Short-term, Indices Are Oversold

SGS  Market Timer Status:  SHORT 
SHORT as of the close of Friday Oct 5, 2018
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

Major indices declined last week but market breadth and internals improved significantly. There is a good chance that indices are oversold in the short-term and we could see a counter-trend rally on the back of short covering early this week.

As shown above, the "bottom head & shoulders" price pattern on SPX daily chart is still in play.  There is still a good chance that SPX rallies early this week to test the Neck Line around 2810 to 2820. 

SGS declined early last week but advanced on Wednesday and Friday.  SGS is still in SHORT territory, signalling that, in the long-term (weeks to months), there is still a high chance (> 70%) that major indices continue trading lower.

Support and resistance levels for SPX for the upcoming week are shown above. 

My Plan

No change since last week, I'm still in cash and going to watch internal data as SPX trades around 2700 early this week.  I'm specifically looking at the number of new lows for yearly, quarterly, and monthly time frames.  If the sell-off is done and indices are to move higher to challenge their all-time highs, then the number of new lows should drop significantly in those time frames.  Otherwise, what's going on is nothing but a bear market counter-trend rally to trap bulls.

Current Long-Term Portfolio (2018)
Past Long-Term Portfolios (2017-2008)

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Contact: 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.

Fed's Next Move

SGS  Market Timer Status:  SHORT 
SHORT as of the close of Friday Oct 5, 2018
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

The U.S. Major indices, at their recent lows late last month, had corrected on average about 15% from their all-time highs in September.  However, in the last two weeks, major indices have recovered between 1/3 to 1/2 of their losses, and at least for now, they have avoided entering into a bear market when major indices drop 20% or more from their 52 week highs. 

The question before the Fed is whether  or not the recent sell-off in the US equity markets is signalling that the U.S. economy is going to follow most of world's economies and slow down significantly.  The correct or incorrect answer to that question will dictate the Fed's next move for interest rates.  If the Fed decides that the U.S. GPD is continuing to grow at a moderate to a high rate (3% to 4%), then the Fed very likely would stay with their current plan to increase  rates next month and in 2019.  Multiple rate hikes would push major indices considerably lower.

As shown above, SPX seems to be forming a "bottom head & shoulders" price pattern on its daily chart.  At this point there is a high chance that SPX rallies early this week to test the Neck Line around 2810 to 2820.  It's difficult to predict what would happen around the Neck Line.  The picture becomes clear once SPX reaches the Neck Line and trades around it.

SGS declined early last week but advanced on Thursday and Friday.  SGS is still in SHORT territory, signalling that, in the long-term (weeks to months), there is still a high chance (> 70%) that major indices continue trading lower.

Support and resistance levels for SPX for the upcoming week are shown above. 

My Plan

I was expecting a panic selling event last week but it didn't happen. On Wednesday and Friday, I closed my long SPXU positions.  I'm in cash and going to watch internal data as SPX trades around 2815-2820 early this week.  I'm specifically looking at the number of new lows for yearly, quarterly, and monthly time frames.  If the sell-off is done and indices are to move higher to challenge their all-time highs, then the number of new lows should drop significantly in those time frames.  Otherwise, what's going on is nothing but a bear market counter-trend rally to trap bulls.

Current Long-Term Portfolio (2018)
Past Long-Term Portfolios (2017-2008)

twitter
Contact: 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.

Tick Tock ... Tick Tock ...

SGS  Market Timer Status:  SHORT 
SHORT as of the close of Friday Oct 5, 2018
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

Last week, I outlined three scenarios for the mid-term election outcome and the most likely scenario (Scenario A Bad: Reps lose the House, keep the Senate but lose most of state gubernatorial and local races) occurred.  Initially indices rallied on the back of incorrect assessment that the election was a big victory for Republicans but later in the week after the dust settled, it became clear that the big winner was the Democratic Party.

I believe the recent sell-off is a warning of an event that could send indices much lower. I don't know what that event might be but my best guess is that it would be a political event and very likely related to Trump.

SGS advanced last week but it is still in SHORT territory, signalling that there is a good chance that the sell-off that started last Thursday continues.

Supports and resistances for SPX for the upcoming week are shown above. Last Friday,  SPX 200 D-SMA was tested and it held.  There is a good chance that the 200 D-SMA (2763) is breached and SPX trades and closes below it. Should that happen sometime early this week, SPX very likely sells-off to test its recent low (2603) later in the week.

My Plan

No change since last week.  I'm still expecting a panic selling event in very near future.  My plan is to close my long SPXU positions into that panic. 

Current Long-Term Portfolio (2018)
Past Long-Term Portfolios (2008-2017)

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#balancetrading
Contact: info@balancetrading.org

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.

Tick Tock ...

SGS  Market Timer Status:  SHORT 
SHORT as of the close of Friday Oct 5, 2018
SGS is a Long-Term (weeks to months) Timer
Why Market Timing Is A Must

I have been trading full-time for over 20 years. Over the course of those years, I have noticed that the stock market starts to sell-off at least a few weeks before a major event that causes a significant (greater than 15%) price correction.  Below are some examples:

• Jun 2015 Rise of ISIS & Terror in Europe/US - Indices started to sell-off in May 2015
• 2008 Financial Meltdown - Indices started to sell-off in Nov 2007
• Mar 2003 Iraq War - Indices started to sell-off in Oct 2002
• 911 in 2001 - Indices started to sell-off in Aug 2001
• 2000 Presidential Election Crisis - Indices started to sell-off massively in Sep 2000
• Oct 1998 Long-Term Capital Debacle - Indies started to sell-off in Aug 1998

The recent sell-off just before the mid-term election is troubling. It is very likely predicting one of three scenarios listed below:

• Scenario A (Bad): Reps lose the House, keep the Senate but lose most of state gubernatorial and local races.
• Scenario B (Worse): Reps lose the House, the Senate, most of state gubernatorial, and local races.
• Scenario C (Ugly): Chaos engulfs all close House, Senate,  and gubernatorial races.  Long lines due to equipment and computer breakdowns on the election day, prevent thousands from voting.  All close election results are contested by both parties.  Numerous federal law-suits are filled by both sides, contesting results and demanding recount.

SGS advanced last week but it is still deeply in SHORT territory, signalling that selling will resume and any counter trend rally would be short-lived.

Supports and resistances for SPX for the upcoming week are shown above. At the high of the day on Friday (2756), SPX had retraced back about 45% of its decline from it all-time high (2940) to its recent low last week (2603).  Retracements after a big sell-off are typically around 40% to 60%, so there is a good chance that the counter trend rally is done.  SPX very likely starts to sell-off again on Monday to test supports around SPX 2600, 2559, and possibly mid 2400's sometime this week. 

My Plan

Per my plan, I opened new long SPXU positions on Monday and Tuesday last week.  Looking back, I was a little too early and shorting via SPXU was not a good move.  SH and SDS are better choices to short SPY.  I expect a panic selling sometime later in the week.  My plan is to close my long SPXU positions into that panic. 

Current Long-Term Portfolio (2018)
Past Long-Term Portfolios (2008-2017)

twitter
#balancetrading
Contact: info@balancetrading.org

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.