Whaz-up with da’ markets?

February 13, 201912 Comments

About a week ago, we got a neartermed timing model “sell signal”. This lines up with the “cautious” reading I got from the more macro-viewing Bear-o-meter on February 4th https://www.valuetrend.ca/bear-o-meter-drops-to-cautious-zone/

Below is the chart of my neartermed timing system signalling a sell. This system, which I have posted numerous times on this blog, is pretty short termed in nature. It only gives directional signals for very short termed moves. These moves might only last a few days or a couple of weeks. Thus, I use my neartermed timing model as a refining tool – set within a larger trend analysis, and taking into the risk that the Bear-o-meter implies for general market conditions.

The neartermed timing model looks at concurrent overbought or oversold signals on a daily chart via:

  • A touch of the upper (overbought) Bollinger Band or lower (oversold) Bollinger Band
  • A move above the overbought RSI line (70) or oversold RSI line (30)
  • A Move above and hook (crossing of the lines) of the full stochastics indicator

All three of these parameters must happen simultaneously as either overbought or oversold to warrant a buy (oversold) or sell (oversold) signal. Again, its likely the signal will only tell us the probability of a move in the very near term. So its not a tool to use to make big decisions. It can help us refine our timing within our greater analysis.

Against the backdrop of a neartermed overbought signal (vertical red line on chart indicating overbought on all three indicators simultaneously) over a week ago—I got the Bear-o-meter signal as noted above. So I raised some cash. We’re at 40% cash in the ValueTrend Equity Platform.

What will make me buy back in?

The chart below shows us that the S&P 500 is attempting to blow through its 200 day SMA. Its been above that SMA for one day so far. The market might prove to be breaking out  if it stays above this line (2750) for a couple more days. Even more important would be a break above 2800—which is a pretty strong point of resistance. You can see how that price point (2800) failed three times in the last quarter of 2018. So, I might be tempted to buy a little if the S&P stays over its 200 day SMA. I’d be tempted to go all in if it breaks 2800.

Conversely, I might be tempted to go all in on a successful retest of 2650. That’s a pretty nice level of support – you can see how – after each failed test of resistance at 2800 in 2018 – the SPX came back to bounce off of 2650. I’m convinced a retest of that price would hold.

Both of these conditions (a break through 2750, then break though 2800…OR…a test of 2650) would be technically positive.

That’s it for now. I’ll be back from Florida next week. Meanwhile, I am checking the site for comments as I can, so please don’t hesitate to post your comments or questions below.

 

12 Comments

  • Its knocked on the 2800 door 3 times now and has been rejected. Maybe this is the time it gets through.

    Reply
      • I had contacted you a few months ago and told you based on the EW person I follow the S+P would fall below Oct 2018 lows and would then go on to make all time highs. It is playing out exactly as this person called it. All time highs are coming based on his always being correct with his EW calls and the S+P.

        I know when I posted months back telling you about what the market would do based on this person’s EW work you thought it was dubious but the market did exactly what he predicted and now it will go on to make all time highs.

        Brian

        Reply
  • This is second day spx held above 200 sma of around 2744 and today broke 150 day sma of 2749. If the spx holds another 2 days above 2749 this would be positive indicator…would you say market is more neutral rather than bearish based on your bear-o-meter? spx on weekly basis is on trend to break above its 50 wk sma also.

    Reply
    • It failed at 2750 the other day, but that can easily change. I am in total wait and see mode. I will act as according to what I noted on the blog–but for the time being I am staying put with 40% cash. That could change in a few days. Or not.

      Reply
  • Keith,
    As always, thanks a lot for sharing your insights into these tumultuous markets!

    Have you ever considered adding any other indicator(s) to the three ones you mentioned in your posting? For example, market breadth like $SPXA200R or something similar? I was also wondering if there were any TA studies on correlation between such indicators.

    All the best,
    Eugene

    Reply
    • Eugene–I use the momentum studies for my short termed daily chart work because they are best for such short termed timing decisions. However, on a mid termed basis you may note, if you look at other blogs, that I look at weekly charts with momentum plus moneyflow (2 indicators), volume, moving averages (2), and comparative relative strength to the appropriate index (TSX, SPX)
      For macro studies I use 11 indicators for the Bear-o-meter that incorporate much different parameters (sentiment, breadth, seasonality, etc)–again, refer to past blogs for explanations

      Reply
  • Interesting Keith. The S&P closed above the 200 day MA on the 13th, but below it on the 14th and it looks like it should be above it again today. Does this action reset your 3 day count rule?
    Regards,
    Wayne

    Reply
    • Wayne–yes it does, as I like a minimum of 3 days above the line. This is a crazy market. Read my blog next monday–I use a quote out of the Batman movie by the joker … “You and I are like an unstoppable force meeting an unmovable object”–that is the market…unstoppable but up against some theoretically unmovable objects.
      We shall see what happens next week!

      Reply
  • Dear Keith,

    Are you going to make any update regarding close of Feb 15 as it is beneath of Spx 2800 and bollinger band. According to your assumption l, I expect sell of renounce from 2760 at the best scenario if it reaches 2800 level.

    Reply
    • The market is short termed overbought but its move above the 200 day SMA is encouraging. So a neartermed pullback might be a reason to leg in.

      Reply

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