Market Timing

Most of you are aware of our MIPS Market Strength Indicator (MSI), which provides a glimpse of what MIPS believes to be the "Strength" (or Weakness) of the market.

Prior to today, the up-to-date MSI graph was on our homepage at www.mipstiming.com.  At the request of our MIPS members, the MSI graph that is on our homepage now is "delayed" about 30 days, and the up-to-date (upd) MSI graph is available to MIPS Members only. This means that the upd MSI page is password protected and members must login to gain access.

MIPS Members can access the upd MSI by clicking on the "Up-To-Date" link in the MSI window on our homepage (see immediately below).

                                               http://www.mipstiming.com/msi___mips_members


Examples:

#1 - Here is the "delayed" MIPS graph on our homepage (thru 3/14/2014)



#2 - Here is the upd MSI graph at   http://www.mipstiming.com/msi___mips_members   (thru 4/02/2014).

 

The SPY proved today (March 21) that the market's "Stone Wall" that has prevented it from surpassing its all-time high is still there. 

To see this plainly, please look at Graph #1 below:
  1) The SPY hit its all-time high at $189 on 3/07/2014.
  2) Then it trickled down for a few days followed by a big drop on 3/13/2014.
  3) The SPY bounced back on the intersection of its trendline and support level at $185.
  4) This uptick met an abrupt halt at $188, exactly where the big drop started several days before.
  5) Since then, the SPY has tried and failed 3 more times to break above this "Stone Wall" at $188.
  6) In fact, early today the SPY did pierce this level and climbed all the way to the all-time high level at $189,
      only to be slapped all the way back down to the low of the day at $186.2 (see the 2nd Graph below). 
  7) The volume on down days was higher than on up days (bearish, but certainly not conclusive).
These movements in the SPY are more pronounced in Graph #2 below

Graph #1



In Graph #2 below, the SPY now appears to be in an "Reverse Pennant" or "Widening Wedge" pattern, either or both of which could prove to be bearish.  As we all know by now, there are plenty of reasons why this market should have had a correction by now and really only one big reason why it should continue to climb higher.  However, the one big reason (the Fed) is starting to lose traction.

It's anybody's guess where the market will move from here.  But MIPS does not guess, it calculates all the likely options and chooses the one with the highest probably.  And, it almost always beats my guesses.

Graph #2

In our blog from March 4, 2014 below, we stated that we believed that the market (the SPY) had confirmed its breakout above its previous all-time high (and strong resistance level) of $185 per share on 2/27/2014.  Of course, on that day its upside "resistance" at $185 immediately became its downside "support" level.

In that blog, we also went on to say that: "Most likely, the SPY will come back down to test this new $185 support level and the SPY must 'hold the line' there for this 'breakout' to be real and lasting."

And, that is exactly what the SPY did last week.  As can be seen in the graph immediately below, after the SPY reached new highs, it dropped back down over 6 days and actually closed a little below its strong support at $185 (which now looks like a typical "bear trap").  Today the SPY rallied and closed at $186.33/share, thus technically again confirming the previous breakout.  Now, the new upside resistance for the SPY is at about $188/share and the new downside support is at about $184.5/share. The next support level is the 50-day EMA, which is now at $183.4/share. It is important to notice that:
  1) the two "pullbacks" in the last few weeks did not break the SPY's long-term trendline,
  2) since MIPS does not follow "wiggles", the MIPS models did not get sucked into costly short calls, and
  3) the volume on today's uptick was on healthy, but not high, volume.

All things considered, and from a purely technical standpoint, the market appears to be poised for more upside.  But, there are many reasons why the market could pull back sharply (like the situation in the Ukraine, amongst may others).  So, instead of trying to "guess" with our hard earned money which way the market will go from here, let's let MIPS do the heavy lifting and tell us what to do.



Paul Distefano, PhD
CEO/Founder
MIPS Timing Systems, LLC
Houston, TX
281-251-MIPS(6477)


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         3/04/2014

MIPS Members:

In our previous Blog below, we showed a breakout of the SPY above its all-time high level of $185 on 2/27/2014 (Thursday) and a confirmation of this breakout on Friday. After a single day of dealing with Putin's ego on Monday (SPY back down to close a fraction below $185), the SPY bounced back up today to $187.85 (new high). And, it was very comforting to see higher volume on the up days (see graph immediately below).

All of this is good news for the bulls. The market should push even higher in the short-term (weeks/months). For this to actually happen, however, we need to see continuing higher levels for the SPY from here or at least several solid days above $185. Most likely, the SPY will come back down to test this new $185 support level and the SPY must "hold the line" there for this "breakout" to be real and lasting.

