowing down to no, or at best anemic, growth.   Central banks have reduced interest rates to zero and sub zero to no avail.   The amount of goods and services being produced is far exceeding the amount being consumed.   The global consumer is either too old or too poor to consume all of that production.  There seems to be no way out of this stagflation / deflation cycle.

• Politically:  Donald Trump is going to be the likely  nominee for the Republican Party.  That brings a great deal of uncertainty to equity and bond markets.  Markets hate uncertainty.  When faced with so much uncertainty, there is only one way they go and that way is down.

• Technically: SPX reached its All Time High (ATH, 2134) on May 20, 2015 and since then SPX has lost 10% as of close of last Friday.  From late August 2015 to early February 2016, there were four bear market rallies and SPX gained an average of 10% during each of those rallies.  Except for the rally from 9/29/2015 low (1871) to 11/3/2015 high (2116) the gain has been lower and lower for each rally.  Furthermore, market internals and breadth deteriorated more during each rally.
  
  A study of the number of new highs (NH) versus the number of new lows (NL), summarized below, supports that the recent rally from 2/11/2016 low (1810) very likely ended at 2/17/2016 high (1930).

Long Term Outlook (Weeks to Months):

As shown on chart above, from 1990 to 2007 SPX traded below its 13 Q-EMA three times,  Every time that happened the US economy entered into a recession 2 to 3 months later and SPX continued its sell off for at least another year.  Those were recessions of 1991-1992, 2000-2002 and 2008-2009.

From 2009 to 2015, SPX traded below its 13 Q-EMA twice, but both times the Fed intervened by starting more QE rounds (QE-2 in Aug 2010 and QE-3 in Nov 2011) which shored up indices and avoided a recession.

The long term picture has not changed.  SPX penetrated its 13 Q-EMA and traded below it on Feb 12 by 3%.  Chances are high now that the US economy enters or has already entered into a recession.  Unless the Fed intervenes again and starts another round of QE, indices continue to suffer.

Short Term Outlook (Days to  to Weeks):

SGS_ST  Market Timer Status:  SHORT 

Short as of  1:00 PM on Feb 18, 2016

SGS_ST is a Short Term (hours to days) Timer

Shorter term, chances are good that SPX continues to sell off.  Once SPX starts trading below its AUL, then the likelihood of further sell off to retest of recent lows becomes high.

MY Plan:

Depending what price action is seen around 1830, I might cover all short positions or keep them open.  Should SPX sell off, take out 1810 and close below it, I would do my third and final short sell in SPY and QQQ.

Last Friday I also opened my first of 10 positions (equal $) in UWTI.

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SPX: S&P 500 Index    D-SMA: Daily - Simple Moving Average
DJI: Dow Jones Industrial Index    D-EMA: Daily - Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ADL: Active Downtrend Line
OEX: S&P 100 Index    AUL: Active Uptrend Line
NDX: Nasdaq 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line  

Disclaimer: The views expressed are provided for information purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Introducing SGS_ST Market Timer for Short Term Trading (Hours to Days)

SGS Market Timer Status:  SHORT 
Short as of close of 12/11/2015

SGS_ST Market Timer Status:  SHORT 
Short as of  2/18/2016, 1:00 PM

Current Long Term Portfolio (2016)
Updated for recent trades

Past Long Term Portfolios (2008-2015)

Starting this coming Monday (2/22/2016), I am posting daily updates on my blog.   Each morning, before market opens, I am posting the status of my short term market timer (SGS_ST) and daily support and resistance levels for SPX.

More on SGS_ST tomorrow.

Have a nice weekend.

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SPX: S&P 500 Index    D-SMA: Daily - Simple Moving Average
DJI: Dow Jones Industrial Index    D-EMA: Daily - Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ADL: Active Downtrend Line
OEX: S&P 100 Index    AUL: Active Uptrend Line
NDX: Nasdaq 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line  

Disclaimer: The views expressed are provided for information purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Here You Go Again Big Money and Why Not

SGS Market Timer Status:  SHORT 
Short as of close of 12/11/2015

Current Portfolio (2016)
Updated for recent trades
Past Portfolios (2008-2015)

This weekend Mike Burk, in his weekly update, wrote the following as to what is happening in equity markets:

"In the early years of this century housing was the only game going.  The Fed kept the game going by keeping interest rates too low for too long.  When housing finally collapsed of its own weight it took the financial system with it.  Since the collapse of 2008 - 2009 health care and energy have been the big winners and the Fed has kept that game going by keeping rates too low for too long.  The financial system is again in jeopardy."

