Sunday, March 15, 2020

The Fed Will Come In Again & Again

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


The 2008 "Sub-Prime Crash" of equities is probably the closest parallel to what is happening now. Based on the level fear measured by SGS now and back in 2008, my guess is that March 2020 is October 2008. That means the sell-off likely continues for at least another 6 months. Last week, SPX tested its PUL-2 and then rallied on the back of the Fed $1.5 trillion intervention in the REPO and other treasury bonds related markets. The Fed will continue its intervention at an unprecedented level to shore up equities but monetary stimulus alone would not stop the decline. What's needed is a massive fiscal stimulus and that would not happen until sometime in 2021, very likely under a new administration and congress. At this point the likelihood of SPX testing its PUL-1 around 2500 is high. If PUL-1 is broken, then SPX would decline to find support around 2000 to 1800 by early 2021. Hopefully at that point, our equity markets start to recover on the back of "Infrastructure" spending.
SGS declined more last week and confirmed major indices selling off.  Last week on Thursday, SGS put in its 2nd lowest value since 1990.  That confirms that indices are at extreme over-sold levels and a sizable bounce in the next couple of days is very likely.
Support and resistance levels for SPX for this week are shown above.


My Plan

sgs-st is stilll neutral (over-sold triggered) but indices are extremely over-sold and a sizable bounce on Monday and Tuesday is very likely.  I opened two SPY positions last Thursday and Friday.  My plan is to close those positions into the expected bounce.


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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.
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Saturday, March 7, 2020

The Addict Wants His Fix Or Else

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


As shown on the above busy chart, SPX is now trading below its M-DTL (Monthly Dynamic Trend Line, aka Monthly 13 EMA).

Since 1990, there have been eight instances, including the current one, that SPX has broken through its M-DTL and started to trade below it (shown by blue arrows on the chart above). In six out of those eight, the Fed intervened with a massive monetary stimulus package, stopped the decline, and shored up indices. In the remaining two instances (Oct 2000 and Jan 2008), however, there was no fiscal or monetary intervention. In 2000, SPX continued its decline for another 42% and bottomed in October 2002 when Iraq War fiscal spending started. In 2008, SPX continued its decline for another 52% and bottomed in March 2009 when the Fed started to massively buy mortgage backed securities via QE in order to stimulate the housing market.

Once again, SPX is trading below its M-DTL and the addict is demanding his fix or he would burn the house down as he did in 2000 and 2008. What is needed now is a fiscal stimulus package but in the current political environment it would not pass in the Senate. So the Fed has to step in and do something to pump more money into the market. I'm watching the 20% marker on the sell-off scale. Once SPX correction gets close to 20% (around 2750, 19% drop for the all-time high), the Fed very likely would rush in.

If the Fed does not act or whatever they do is not what the market is demanding, selling would continue until the Congress passes a massive fiscal spending sometime in 2021.
SGS declined more last week and confirmed major indices selling off.
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.


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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.
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Sunday, March 1, 2020

Selling Is Done, A Sizable Bounce Is Likely

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


In the last 20 years, there have been only 6 instances, including last week, that SPX had dropped more than 10% in a given week (low of the week compared to the close of the previous week). Also, on the average, SPX had rallied 7.6% (close of the week compared to the high of the following week) in the week immediately following the sell-off. There is a good chance that SPX rallies around 7% to 8% from its Friday's close. A 7.5% rally for SPX, gives 3175 as a target for this week's probable high which is also near the 61.8% Fibonacci retracement level of the sell-off from 3393 to 2855.
SGS declined substantially last week and confirmed major indices selling off.  On Friday, the value of SGS dropped to -359 and SGS changed its status from LONG to SHORT.  Longer-term, that is bearish.
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.

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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.
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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.

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Sunday, February 9, 2020

Answers to Frequently Asked Questions (2025 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.

I retired in December 2024.  

What is SGS?

SGS is a proprietary mathematical market timer designed for long-term trend following over weeks to months. Unlike price-based timers, SGS operates as a smoothed and normalized measure, aggregating the difference between new highs and new lows across approximately 4,000 liquid stocks and ETFs traded on the NYSE and NASDAQ. This calculation is performed for five distinct timeframes: daily, weekly, monthly, quarterly, and yearly.