Still, its anybody's guess. To our benefit, we have MIPS to tell us what to do (all MIPS models are still long).


 

In our previous Blog below, we showed a breakout of the SPY above its all-time high level of $185 on 2/27/2013 (Thursday) and a confirmation of this breakout on Friday.  After a single day of dealing with Putin's ego on Monday (SPY back down to close a fraction below $185), the SPY bounced back up today to $187.85 (new high).   And, it was very comforting to see higher volume on the up days (see graph immediately below).

All of this is good news for the bulls.  The market should push even higher in the short-term (weeks/months).  For this to actually happen, however, we need to see continuing higher levels for the SPY from here or at least several solid days above $185.  Most likely, the SPY will come back down to test this new $185 support level and the SPY must "hold the line" there for this "breakout" to be real and lasting.

Still, its anybody's guess.  To our benefit, we have MIPS to tell us what to do (all MIPS models are still long).





<<< Previous Blog >>>

MIPS Members:

After the SPY hit or broke its all-time high resistance level at $185 for the last 5 of 6 days and got slapped back each time, it finally broke out above that level on 2/27/2013 (see graph immediately below).  Although the breakout was not dramatic (no gaps, no extremely high volume, etc), it was a classic breakout.  The SPY opened lower than the previous day's close, and steadily climbed all the way to $185.82 on the close on Thursday.

From this, one would expect the market to climb from here.  So far on Friday (10:15 am CST), all of the major indices are up (with the SPY up +0.5%).  For how long and how high this continues, we will have to wait and see.  All of the MIPS models are still long at this time.





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MIPS Members:

In our previous blog below, we pointed out how the SPY had made a dramatic change in direction in the first week of Feb'14, and turned up in what seemed to be a powerful uptrend.  But, the uptrend lacked strong momentum due to the low volume in this uptrend. In other words, the uptrend was the result of buying by the little guys and was NOT joined by the fat kats.

So, what has happened since then?  The SPY uptrend hit what I call a chartist's "stone wall" at its previous all-time high of 185.0 (see chart immediately below).  And, by the way, the SPY tried to break through 185.0 in 3 of the last 4 trading days, only to be slapped back at exactly 185 all 3 times.  The little guys could not push the SPY through the 185.0 resistance level all by themselves.  And, they will not try this alone much longer.  My opinion is that, if this market gets some support from the fat kats, the SPY will continue up to new highs.  But with the little guys alone, it cannot.  The SPY volume levels will be high on my radar screen next week.

And, of course, if the little guys give up or the fat kats go against them, the SPY will most likely fall back to its support level at 174, or below.

It's so good to put the decision of what to do on the shoulders of the MIPS models so we can sleep at night. Let's wait for MIPS to tell us what to do, and when.

MIPS Members:

After the SPY hit or broke its all-time high resistance level at $185 for the last 5 of 6 days and got slapped back each time, it finally broke out above that level on 2/27/2013 (see graph immediately below).  Although the breakout was not dramatic (no gaps, no extremely high volume, etc), it was a classic breakout.  The SPY opened lower than the previous day's close, and steadily climbed all the way to $185.82 on the close on Thursday.

From this, one would expect the market to climb from here.  So far on Friday (10:15 am CST), all of the major indices are up (with the SPY up +0.5%).  For how long and how high this continues, we will have to wait and see.  All of the MIPS models are still long at this time.



 

<<< Previous Blog >>>

MIPS Members:

In our previous blog below, we pointed out how the SPY had made a dramatic change in direction in the first week of Feb'14, and turned up in what seemed to be a powerful uptrend.  But, the uptrend lacked strong momentum due to the low volume in this uptrend.  In other words, the uptrend was the result of buying by the little guys and was NOT joined by the fat kats.

So, what has happened since then? The SPY uptrend hit what I call a chartist's "stone wall" at its previous all-time high of 185.0 (see chart immediately below).  And, by the way, the SPY tried to break through 185.0 in 3 of the last 4 trading days, only to be slapped back at exactly 185 all 3 times.  The little guys could not push the SPY through the 185.0 resistance level all by themselves.  And, they will not try this alone much longer.  My opinion is that, if this market gets some support from the fat kats, the SPY will continue up to new highs. But with the little guys alone, it cannot.  The SPY volume levels will be high on my radar screen next week.

And, of course, if the little guys give up or the fat kats go against them, the SPY will most likely fall back to its support level at 174, or below.