It is not surprising to see the financial system in jeopardy because Big Money (BM) is at it again.  BM caused the 2008 financial collapse by committing outright fraud and pocketing a few trillion dollars while millions of people lost their jobs, homes and retirement savings.  Tax payers were eventually forced to bail out the financial system and save it from a total meltdown.

BM was never punished by Obama's DOJ.  There were a few congressional hearings in 2009 and at the end BM's companies (i.e. shareholders) paid a few billion dollars in fines.  No one was prosecuted and no one served time.

This is analogous to punishing a bank robber for a heist by making him pay only a couple of thousand dollars in fines while letting him keep his few hundred million dollar loot. Without any meaningful punishment for his crimes, that bank robber would continue robbing banks.

Similarly in BM's mind, why not do it all over again and walk away with billions.  If he is caught, no big deal, he just pays a few millions in fines, but keeps his loot.  Why not indeed.

Long Term Outlook (Weeks to Months):

SPX sold off and tested recent the low (1812) on Friday.  Whether or not that test was successful and selling was exhausted remain to be seen.  I still expect SPX to reach its H&S Top objective (upper 1500's) sometime in late March to early April.

Short Term Outlook (Days to  to Weeks):

Shorter term, chances are good that SPX rallies on Monday to test upper 1870's which could be a possible neck line for a H&S Bottom price formation.  Selling should resume after that as SPX breaks out of its bear flag, shown on its hourly chart above, to the downside.  I expect SPX to go lower to test support around 1830, possibly forming he right shoulder of that H&S Bottom price formation.

MY Plan:

Per my plan I did my 2nd short sale of 3 in SPY and QQQ on Tuesday.  Depending what price action is seen around 1830, I might cover all short positions or keep them open.  Should SPX sell off, take out 1810 and close below it, I would do my third and final short sell in SPY and QQQ.

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SPX: S&P 500 Index    D-SMA: Daily - Simple Moving Average
DJI: Dow Jones Industrial Index    D-EMA: Daily - Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ADL: Active Downtrend Line
OEX: S&P 100 Index    AUL: Active Uptrend Line
NDX: Nasdaq 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line  

Disclaimer: The views expressed are provided for information purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Selling Very Likely Continues

SGS Market Timer Status:  SHORT 
Short as of close of 12/11/2015

Current Portfolio (2016)
Updated for recent trades
Past Portfolios (2008-2015)

Long Term Outlook (Weeks to Months):

An ominous Head and Shoulders Top (H&S Top) has formed on the weekly chart of SPX, shown above.  The neckline for that H&S Top has been breached now and SPX is very likely on its way to upper 1500 (1574) to reach the objective level for that price formation. To get there, SPX would have to drop an additional 16% from its close (1880.05) on Friday. 

Chances are good that SPX drops to upper 1500's by late March to early April.  At that point, the Fed would very likely intervene by lowering interest rates (0.25%) and going back to ZIRP.  It's doubtful if the Fed can shore up indices and prevent a recession by ZIRP alone.  Eventually, the Fed would be forced to start another round of QE sometime early summer.

It's either starting a new round of QE to prevent a recession or having a narcissist in the White House in January of 2017.  I would choose QE.

Short Term Outlook (Days to  to Weeks):

Shorter term, after a "dead cat" bounce early this coming week, SPX very likely sells off to test its TUL around 1830.

MY Plan:

Per my plan I did my first of 3 shorts in SPY and QQQ on Thursday at the open.  I'm planning to do my second short sell sometime early next week, very likely on Monday.

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SPX: S&P 500 Index    D-SMA: Daily - Simple Moving Average
DJI: Dow Jones Industrial Index    D-EMA: Daily - Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ADL: Active Downtrend Line
OEX: S&P 100 Index    AUL: Active Uptrend Line
NDX: Nasdaq 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line  

Disclaimer: The views expressed are provided for information purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Bear Market Rally Is Over, Selling Very Likely Resumes

SGS Market Timer Status:  SHORT 
Short as of close of 12/11/2015

Current Portfolio (2016)
Past Portfolios (2008-2015)

Long Term Outlook (Weeks to Months):

The recent bear market rally that started on January 20, came to a spectacular end last Friday as SPX rallied about 2.5% on the back of massive short covering caused by BOJ adopting negative interest rate policy and oil market stabilizing.

On its weekly chart, shown above, SPX found resistance at one of its old Primary Downtrend Lines (PDL-1) on Friday.  Chances are excellent that SPX starts to sell off this coming week to test its Tentative Uptrend Line (TUL, pink line) and its recent lows (1812) in the next couple of weeks.

