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Market Timing

Thursday, May 07 2015

Needless to say, in the last few days the market has not performed well.  In fact, some emails that we have received are borderline "panic".  So, how bad is the market now and where are we headed?

If we look at a daily chart, as usual it looks like the market is coming apart (see the 1st graph below).  From this viewpoint, we can see very clearly that the SPY hit the Bear's front-line resistance at 212.0 twice in five days, and got slammed back both times ("Bam").  Even though the market has been flat for over 5 months, the daily action has been very volatile.  So, even though it is very obvious that the short-term trend is "flat", it is difficult to see where the intermediate-term is going.

Like most other things in life, if we want to see the "big picture" we need to step back and look at the situation from afar. In this case, let's turn to a graph with weekly data instead of daily data (kind of smooths out the crazy ups-and-downs of everyday activities, as the "floor traders" sell one day and buy back the next. 

The next graph shows the rare, "near perfect" 3-year trend from January 2012 through today (5/06/2015).  [The trendline is white and the 50-week EMA is green.]  As you can see, the SPY hit (or dropped back close to), its trendline (or EMA line) 7-8 times, but the trendline proved to be excellent resistance as the SPY bounced back up every time.  As you can see, we are there again today.

Lots of smallish short-term "traders" (if we can call them that) got whipsawed mercilessly in this "froth" above the trendline, a place where the big floor traders live.  Little guys trying to navigate that territory usually get killed.  And, what for?  Why take the risk of trading against the big guys IN THEIR OWN EXCLUSIVE TERRITORY when you can experience good returns following the trend.  Greed, maybe? 

We just said the you could make good money following the trend instead of jumping into the froth above the trendline and getting killed.  OK, so how did MIPS do in this time period?  For that, we refer to, where MIPS3 has been "verified" since late 2005 (MIPS4 would have done better, but it was not introduced until 1Q'13).

As you can see below, MIPS3 trading 1.5x leverage SPY ended up +87%, while the SPY was up +64%.
- Just in case you don't know, if you did that well for the next 21 years, your portfolio then would be
  about 80 times the value of what you have now (e.g., $50,000 would be about $4,000,000) !!! 
- Still want to "play the froth" and lose your butt, or can you be patient and possibly get rich ?

Stay tuned and follow MIPS !!!


Posted by: Dr. G. Paul Distefano AT 01:39 am   |  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)