It's so good to put the decision of what to do on the shoulders of the MIPS models so we can sleep at night. Let's wait for MIPS to tell us what to do, and when.





<<< Previous blog >>>


MIPS Members:

The market has undergone a remarkable rebound so far in Feb'14 (see graph below).  In the last 10 days, the SPY regained almost all of the ground that it lost in the 10 days before that. Problem is, however, that the rebound thus far has been on ever decreasing volume, so it was not caused by the big guys.

So, where does the SPY go from here. From global economic conditions, the actions of the Fed, and the market's technical indicators, one could make a good case for the SPY to go up (to over 200) or down (to below 160) from here.  And, we at MIPS sure don't have a prediction either way at this time (but MIPS will in ample time).

If outside conditions don't greatly surprise us, we believe that the SPY will go up and try (at least several times) to break through its previous high of $185 to the upside. If it does, there is not a consensus top where it may play out.   On the other hand, if the SPY fails to break its previous high (again, after several tries), it will most likely drop all the way back to $174.  And, if it breaches its support at that level, then look for it to fall to 160 or lower. The worst case is that the SPY goes into a sideways trading pattern between 174-185, thus developing into a pattern that is ripe for whipsawing.

We will wait for the big guys to make up their minds and start their move, and then let MIPS tell us what to do, and when.

MIPS Members:

In our previous blog below, we pointed out how the SPY had made a dramatic change in direction in the first week of Feb'14, and turned up in what seemed to be a powerful uptrend.  But, the uptrend lacked strong momentum due to the low volume in this uptrend.  In other words, the uptrend was the result of buying by the little guys and was NOT joined by the fat kats.

So, what has happened since then?  The SPY uptrend hit what I call a chartist's "stone wall" at its previous all-time high of 185.0 (see chart immediately below).  And, by the way, the SPY tried to break through 185.0 in 3 of the last 4 trading days, only to be slapped back at exactly 185 all 3 times. The little guys could not push the SPY through the 185.0 resistance level all by themselves.  And, they will not try this alone much longer.  My opinion is that, if this market gets some support from the fat kats, the SPY will continue up to new highs.  But with the little guys alone, it cannot. The SPY volume levels will be high on my radar screen next week.

And, of course, if the little guys give up or the fat kats go against them, the SPY will most likely fall back to its support level at 174, or below.

It's so good to put the decision of what to do on the shoulders of the MIPS models so we can sleep at night.  Let's wait for MIPS to tell us what to do, and when.






<<< Previous blog >>>


MIPS Members:

The market has undergone a remarkable rebound so far in Feb'14 (see graph below). In the last 10 days, the SPY regained almost all of the ground that it lost in the 10 days before that. Problem is, however, that the rebound thus far has been on ever decreasing volume, so it was not caused by the big guys.

So, where does the SPY go from here. From global economic conditions, the actions of the Fed, and the market's technical indicators, one could make a good case for the SPY to go up (to over 200) or down (to below 160) from here. And, we at MIPS sure don't have a prediction either way at this time (but MIPS will in ample time).

If outside conditions don't greatly surprise us, we believe that the SPY will go up and try (at least several times) to break through its previous high of $185 to the upside. If it does, there is not a consensus top where it may play out. On the other hand, if the SPY fails to break its previous high (again, after several tries), it will most likely drop all the way back to $174.  And, if it breaches its support at that level, then look for it to fall to 160 or lower. The worst case is that the SPY goes into a sideways trading pattern between 174-185, thus developing into a pattern that is ripe for whipsawing.

We will wait for the big guys to make up their minds and start their move, and then let MIPS tell us what to do, and when.

The market has undergone a remarkable rebound so far in Feb'14 (see graph below).  In the last 10 days, the SPY regained almost all of the ground that it lost in the 10 days before that.  Problem is, however, that the rebound thus far has been on ever decreasing volume, so it was not caused by the big guys.

So, where does the SPY go from here.  From global economic conditions, the actions of the Fed, and the market's technical indicators, one could make a good case for the SPY to go up (to over 200) or down (to below 160) from here.  And, we at MIPS sure don't have a prediction either way at this time (but MIPS will in ample time).

If outside conditions don't greatly surprise us, we believe that the SPY will go up and try (at least several times) to break through its previous high of $185 to the upside.  If it does, there is not a consensus top where it may play out.  On the other hand, if the SPY fails to break its previous high (again, after several tries) , it will most likely drop all the way back to $174.  And, if it breaches its support at that level, then look for it to fall to 160 or lower.  The worst case is that the SPY goes into a sideways trading pattern between 174-185, thus developing into a pattern that is ripe for whipsawing.