Should support at TUL fail, SPX very likely would sell off more to test its Primary Uptrend Line (PUL-0, thick black) around mid 1700 sometime in mid to late February. My guess is that the Fed would intervene at that point by giving back its December 0.25% rate hike and going back to ZIRP again.

It's doubtful if going back to ZIRP would end the bear market.  Eventually, trying to stop a recession, the Fed would be forced into starting another round of QE later this year (sorry Donald, you will lose in the general election to the devil that BM knows well).

Short Term Outlook (Days to  to Weeks):

Shorter term, SPX very likely starts selling off early this coming week, very likely on Monday.

MY Plan:

I'm still 100% in cash and planning to open first of 3 short positions in SPY sometime on Monday.

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SPX: S&P 500 Index    D-SMA: Daily - Simple Moving Average
DJI: Dow Jones Industrial Index    D-EMA: Daily - Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ADL: Active Downtrend Line
OEX: S&P 100 Index    AUL: Active Uptrend Line
NDX: Nasdaq 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line  

Disclaimer: The views expressed are provided for information purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Rally Very Likely Continues For Days To Weeks

SGS Market Timer Status: SHORT 
Short as of close of 12/11/2015

Current Portfolio (2016)
Past Portfolios (2008-2015)

Long Term Outlook (Weeks to Months):

Twenty five years of trading history of SPX is shown in the quarterly candle stick chart above.  Each candle stick represents a quarter.

In the last 25 years, as marked on the chart, every time SPX had closed below its 13 Quarterly Exponential Moving Average (13 Q-EMA), it continued its sell off for at least four more quarters (a year) unless the Federal Reserve (the Fed) had intervened.

In first quarters of 2001 and 2008, for example, SPX closed below its 13 Q-EMA and continued its sell off for at least another year. In both of those bear markets, SPX corrected over 50%.  The selling did not stop until the recession was ended by a massive infusion of money into the economy.  In 2003, the Iraq War stimulated the economy and brought it back from recession.  In 2009, the Fed directly stimulated the economy by a massive bond buying program (Quantitative Easing, QE) which stopped the financial meltdown and ended the recession.  Going forward since 2009, the Fed announced another round of QE every time SPX closed below its 13 Q-EMA (QE-2 in August of 2010 and QE-3 in October of 2011).

Last Wednesday, SPX penetrated its 13 Q-EMA by over 2% which was deep.  My 20 year trading experience has taught me that a deep penetration (more than 0.5%) of a support or resistance signals a high likelihood of failure of that support or resistance at a near future retest.  Two percent penetration is quite deep which means that chances are excellent that SPX tests its 13 Q-EMA soon and closes below it.

Knowing what the Fed has done since 2009 and assuming that SPX sells off and starts trading below its 13 Q-EMA, the $64,000 question is: would the Fed intervene again?  My best guess is that the Fed would come in and shore up the market once SPX sells off to test its quarterly uptrend line (shown in thick blue) around 1700.  I think chances are good that the Fed would give back its December rate hike (0.25%) and would assure the market that its ZIRP (Zero Interest Rate Policy) would continue for a while, at least for the remainder of 2016.

Short Term Outlook (Days to  to Weeks):

Shorter term, indices are still oversold.  Chances are good that the bear market rally that started on Wednesday continues for days or possibly weeks.

How far SPX retraces back its recent decline is a crap shoot.  My best guess is that SPX could retrace back around 50% to 60% and test the resistance at 2000, especially if the Fed puts out an extremely dovish FOMC statement on Wednesday.

MY Plan:

I'm 100% in cash now and planning to start opening short positions (3 short positions  in SPY) as SPX peaks around 2000.

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SPX: S&P 500 Index    D-SMA: Daily - Simple Moving Average
DJI: Dow Jones Industrial Index    D-EMA: Daily - Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ADL: Active Downtrend Line
OEX: S&P 100 Index    AUL: Active Uptrend Line
NDX: Nasdaq 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line  

Disclaimer: The views expressed are provided for information purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

A Bear Market Rally Is Imminent

SGS Market Timer Status:  SHORT 

SHORT as of close of 12/11/2015
Current Portfolio (2016)
Updated for recent trades
Past Portfolios (2008-2015)

Long Term Outlook (Weeks to Months):

Last week on Thursday SPX penetrated  an important trend line support (line connecting lows of Oct 2014, Aug 2015 and Sep 2015), then rallied intraday and closed above it.  On Friday SPX tested that line again, penetrated it by more than 0.5% and closed below it.   That is awfully bearish and signals more selling ahead.

