The purpose of this site is to share results of a trading system that I use for identifying both long-term and short-term trading opportunities. I take the time to do this because of my passion for investing and helping others succeed. The system helped me avoid the "Crash of 2007/2008" and every major correction since then. The cornerstone of my trading system are analyses of futures and equity and index options.

If you are an investor, there's no need to concern yourself with the short-term trades that I discuss. The notes in the left-hand pane will provide you with my high-level outlook for the calendar year and for the next 12 months. The left pane will also contain alerts about possible intermediate-term reversals to help you make timely decisions for rebalancing your portolio, taking profits, or putting new money to work.

If you are a short-term trader, I will detail in my blog posts ideas for going long and short the S&P indices to capitalize on the aforementioned reversals.

This site is for information purposes only. Past performance of the trading system is not a guarantee of its future success. Please consider consulting a qualified investment adviser before making investment decisions.



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Sunday, July 12, 2015

It's a tough call, but someone's gotta do it

Believe it or not, with as much fear in the market, the facts before me don't support a bear case . Here are the technical factors that support a bullish stance:

1. Macro Indicator: My macro indicator that gauges market liquidity isn't showing a continued deteriorating condition. It's sorta interesting though that a notable technician, Tom McClellan, recently spoke on the Financial Sense Newshour podcast and cited the same macro indicator I use but shared an interpretation that differs from mine. He's calling for an August top, but in my opinion, the indicator hasn't deteriorated enough to warrant the pessimistic call -- at least not yet.

2. Relative Strength: The S&P successfully tested it's 200 day moving average and has since bounced. Furthermore, a key component of the market -- financial stocks -- has showed a lot of resilience from a relative strength perspective. Lastly, the market closed out the week by forming a (minor) positive RSI divergence.

3. Short-term Options Activity: My short-term model appears as though it will generate a buy signal by Thursday, July 16.

As I indicated in a prior post, my "system" would call for a fully invested stance if the market penetrated the trailing ATR3 stop. That level currently stands at 2106. Given the positive divergence and the impending short-term buy signal, my plan is to deploy 50% of sidelined cash by Thursday and then deploy any remaining funds when 2106 is breached to the upside. Please note that the actual amount deployed will depending on finding attractive stocks for my dividend growth portfolio, which represents a sizable portion of my allocation. By attractive, I mean from both fundamental and technical perspectives.

So there you have it.

Tuesday, June 30, 2015

OK, Now What?

As planned, I took more off the table when the S&P broke 2071. More precisely, I sold the Russel 3000 at S&P 2074. By doing so, my equity position is now less than 50%. My trading system normally calls for an equity allocation of 50% under current circumstances, but I'll admit that my emotions together with an anticipation of further macro deterioration, have gotten the best of me and as a result, my equity level is more like 33%. Normally, I would feel uncomfortable with such a low equity allocation, but given that most of my selling occurred when the S&P was at 2100 makes me feel as though I wouldn't miss out -- if the market takes off from here. The difficulty at this point is making the right moves without knowing what my macro indicator will ultimately do. Thus, I'm more inclined to withhold from further selling and ride it out until I know more. With the market near the 200 day moving average, the S&P could bounce here, but my short-term indicator appears as though it will not signal a "buy" until mid-July. So if you've been reading my blog, you know that it's possible that a top might be forming and that a top might occur in August. So the challenge is whether to buy into any rallies or to sell into it. At this point, I'm still thinking that the market will rally into August but I don't think that adding to my equity position is worth the risk. Given that the market dipped below 2070, I wouldn't even consider buying unless the S&P crossed back up over 2115 which corresponds to the current trailing ATR3 stop. Hopefully, by then, my macro indicator will give me guidance to either sell or jump back in.

Friday, June 26, 2015

Pins and Needles Kind of Week

I wanted to update my readers that my macro indicator, which is updated every Friday, is not showing any additional signs -- bullish or bearish. If a top is forming, I fully expect to see additional gains in this market which is customary as "smart" money distributes their holdings to the gullible. The key to any rallies will be to assess whether relative strength and volume indicators support a continued bullish trend or the aforementioned (bearish) distribution. My short-term indicator which assesses speculative behavior in the options market appears as though that it will signal a sell early next week. This combined with the fact that the weekly RSI traced a bearish divergence today caused me to trim my holdings at or abouts S&P 2100 by selling holdings that have shown weak relative strength. As I mentioned in my prior post, if the S&P breaks 2071 to the downside, I plan to take more significant steps to reduce alpha.

Monday, June 22, 2015

Time to think about a possible bear market

As I mentioned in my prior posts, my macro indicator has been showing signs of significant weakness. If this weakness persists, it would translate to a possible top in the S&P 500 sometime between early August and mid-September with the greatest likelihood being August. I've been wary of warning my readers too early because the macro indicator has had some short periods of positive movement. However, in looking at the trendline over time, the positive short-term movements have traced lower highs and it is now close to giving me a confirming signal. Until I get this confirming signal, it's important not to overreact. It would be prudent, however, to harvest some gains and think about selling holdings that have exhibited poor relative strength. Irregardless of the macro indicator, my trading system is calling for a 50% reduction in core holdings if the S&P falls below 2070. I'm often asked if I would short this market. My philosophy on this topic has been to only consider shorting when my macro indicator supports it. In addition, I would only consider shorting if a downturn appears as though it could be protracted and deep (i.e, 6 months or more). All technical indicators have limited predictive potential, but my macro indicator which gauges market liquidity, is "saying" that a downturn could be on the order of 10+ months. Again, this estimate will only be valid after I get a confirmation. So until my next post, I'd highly recommend you think about what you would do in the event of a bear market. If and when I get a confirmation, I will detail my strategy including an approach to shorting the market if I believe the risk in doing so is worth taking.

Wednesday, March 25, 2015

Took cash off the table

With the market not acting in step with the indicators I follow, I decided to jump ship at S&P 2077 and go to cash (in my cash account). Not touching my IRA just yet.