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 market liquidity to gauge longer-term market sentiment and equity and index options (put/call ratios) to identify short-term entry and exits.

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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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.