We will wait for the big guys to make up their minds and start their move, and then let MIPS tell us what to do, and when.


 

Up day, down day; three up days, three down days; etc.  We have seen three multi-week sideways trading patterns in the SPY since October 2013.  Then, we had a relatively big drop six days ago, followed by what is looking like another sideways trading pattern.  In effect, the market has not really gone anywhere since mid-November 2013.  So, is this the start of the Big One Down? 
Read on... This blog is an update to a prior blog entitled "Market Crash Coming?" (see below). 

The points of our previous blog below are that: (1) the last two crashes in 2000 & 2008 took 8-9 months to develop, so the Big Ones do not normally happen quickly, and (2) when the big drop started in 2008, MIPS3 picked it up quickly and did very well for the year (MIPS3 up over 50%, SPY down over 50%).

As mentioned above, in the last few days, the SPY movements have developed into another sideways pattern, and of course, no one knows which way it will break out from here.  But, the breakout is usually in the same direction that the market was heading when it went into the pattern.  In this case, that means down, but the bulls are still flexing their muscles to the upside (with help from the Fed).  So far this year, there has not been much harm done either way because every down day has been followed by an up day. This is not usually a recipe for a big drop, but anything can happen.   Of course, MIPS is analyzing the market movements in many ways that we cannot.  And, the MIPS models were developed to not "jump-the-gun" (like we might do), and make a big mistake.























BTW, many investors are freaking out because of the market weakness in the last seven days.  But,
the seemingly "big" market drop that we are seeing now is actually "tiny" once you stand back
and look at it from a long-term perspective (like over several years, as in the graph below).
Then, you can see that this year's "dip" is hardly even noticeable compared to other market "drops"
between 2007 and now.
- So, sit tight and don't panic.
- Remember, many investors lose most of their money thru panic selling, but a good "mechanical"
   model  should give you the confidence and discipline to "stay put" until you get another signal.
























Finally, how did MIPS do in the last 11 years ???
- very well, see the MIPS4 performance below



Hope this helps !!!

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As most MIPS members already know, we show several possible trading profiles for our MIPS models under the "Services" tab on our main menu at www.mipstiming.com (and more under the "Trading Profiles" button on the Services page).

Also, I have said many times that you can trade any ETF that "correlates" well with the SPY (from Investopedia => http://www.investopedia.com/terms/c/correlation.asp ).  Trading SPY/SH is the most conservative trading profile for our long/short MIPS models. However, we will show and will expand upon, more aggressive trading profiles herein.

For aggressive investors, we recommend trading a "mix" of ETFs, like 1/3 each of SPY, IWM, SSO or 1/4 each of SPY, IWM, QQQ, SSO on long signals and their respective inverse ETFs on short signals (SH, RWM, PSQ, SH*, where *SH is the single leverage inverse fund for SPY because we do not like double leverage on shorts).

See, for example, the results below from trading 1/3 each of SPY/SH, IWM/RWM, SSO/SH long/short:
BTW, on short signals, remember that your options are: (a) 1/3 each of SH, IWM, SH as in #1 below, or (b) 50% each of SH and RWM, or (c) 100% RWM, or (d) 100% SH.

I.)  MIPS4/MF+ Trading SPY/SH from 2007-2013
      CAGR since Jan'07 SPY=+6.1%  vs. MIPS=+31.3%   Max Drawdown= -10.6%

  
II.) MIPS4/MF+ Trading IWM/RWM from 2007-2013
CAGR since Jan'07 SPY=+6.1% vs. MIPS=+36.9%   Max Drawdown= -15.1%

III.) MIPS4/MF+ Trading SSO/SH from 2007-2013
CAGR since Jan'07 SPY=+6.1% vs. MIPS=+52.7%, Max Drawdown= -16.1%

 

Good "mixing" to all !!!

Was the market up or down in the last 4 weeks?  Neither. The market (SPY) has been up and down in the last 4 weeks, three times each. The net effect was the SPY bouncing at plus and minus 0.8% around the "mean line" of about $183.36/share. Not very exciting.  See the graph below.

Of course, this will not go on forever, and the SPY will once again break out of this most recent sideways trading pattern.  My bet is to the upside, but no one can be sure about that. With QE3 alive and well under Yellen, being long is most likely a very good bet.

However, many indicators (both fundamental and technical) are signaling the high probability of a "correction" of at least 5-20% in 2014, but who really knows.  What we can be sure of is that one day the market will take a dive that could result in another big "crash". But when?  Don't know, and that is why we use MIPS.