SGS Market Timer Is LONG

SGS Market Timer Status:   LONG 

LONG as of close of 10/23/2015
RTS Current Portfolio (2015)
Updated for recent trades
RTS Past Portfolios (2008-2014)

SGS Market Timer is LONG as of close of Friday 10/23/2015.

Where Are We Heading Longer Term (Weeks)?

SPX has reached a double resistance (PDL-1 and PUL-1) on its monthly chart.  Chances are good that SPX sells off to test its DTL before heading higher.

 
Where Are We Heading Shorter Term (Days)?

SPX punched through 2035-2045 resistance zone and its 200 D-SMA last week on the back of good earnings (GOOGL, MSFT and AMZN), more QE (ECB) and a "surprise" interest rate cut (BOC).  

At this point, indices are overbought and chances are good that they sell off late this coming week to back test important old resistances that now would act as supports.  For SPX, a sell off to back test 200 D-SMA (2060), 100 D-SMA and PDL-1 (2035) is very likely.

My Plan:

Per my plan I covered 1/2 of my short position last week (Friday).  I'm going to covered all remaining short positions as SPX sells off to back test its PDL-1 around 2035.  Should SPX continue to move up, I would cover if SPX closes above 2100.

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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.

ZIRP Pushing Indices To New Highs?

SGS Market Timer Status:   NEUTRAL 

NEUTRAL as of close of 10/8/2015
RTS Current Portfolio (2015)
RTS Past Portfolios (2008-2014)

The Fed. ZIRP has been in effect since early 2008.  It didn't stop the 2008-2009 crash.  What stopped indices from going lower in early March of 2009 was the Fed's announcement of QE (QE-1).  In fact since March of 2009, indices have rallied only and only when the Fed or other central banks (BOJ, ECB) have announced additional QE as shown on the SPX monthly above. 

The current rally that started on September 28 is either a bear market rally that very likely has come to its end, or it is a rally to new highs for indices because Big Money knows something that we don't.  It could be that Big Money knows that the Fed. is preparing for another round of QE should Q3 GDP turns out to be less than 2%.  What is happening now is very similar to what happened in October 2014 when BOJ and EBC announced their own massive QE's.

Bottom line is that ZIPR alone is not enough to sustain the big bull rally since 2009.

Where Are We Heading Longer Term (Weeks)?

The odds of the current rally being a bear market rally is still substantially higher than the current rally being a new rally to new all time highs for indices for the following reasons:

• Macro Economics:  Nearly all signs point to anemic or no growth for developed and emerging economies.  Simply put, production of consuming and industrial goods, energy and basic materials is surpassing their consumption.
  
  
• Fundamentally:  Companies earnings for Q3 and outlook for next year have been disappointing so far.
  
  
• Price Charts: There is a giant bear flag now quite visible in SPY daily chart, shown below.

I believe the rally that started on 9/28 is reaching its end and SPX will start a sell off early next week.  My guess is still that SPX will test its TUL-0 sometime within the next couple of weeks.

 
Where Are We Heading Shorter Term (Days)?

SPX has now reached 2035-2045 resistance zone.  Chances of SPX breaking through this zone is remote.   If the current rally is a bear market rally, we should see SPX sell off with no or very little penetration into this zone.

My Plan:

I have not covered my shorts.  My plan is to cover short should SPX passes through resistance zone of 2035-2045.

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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?

SGS Market Timer Status:   NEUTRAL 

NEUTRAL as of close of 10/8/2015
RTS Current Portfolio (2015)
RTS Past Portfolios (2008-2014)

Is the rally in the past two weeks a bear market rally? No, it is not simply because you need a bear market to begin with in order to have a bear market rally in it. 

There is no bear market in the golden age of global ZIRP and QE.  A bear market is not allowed to exist.  If there is good economic growth (3% to 4%), which is the Fed's goal and the promise for their ZIRP and QE in the US, then there is a raging bull market.  If there is no or negative growth, then there is a market that goes sideways in a wide trading range of  +/- 10%.

Based on the recent economic data, there is no growth or at best there is anemic growth in the US economy.  Therefore, it's reasonable to assume that SPX would very likely remain range bound between 1800 to 2200 for the next 6 to 12 months or as longs as ZIRP continues.  If the economy starts heading into a recession, then the Fed would start another around of QE and indices would probably rally up again.  

