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Market Timing

Monday, July 11 2016

The market (S&P 500 and SPY) has been moving up nicely for the last two weeks.  The objectives are, of course, for the market: (a) to move out of its exhausting 15-month sideways trading pattern, (b) to break above its all-time highs, and (c) to follow with a strong upward move.  The all-time "closing high" for the S&P 500 is 2135 (approx,  213.5 for the SPY), and its all-time "intraday high" is 2140 (approx. 214.0 for the SPY).  The SPY has come close to or hit 214.0 about 10 times in the last 15 months, and has failed to break above it each and every time (fierce Bear counter attacks).

Today's market action did nothing to make investors feel confident that this is the time that the SPY will see both closing and intraday highs. The SPY did hit and trade slightly above 214.0 intraday today; but when it penetrated the Bears "front line" at 214.0, the Bulls got forced back to close below both the SPY's closing and intraday highs (orange circle in the graph below).  Also, the SPY is still in the notorious 15-month sideways trading pattern. 

The Bears "held the line" today.  Not a good sign, but this is almost certainly NOT the Bulls' last try at breaking above the all-time highs and heading for the sky.  If the Bulls do succeed, it will not be without a fight from the Bears.  No definitive winner yet !!!

This is not a time to be too aggressive, because the near-term outcome is not easily predictable.
Sit tight and wait for MIPS to tell you what to do...

Posted by: Dr. G. Paul Distefano AT 09:22 pm   |  Permalink   |  Email
Sunday, July 10 2016

As Q2’16 came to a close, this blog turned out to be completely different from what I had planned a week before.  Of course, this quarter’s D-Day for stock markets all over the world was the vote by the Brits to leave the EU (the so-called BREXIT).  With the Brits voting to leave, the worldwide performances for the quarter were severely damaged in one day.  Compared to this, all other topics are boring.  Since the BREXIT vote, the markets have rebounded some, but not with enough time to recover the entire BREXIT losses before the end of the 2nd quarter.

My fear is that the rebound is only temporary, simply because the “Market to Nowhere” (in the case the S&P 500) is approaching its VERY STRONG resistance level at its all-time closing high of 2135 (and its Intraday high of 2140) again. This is something that the market has tried to break, and failed to do, over ten times over the last 17 months.

This record flat tight-trading range should be the main topic of Q2’16 as it has been for over the last 18 months.  There are some very serious reasons for this strange, rare market behavior. Take a few seconds to look at the graph below and concentrate on the blue rectangle on the top right. This blue consolidation pattern represents a FLAT trading range of roughly plus and minus of 2.4% for nearly one and one-half years, with two big drops in between.  That is phenomenal and very rare.  Remember, this means that when the market is in a tight pattern like this, and you do not trade at all during the entire period, it would not matter much if you stayed long, short, or in cash.  On the other hand, if an investor tried to trade this market, they could have ended up getting whipsawed mercilessly.

“Big Picture” Outlook

In the graph above, you can see that the two big moves to the downside, below the trend line and/or through the bottom of the blue trading pattern, were fast and deadly (that is, volatile and deep); whereas the moves to the upside got slapped back every time the market approached its all-time high.  This says to me that most large investors may be expecting a big drop, and have little or no confidence in the market making new all-time highs. 

Yellen’s Up Market
But, please do not underestimate the immense power that the “Master Market Manipulator” (Federal Yellen) has over the stock markets.  If Yellen wants the market to go up (or at least to not go down), she will simply repeat what she has concocted to make her “black magic” successful over the last 7 years.  This time, however, if the market does break to the upside, the sky is most likely the limit !!!

Extremely Strong Resistance
On the other hand, even with Yellen’s help, breaking the all-time high of 2140 on the S&P 500 will be like breaking through a 10-foot-wide steel wall.  The Bears are lined up there with all of their guns loaded (sell orders) and are ready to fire when they can “see the whites of their eyes”. The end result of this could be another “topping pattern” as in 2000 and 2008 (see graph below).  

In 2000 and 2008, the markets waffled (“topped”) in a tight consolidation pattern for 10-12 months before breaking to the downside and crashing 40-50%.  In 2016, the market has been “topping” in a very similar trading range for almost 22 months, and could be getting ready to dive.

Be careful !!!
Preservation of Capital Rules...

MIPS Models

After the big one-day “hit” from the BREXIT on 6/24/2016, the performance of our MIPS4 model:
   a) trading 1.0x SPY Long and 1.0x SPY Short, and
   b) trading 1.5x SPY Long and 1.0x SPY Short, and
were near breakeven for 2Q’16, but they remained up about +1.5 and +3.0% YTD in 2016, respectively.


Posted by: Dr. G. Paul Distefano AT 01:50 pm   |  Permalink   |  Email
Sunday, July 03 2016

We have acquired a lot of new MIPS members over the last 6 months, some of whom are not sure when to trade a new MIPS signal, especially over a weekend or holiday.

If you just remember this, you cannot go wrong...
- upon receipt of each new MIPS Signal Change email, you trade on the next available market opportunity.

For example: 

- if you get a Signal Change email on Friday night, you trade  the new Signal on Monday's open, or
- if you get a Signal Change email on Sunday night,
you trade the new Signal on Monday's open, or
- if you get a Signal change email on Monday morning before the market opens,
you trade on that open.
In all of the above cases, you would be trading the new MIPS Signal (if any) as of Firday's close.

For more, you can click the "Services" tab in the main menu and then click the blue button on the upper left entitled "How/When to Trade";  or simply click here =>

Posted by: Dr. G. Paul Distefano AT 10:39 pm   |  Permalink   |  Email

MIPS Timing Systems
P.O. Box 925214
Houston, TX  77292

An affordable and efficient stock market timing tool. Contact MIPS
281-251-MIPS (6477)