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Market Timing

Monday, May 25 2020
This week could determine the direction for the stock market (SP500) for the next Bull or Bear "run".

Graph #1
As you can see in Graph 1 immediately below, the SPY fell like a rock in Feb/Mar 2020 (Leg#1 down), but recovered to what the "pros" say is the normal
"Retracement Point" ( ).  These "Mr. Know It All's" claim that all bear markets tend to bounce up from their first bottom until the market has recovered about 50% of its first drop.  From there, the market will decide if it will continue up or to fall back down for its 2nd drop ("Leg#2 down).  BTW, most of the time in bear markets the market does just that, but these are not normal times.

So far, the market has followed the above to the tee, but it has hit two stages of uncertainty from late April until now (go to Graph #2 below)

Graph #1

Graph #2
Graph #2 below is simply an expansion of the second half of Graph #1 (to make my comments below easier to see in the graph).

The purple "flat market" or "sideways pattern" in Graph #2 shows the uncertainty around the retracement point very well.  As can be seen in this purple pattern, the market bounced around in a plus/minus 2.25% range for 21 days (if that isn't uncertainly, what is it?).  And, you can see that the SPY hit (but failed to break above) the SPY 200-Day EMA line 4 times (blue line).

But then, on May 18th the SPY broke out of the purple pattern AND sprung above the 200-Day EMA as shown in the smaller, brownish pattern. The market has traded in this very small range for 5 days; 4 of which closed above the 200 EMA.
So, that leaves us here on May 25th wondering what will happen next. My guess (not MIPS') is that, over the next several days, the market will break above the 200 EMA decisively and go up from here for a while.  Even with that opinion, I still believe that the market will re-test its March lows before it goes back into a real bull market. . My opinions are OK, but I follow MIPS...  So should you.!!!

Graph #2
Good Trading ...

Paul Distefano, PhD
CEO / Lead Developer
MIPS Timing Systems, LLC
Houston, TX
408-234-8348 (Cell)
Posted by: Dr. G. Paul Distefano AT 07:32 pm   |  Permalink   |  Email
Sunday, May 24 2020

- In this Blog, my reference to ‘the market’ is the SP500 ETF (SPY)

This market we are in now (and have been in for the last 3 months) is one of most difficult, most dangerous markets we have seen in many decades (like all the way back to 1933).  

In the last 80+ years, the SPY has ‘averaged’ gains/losses of roughly 12% per year.  That results in average ‘changes’ of about 1% per month (or 0.05% per day).  This 2020 market dropped 34% in 1 month and 14% in two days.  And, the market changed over 8% in a single day several times in the first quarter.  

See stats below for the SPY in the year 2020:
   1) One Month (Feb 21- Mar 23)     -34%
   2) Five Days (Feb 21 – Feb 27)    -15%

   3) Two Days (Mar 11- Mar 12)      -14%

   4) One Day (Mar 16)                     -11% 

You have to be aware that those kinds of movements are much, much faster (and larger) than any in the past; and that makes them very dangerous and very difficult to 'track'.  Few (if any) trading techniques (or retail timing models), are now designed to work well in this type of market behavior.  For example, some of the top performing timing models in 2020 YTD ranked by 3rd party tracking companies have terrible long-term performance records.  Outside of stock markets, if a fighter jet is programmed to travel at 3,000 mph (like the USA’s F15), it would fail in combat with an enemy jet travelling at 8,000 mph (if possible).  So, in all cases like this, the software would need to be updated to handle any and all new faster acting conditions.  

We at MIPS are not just sitting around in this crazy market that moved faster in a small part of one month (Feb'20) than any other market has in the last several decades.  MIPS is currently designed to work well in fast markets, normal markets, slow markets, and flat markets. The recent market behavior has shown us that we need to add very fast moving market conditions to our models; together with protection from large daily losses from markets with unusual high volatility

Our development team has been working 16-18 hours daily for the last 10 weeks adding these new features to our models.  I am thrilled to say that we have added several algorithms to help MIPS perform much better in
very fast moving markets with unusual high volatilityThe performance results from our new models are significantly better; and with a little more testing we will release the new versions of all MIPS models very soon. The graph below shows that the new version of the MIPS/Nitro model would have produced results roughly two times better than the current version.

Confidential - Below is how the new MIPS/Nitro model's performance looks now (in final testing)
   Black   -  New Fast Moving/Highly Volatile (FM/HV) MIPS/Nitro Version of the Model
Orange - Current MIPS/Nitro Model

Paul Distefano, PhD
CEO / Lead Developer
MIPS Timing Systems, LLC
Houston, TX
408-234-8348 (Cell)
Posted by: Dr. G. Paul Distefano AT 03:12 pm   |  Permalink   |  Email

MIPS Timing Systems
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Houston, TX  77292

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