That is the Fed's game plan as it became quite evident based on the minutes of FOMC September meeting.  The Fed has no intention of ending ZRIP, not 2015 and probably not anytime in 2016.  "Free Money Party" goes on and on.  Enjoy .
 
Where Are We Heading Longer Term (Weeks)?

SPX is overbought and chances are good that it would sell off over the course of next two weeks to test its new TUL-0 around 1885 as disappointing earnings reports pour in.

Where Are We Heading Shorter Term (Days)?

Last Wednesday SPX tested its 50 D-SMA and on Thursday and Friday closed well above it.  That is bullish and cannot be ignored.   SGS Market Timer also turned from SHORT to NEUTRAL as of close of last Thursday. Chances are good that SPX sells off early this coming week to back test its 50 D-SMA around 1990 and very likely its DTL around 1980.

My Plan:

With SGS going from SHORT to NEUTRAL, my plan is to close my short positions.  I am planning to cover one half of my short positions as SPX sells off to back test its 50 D-SMA and test its DTL.   For the second half, I am going to wait to see if SPX sells further to test its TUL-0 around 1880 to cover the 2nd half.  If SPX rallies higher, however, I'm going to cover the 2nd half should SPX takes out its recent high of 2020.

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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.

SGS Market Timer is NEUTRAL

SGS Market Timer Status:  NEUTRAL 

NEUTRAL as of close of 10/8/2015
RTS Current Portfolio (2015)
RTS Past Portfolios (2008-2014)

SGS Market Timer turned NEUTRAL as of close of today.  Indices are overbought and a sell off should start soon, very likely tomorrow.  My plan is to cover shorts into the sell off unless it continues breaking through the strong support at SPX 1900.

With the Fed. sidelined now, there is a good chance that indices sell off big due to poor earnings and outlook.  I'm still optimistic that a major sell off is eminent that would take SPX down to lower 1700's to test its PUL-0 by the end of this month.  

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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 Will Resume

SGS Market Timer Status:  SHORT 
SHORT as of close of 7/24/2015
RTS Current Portfolio (2015)

Update for recent trades
RTS Past Portfolios (2008-2014)

Last week started well for bears.  SPX continued its sell off at an accelerated rate on Monday, then corrected for the next three days with a typical counter trend weak rally.  By Friday indices were ready to take a big leg down.  Everything got off to a good start for bears, but about an hour into trading something strange happened.  It seemed that a force intervened and started buying index futures and ignited a massive short covering that lasted into the close.  It would not surprise me to learn in a few days that PPT intervened on Friday as they intervened on Monday August 24 when SPX plummeted to 1867 shortly after the open.

The Fed Zero Interest Rate Policy (ZIRP) has created two bubbles over the course of last 6 years.  A big bubble in equities and giant bubble in bonds, especially in junk bonds.  Some estimate the junk bond bubble to be over 1.5 trillion dollars.  Higher interest rates and the probability of them going even higher would cause the bond bubble to burst.  That's why the Fed is reluctant to hike because nobody, including the Fed, really knows what those bubbles popping would do to equities and the economy.   This is similar to 2007 when nobody knew what was about to happen when the bubble in mortgaged back securities popped.  Now we know what happened, it was the crash of 2008 and the worst recession since the great depression.

 
For the next few weeks, it is a win-win to be short in equities.  If GDP for Q3 is 3% or higher, then the Fed has no choice other than raising interest rates which would cause a sell off in bonds and a short term (weeks) sell off in equities.   If Q3 GDP is 2% or lower, which is very likely, then despite the Fed not raising interest rates, the equities would sell off because of a slowing down economy and hence lower earnings for companies.

Where Are We Heading Longer Term (Weeks)?

The rally that started on Tuesday last week is or was very likely a typical bear market rally, sharp in size and short in duration. My guess still is that SPX would find PUL-0 by late October around 1720.

Where Are We Heading Shorter Term (Days)?

Shorter term, it's going to get pretty ugly again, possibly starting on Monday.  Chances are good that SPX breaks through its TUL-1 by mid week and then continues its sell off to break through its TUL-0 to test its August 24 low (1867).

My Plan:

Per my plan I did my third and final short sell last 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.