Stock Market Sell Signal Still Intact
Stock-Markets / Stock Markets 2015 Jul 10, 2015 - 06:17 PM GMT
Let’s do a review of the market signals. There seems to be the question that, if we had a market bottom on Tuesday, won’t we see a larger rally? The answer is, not necessarily.
The current market conditions seem to have the SPX trapped beneath the Ending Diagonal trendline at 2085.00. That may imply we saw both a low (2044.02) and a high (2083.72), a double Pivot, on the same day, July 7. A higher high at or near 2085.00 could still develop, but a failure to rally above 2085.00 would be profound.
In summary, SPX is still on its confirmed sell signal and that signal may only change if it rises above 2085.00.
VIX also remains on a confirmed sell signal. That signal may only change should it decline beneath 15.21. Although VIX is down this morning, there doesn’t seem to be any risk of going off signal so far.
The Hi-Lo Index has crossed above its 50-day Moving Average at -19.96. This puts it back on an aggressive sell and should be watched. The danger level is above mid-Cycle resistance at 61.52.
These signals were designed to prevent overtrading in times like this. Yes, it makes our positions volatile, but the same volatility applies to everyone else, as well. Trading allows for draw-downs, which are natural occurrences in the market. Today’s draw down was -1.22% at its peak. However, those who are still long have suffered a -3% draw down from the 2129.87 to today’s high and a -4.00% draw down to yesterday’s low. Please keep that in perspective.
I had the pleasure of talking with Sir John Templeton in mid-March of 2000. At that time he informed me that he had put $2 million short in January and his account was down by $600,000.00 by mid-March. I asked him whether he had exited his position. He said, “No. I have added back the $600,000.00 loss to my short position.”
By mid-April his account was worth over $6 million.
Here is another reason for not overtrading. TD Ameritrade broke down this morning, experiencing “widespread order-routing” problems.
Regards,
Tony
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As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals
Disclaimer: The content in this article is written for educational and informational purposes only. There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.
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