Almost there -- Update on levels to watch

My macro indicator declined to -15; at this rate, it's possible that it will give a "sell" signal next week.  However, as I mentioned in my post last week, one of two confirming indicators will need to "fire" as well.  The levels to watch are as follows:

For a RSI divergence, the S&P 500 would need to meet or exceed 2868.88 next week and close below 2826.05.  Alternatively, for a trailing ATR3 stop confirmation, the S&P would need to break 2759.18 to the downside.

Given the attention on a trade deal with China, I wouldn't be surprised if the market meanders into June and possibly rise on hopes of a positive outcome.  However, I don't believe that it will change the "complexion" of the market.

If my macro indicator goes below -20, I will execute my sell strategy as detailed in a prior post and I'll be looking to see when the indicator reverses to the upside.  Although market troughs or bottoms are challenging to predict, my macro indicator is showing that a possible bear market in stocks could extend well into next year. Stay tuned.

Formulating a game plan

My macro indicator dropped again this week to -10.  Consequently, I continue to formulate a game plan to execute in the event the indicator declines to -20 or less.  In the last 18 years, every time my macro indicator reached this extreme level, the S&P 500 has declined more than 20%.  In this post, I will discuss key levels and other technical indicators that must trigger to confirm my macro indicator.

As I mentioned in a prior post, I will check two confirming indicators if my macro reading goes down to <= -20. Currently, these two indicators -  Weekly RSI divergence and the Weekly ATR3 stop - haven't been triggered.  The RSI divergence indicator will trigger if the S&P meets or exceeds 2892.15 sometime next week and closes below 2859.53 on Friday.  The ATR3 stop - a slower, less sensitive indicator - will trigger if the S&P declines below 2759.19.  An exit after a RSI divergence will likely lead to a sell signal more favorable (profitable) than the slower ATR3 stop.  In either case, my primary and secondary indicators (working together) will give me more confidence to support my sell strategy.

Have a nice weekend.

No signal today

My indicator dropped to -4; not enough to trigger a trade.  Have a nice weekend!

Anxiously awaiting market data

With the events of this week, I'm anxiously awaiting market data to update my macro indicator -- the data is published every Friday at 12:30.  Given the possibility that I will get a sell signal on Friday, I wanted to share what I plan to do.  Consistent with my overall strategy, upon a sell signal, I will:

1.  Sell my holdings in market-beta (S&P 500 index) and all high-beta (e.g., high tech stocks) - this
     comprises about 20% of my portfolio
2.  Sell profits in all dividend stocks which have appreciated 10% or more - dividend stocks comprise
     about 80% of my portfolio

Note that a sell signal will encompass two elements:  A macro indicator reading of -20 or less and one other long term technical signal (e.g., negative weekly RSI divergence).

Given that fact that your investment strategy differ might differ from mine, you should contemplate ways to reduce risk and at minimum, rebalance your portfolio.  Some of you that subscribe to my email updates will get this post Friday morning.  If I get a sell signal, I will try to publish a short post shortly after 12:30 on Friday -- note that Google distributes email updates one day later.  My capabilities to publish an update will be hampered by the fact that I will be traveling tomorrow.

Market might be nearing medium / long-term peak

My macro indicator dipped this week to a reading of 5.  It was 24 last week.  This continued deterioration is concerning.  As mentioned many times before, a reading of -20 will likely cause me to take action to reduce my equity exposure.  If necessary, I will post an update next Friday.