Also last week, SPX, on its monthly chart, broke through its 23 M-EMA (thick red on monthly chart above) and began trading below it.  Since March of 2009, every time SPX has closed (on monthly basis) below its 23 M-EMA, the Fed intervened either by announcing a new round of QE or continuing with their ZIRP (Zero Interest Rate Policy).  So if SPX closes below its 23 M-EMA this month, which is very likely at this point, it would be how dee doo dee time for the Fed, again :).  More on that next week.

Short Term Outlook (Days to  to Weeks):

Shorter term indices are extremely oversold,  Chances are good that SPX, after possibly testing support at its TUL around 1860 on Tuesday, rallies higher on the back of a bear market short covering / profit taking rally to test 1920-1950 resistance zone sometime later in the coming week.

MY Plan:

Last week on Monday, I covered my short positions in SPY.  I'm 100% in cash now and planning to start opening short positions (3 short position in SPY) as SPX peaks around 1950.

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SPX: S&P 500 Index    D-SMA: Daily - Simple Moving Average
DJI: Dow Jones Industrial Index    D-EMA: Daily - Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ADL: Active Downtrend Line
OEX: S&P 100 Index    AUL: Active Uptrend Line
NDX: Nasdaq 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line  

Disclaimer: The views expressed are provided for information purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Indices Are Oversold

SGS Market Timer Status:  SHORT 

SHORT as of close of 12/11/2015
Current Portfolio (2016)

Past Portfolios (2008-2015)
 

Last Tuesday SPX broke to the down side out of its symmetric triangular formation and continued to sell off for the rest of the week.  On Friday, SPX penetrated and closed below its TUL while its 50 D-SMA touched its 200 D-SMA to put a "death cross" on its daily chart.  SPX chart looks extremely bearish now and it's signaling significant selling ahead in the longer term (weeks to months).

Shorter term (hours to days), however, SPX is oversold,  Chances are good that SPX, after possibly testing support at its AUL around 1890 on Monday, goes higher on the back of a counter trend rally to test resistance at its PDL-1 (1960) and ADL (2000) sometime later in the coming week.

My Plan:
 

Last week I didn't open my third short position on SPY as planned. My plan is to open my third short position once SPX peaks (around 2000) on the back its counter trend rally.  Should SPX sell off early Monday and successfully test its AUL (around 1890), I would cover both of my currently open SPY short positions. 

twitter

facebook (daily updates)

opader@gmail.com

SPX: S&P 500 Index    D-SMA: Daily - Simple Moving Average
DJI: Dow Jones Industrial Index    D-EMA: Daily - Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ADL: Active Downtrend Line
OEX: S&P 100 Index    AUL: Active Uptrend Line
NDX: Nasdaq 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line  

Disclaimer: The views expressed are provided for information purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.

Selling Very Likely Continues

SGS Market Timer Status:  SHORT 

SHORT as of close of 12/11/2015
Current Portfolio (2016)

Updated for recent trades

Past Portfolios (2008-2015)
 

After a false break out to the up side out of its symmetric triangular formation last Tuesday, SPX continued its selling during the final two trading days of 2015.  SPX is now trading well within its symmetric triangular formation.  At this point chances are excellent that SPX tests its AUL (lower boundary of sym. triangular price formation) and 100 D-SMA around 2025 to 2020 on Monday or Tuesday as massive profit taking ("tax selling") hits the market. 

Longer term, I expect SPX to continue its selling to test last August / September lows around 1870 by mid to late January.

My Plan:
 

Per my plan I opened my second short position in SPY last week (Thursday open). My plan is to open my third short position once SPX closes below 2020.

Season's Greetings and Happy New Year

twitter

facebook (daily updates)

opader@gmail.com

SPX: S&P 500 Index    D-SMA: Daily - Simple Moving Average
DJI: Dow Jones Industrial Index    D-EMA: Daily - Exponential Moving Average
DJT: Dow Jones Transportation Index    PDL: Primary Downtrend Line
NAZ: NASDAQ Composite Index    PUL: Primary Uptrend Line
RUT: Russell 2000 Index    ADL: Active Downtrend Line
OEX: S&P 100 Index    AUL: Active Uptrend Line
NDX: Nasdaq 100 Index    DTL: Dynamic Trend Line   
TUL: Tentative Uptrend Line   TDL: Tentative Downtrend Line  

Disclaimer: The views expressed are provided for information purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.