A new SGS value is calculated daily shortly after market close. However, to minimize the impact of market noise and reduce whipsaws, only the SGS value calculated on Fridays is used to determine its status.

The SGS status is defined as follows:

  • LONG: If the Friday SGS value is greater than 0.
  • SHORT: If the Friday SGS value is less than -200.
  • NEUTRAL: If the Friday SGS value falls between 0 and -200.

What is SGS-ST (short-term)?

SGS-ST is a proprietary mathematical market timer designed for short-term trend following, operating over timeframes ranging from hours to days. Like SGS, the SGS-ST status can be long, short, or neutral. However, SGS-ST includes additional flexibility, allowing it to shift from long to neutral in the event of an overbought condition or from short to neutral in the event of an oversold condition.

The status of SGS-ST is determined using two key factors:

  1. Total Area: The cumulative area, measured in price-time, between the 13-hour EMA (Exponential Moving Average) and the 20-hour SMA (Simple Moving Average) of the S&P 500 (SPX).
  2. Growth Rate: The rate of change in this area, expressed in price-time per hour.

SGS-ST values are calculated hourly during regular trading hours (9:30 AM to 4:00 PM ET). Its status is updated based on the most recent hourly calculation.
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Location: Seattle, WA, USA Seattle, WA, USA

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.
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Sunday, January 26, 2020

The 2020 Triage Dance Continues

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


Last October I posted "The 2020 Triangle Dance".  It's time to review where things stand now in this 3-way political dance:
  • DNC - DNC is still trying hard to make sure Biden is their nominee for the 2020 election but hopes will be dashed in upcoming primaries as the Democratic base resoundingly will vote for Sanders.  DNC will not make the same mistake they made in 2016 and, barring an unforeseen health related event, Sanders will be Democratic nominee.

    As for the 2020 presidential election, as predicted, Democrats impeached Trump but still do not want him removed because they consider Trump as the weakest Republican nominee they could possibly face in November.  Also, with Trump at the top of the Republican ticket, Democrats not only have an excellent chance of winning the White House but also have a good chance of flipping the Senate.  To that end, Democrats will try to prolong Trump's impeachment trial in the Senate by forcing Republican senators to vote on introducing new documents, introducing new witnesses, and a host of other resolutions and amendments.  If Democrats manage to find four Republican senators to vote with them for the introduction of new documents and witnesses, the impeachment trial would be extended for days or possibly weeks.  Also, with the introduction of new witnesses and documents, chances of Trump's removal significantly increases to at least 50%.

  • RNC - With Trump as the head of RNC, the situation for Republicans has turned from bad to worse.  Their plan is to quickly sweep the entire impeachment under the rug and hope that people would forget about the whole thing by the election in November.  That won't happen because between now and November new Trump's impeachment related damning stories, books, documents, and leaks will surface every week if not every day.

  • Trump - No change. Knowing the erratic and chaotic nature of Trump, it's hard to predict what he would do between now and the election.  Assuming Trump survives the his pending removal by the Senate, there is a good chance that he would resign if he sees that he is going to lose his second term election in a landslide.  If he chooses to resign, Trump being Trump, he would do it in a way that it would inflict maximum pain and damage to the Republican party and their replacement nominee.  That is not going unnoticed by Republicans.

SGS advanced early last week but declined with the sell-off on Friday.

Support and resistance levels for SPX for this week are shown above.  If the Senate votes to allow new documents and witnesses, then the sell-off that started on Friday would continue and SPX could possibly tests its 50 D-SMA around 3200 sometime this week or next week.  If the Senate rejects new documents, witnesses, and quickly finds Trump not guilty, then a relief rally would push indices to new all-time highs and beyond.


My Plan

Last Wednesday sgs-st turned from long to neutral.  I closed my SPXL position. I'm in cash and waiting to see which way sgs-st turns. 

So far sgs-st  has performed well and my plan is to use sgs-st along with SGS to trade my long-term money.

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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.
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