S&P Sell Signal

Yes, it appears the secular bear is coming out of hibernation. No telling how low we go, because the Fed still has ammo but currently lacks the political capital to deploy it (and I'm not so sure it would achieve the same result this time around). Another rip down will be needed to coerce it. The long term chart on the S&P 500 going back to 1988 looks ugly, and while I'm not a pure technician, we could easily see another 200+ points shaved off the S&P 500. The Baltic Dry has rolled over, global PMIs are weakening, particularly new orders, sentiment is worsening, and most leading indicators are at or past the tipping point, M2 being the lone exception because people are hoarding cash.

Every other time we've gotten one of these sell signals short term interest rates were about 5% or higher. Now they're 0.1% or lower. Ouch! The fact that the market is falling during a period of all-time low rates cannot be good.

This could get very ugly (or it could turn around in a month, though I'm not betting on that).

Just curious, what is the source of the seell signal?

SlowFatMaster wrote:

Just curious, what is the source of the seell signal?

I actually got 2 signals Friday. One is well known among technical analysts, the 10 week exponential moving average of the weekly close of the S&P 500 crossed below the 40 week exponential average. This indicator is rather sensitive, so it can give premature signals that cause you to sell too soon. It gave a sell signal last summer, while the other indicator did not.

The other signal is a modified version of the 10 week - 40 week. It's less sensitive and less likely to say "sell" prematurely. This indicator has issued 16 sell signals since 1960. Eight of those were premature. The average gain for the market when the indicator was wrong has been 6.5%. The average loss when it was right is 13.3%.

The second indicator is proprietary, so I'm not going to divulge it's exact set-up on LRC.

What did usay? wrote:

You and the other panic sellers will help draw the market down even lower. I'll definitey be positioning myself to buy in the coming days. A year from now I'll have the last laugh.

Actually my selling is based on a very thoroughly researched plan. If the signal is wrong, I'll be earning a (very) little interest until my next buy signal. If it's right, I'll preserve my capital while you're losing yours.

There's a 50% chance you'll be a little better off than me a year from now. But there's also a 50% chance you'll be much worse off.

BTW, I hope you're right and I'm wrong because I'll make more money that way. I'd rather be rich than right.

Huh? wrote:

In other words, you're making this shit up.

If it makes you happy to think that, be my guest. Or you can pull up any free charting website yourself and see how a 10 week - 40 week exponential moving average cross performs.

A proprietary technical sell signal? Did your inverted head and shoulder pattern make the death cross and and get ass-raped by the candlestick?

No offense, but those things sound as arbitrary as svit. Same with all of the 50 day or 200 day moving average b.s.

Huh? wrote:

In other words, you're making this shit up.

Blowing.Rock Master wrote:

If it makes you happy to think that, be my guest. Or you can pull up any free charting website yourself and see how a 10 week - 40 week exponential moving average cross performs.

I have my own indicators as well. Its the only way to do it. Variants of trend following. Read any book about, "The Turtle Traders" and you will have everything you need.

Mine flashed 50% cash in early July, 100% 3 weeks ago. +1% YTD.

Blowing.Rock Master wrote:

There's a 50% chance you'll be a little better off than me a year from now. But there's also a 50% chance you'll be much worse off.

Tyre wrote:

So despite all the fancy mumbo jumbo, it's essentially a crap shoot.

lose a little or gain a lot...

Wondering if you have had sell indicators this strong in the past 3 years.

Some pundits are saying "panic selling" "oversold" etc.

I thought Warren Buffet was doing some buying this past week.

FWIW, earnings season was pretty good, though very few mention that.

There have been many temp downturns the past 3 years.

By the way, Asian futures look up this Sunday eve.

Also BTW, I'm not your enemy.

The 10-40 Cross has happened twice in the last 2 years. This is the first modified 10-40 Cross that I've gotten since 2008.

Like I said earlier, this has been wrong 50% of the time since 1960. If it's wrong, I spend a few weeks to a few months earning interest. If it's right, I avoid a 5%-30% loss of capital, and get back in at a lower price.

Warren Buffet, uses vastly different methods and he's buying individual stocks. I'm using ETF's like SPY or SSO. It's possible that we could both be right (or wrong).

I checked the futures. I'm actually hoping for a big overnight jump, so I can get out at a better price. I find that second guessing my plan is when I get in trouble, so I'll stick to my plan. If I'm wrong, I'll find out soon enough - and I'll post it on LRC.

Thanks for that info.

I understand your position, I'll hold, but probably not buy unless we get some gamebreaking news.

Just saying Armageddon has been predicted way too many times the last 2 years.

Interesting to see if Libya has any effect on the market tomorrow. I'm a news guy.

I use somewhat similar methods, but the fact that you claim to be using a 10wk/40wk EMA says to me that have not been doing this with real money. It is actually barely better than flipping a coin, and if you had used this method last summer without any hysteresis, you also would have had a sell signal and you would have gotten whipsawed.

I am longer term oriented and use 19wk/39wk EMA to be confirmed by the weekly MACD. This system has made 4 whole trades since the start of 1995. Note that I go long and short.

My system is not in sell mode now, and I am looking to buy into a correction until the situation changes. Trend following indicators look bad right now, but you do NOT know that the situation is different from last summer, when one of my two indicators went to the short side but the other did not. I can (and have) make the case with Elliott Wave that this is just a large wave 4 triangle that will be resolved to the UPSIDE ultimately.

Also, in the 2 major tops in the last decade, when my indicators gave sell signals, you could wait about 5 months the first time and 2 months the second time to get out at even or higher prices from when the signal occurred. So there is no reason to rush to the exits.

I am sitting on 2 SP500 (full) futures contracts and 3 Comex gold contracts and am looking to buy at fire sale prices until the long term trend following indicators suggest otherwise.

If we do not get a major rally soon like we got last summer, the top will be in.

I have no idea how high gold goes--it's already higher than Goldman-Sachs projected for the ultimate high (at the end of next year)--just going to ride that train as far as it goes.

I learned my lesson in the 2000 top about NOT selling too early. I left lots of chips on the table. Not selling until I can confirm that the top is in, and any one indicator is going to be wrong sometime (just ask the risk management people in 2006-2008 who thought they had everything figured out).

Ride that tiger until he turns around and bites you (then ride another tiger).

Why do these signals always seem to appear *after* the market has lost a lot rather than *before*?

Dow Jones, NASDAQ, and S&P are all up over a percent to start off over an hour in. That's good for me!

All this tech analysis is downright hilarious. Good luck living in that make believe world of yours.

Everyone is clueless wrote:

All this tech analysis is downright hilarious. Good luck living in that make believe world of yours.

Tell that to Richard Dennis and the Turtle Traders....