Rich Trend Trader's Blog

March 26, 2011

Trend Model SELL Failure EOD on 3/25/11

Filed under: Trend Timing Model — Rich Trend Trader @ 8:12 pm

3/28/11: The market action today puts the trend model back into a ‘neutral-up’ position and its back to basics concerning any potential sell signal.  The market usually (but by no means not always) makes its way back up to the upper Bollinger band (20,2) prior to a sell signal.  This may put the market back in the area or above the end of Feb highs.  However, just going to take that signals as they are presented regardless of any potential price target.

Updated Information: If the market closes higher on 3/27/11 then, the current SELL and SELL-Failure combination will be complete and it will be back to square one looking for another sell signal.  It is still possible for the market to trade lower from the 3/25 levels and issue another sell signal based upon the valuation timing indicator.  If the valuation timing indicator goes negative from the current positive value before the market trades higher than the 3/25 level, then another sell signal will be issued.

It is interesting to note that this particular type of sell signal has been generated by the market a total of 18 times since Oct/1996.  There were 14 signals prior to Oct/09 with only 2 failures and a total of 4 since Oct/09 with a total of 4 failures.  Take it for what its worth but since the economic downturn in 2007-2008, it has been non-productive trying to short the market with many trend systems that I review on occasion.

ORIGINAL POST:

Officially, the trend model rules for a sell failure has occurred at the end of the day on 3/25/11 with at least 2 of the 3 trend model indices closing above their previous 10-day high and above the down day on 3/14/11.  I am still hesitant about this sell failure given that only one of the trend model indices closed below its previous 20-day low on 3/16/11.  In every other signal of this type that issued a sell signal, at least 2 of the 3 trend model indices closed below its previous 20-day low regardless of whether the signal was good or a failure.  Therefore, it would not surprise me that the market reverses back down next week before moving to new highs is that is the ultimate direction of the market.

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March 25, 2011

Trend Model SELL Signal Still Active.

Filed under: Trend Timing Model — Rich Trend Trader @ 1:33 am

Previous SELL signals of the same type that was issued at the end of day on 3/15/11 have, as I mentioned, produced signal failures.  However, I have reviewed every SELL signal of this type and have found that every failure was preceded by the close below the previous 20-Day low with the 5-Day RSI below 30 on at least the S&P600 (small cap) and S&P400 (mid cap).  In the case of this SELL signal, only the S&P500 closed below its previous 20-day low on 3/15/11.

I have seen on a few occasions where the market will rally off of a local low point producing closing values above the previous 10-day high (which is the signal failure requirement if the 20-Day low closing values are achieved as described above).  These instances also are accompanied by the valuation timing indicator going from negative to positive as has happened at the end of the day today.  Within 1-3 days this indicator has always gone back negative either confirming the current SELL signal or in the case of a special condition issuing a SELL signal.

In essence, if the current SELL signal is to be successful, the market should be near its current high levels and start back down to produce valuation indicators sufficiently low to produce a BUY signal.

DISCLAIMER: https://richtrendtrader.wordpress.com/disclaimer-on-information-presented-in-this-blog/

March 16, 2011

Trend Model SELL Signal Issued EOD on 15-Mar-11

Filed under: Trend Timing Model — Rich Trend Trader @ 2:58 am

The S&P600, S&P400, and S&P500 indices closed below the open values on 14-Mar-11 and therefore issued a SELL signal off of the internal trend model market down indicator.  I must stress that back tested data indicates that this type of sell signal ‘fails’ approximately 20% of the time.  That is, a valid buy signal off of required levels of valuation do not occur prior to the market moving higher to surpass the closing levels of the market down day on 14-Mar-11.  I want to explain the risk given that the trend model is in what I call a ‘neutral – sell’ off of a ‘neutral – buy’.  That is, the timing portion of the model is not a sell although the valuation indicator is a sell.  The risk now associated with this is as follows in order of importance.

1. Today’s closing levels are sufficient to be another BUY RE-ENTRY signal for the short term CASH signal that I have been developing.  The S&P500 has closed below its previous 20-Day low, the 5-Day RSI is below 30, and the CCI is less than -200.  This type of signal does not indicate that the market is going to immediately move higher rather it is an indicator of the general area of a local market low.

2. The market just sets in the low at this point and then moves higher to produce a failed sell signal.

3. The market continues its decline producing sufficiently low valuation values to produce a BUY signal.  With the lows of the indices being put in today nearly 2% lower than current closing levels, the markets would most likely have to produce a close below the previous 20-day low again on at least 1 of the trend model indices prior to a BUY signal.

Although there are risks involved in every trade, I keep learning over and over again that the best approach is to go with what works over the long term and take what you get or give back what you loose.  The latest trend model BUY signal produced a good return and now we shall see what this SELL signal does.  The SIGNAL DATES AND INDEX RETURNS page will be updated after the market closes tomorrow.

DISCLAIMER: https://richtrendtrader.wordpress.com/disclaimer-on-information-presented-in-this-blog/

March 15, 2011

Close to a Trend Model Sell Signal – EOD 14-Mar-11 Update

Filed under: Trend Timing Model — Rich Trend Trader @ 12:57 am

A SELL signal will be issued if the small cap (Russell 2000 or S&P600), mid cap (S&P400), and large cap (S&P500) all close lower then their respective opening price on 14-Mar-11 tomorrow or any subsequent day.  Variations on this signal is possible even if there is a counter rally higher.  Still developing the CASH signal but if properly implemented during the BUY signal since 02-Sep-10, a higher signal performance would have been achieved.

DISCLAIMER: https://richtrendtrader.wordpress.com/disclaimer-on-information-presented-in-this-blog/

March 11, 2011

More Downside Likely – Trend Model BUY Signal Still Valid

Filed under: Trend Timing Model — Rich Trend Trader @ 5:15 am

I have for several months been looking at the technical data for the CASH signal that I want to implement into the trend model.  This involves using the upper Bollinger band (20,2) and the previous 5-Day low on the small (Russell 2000 or S&P600), mid (S&P400), and large (S&P500) indices.  The latest UNOFFICIAL CASH signal was issued at the end of day on 22-Feb-11.  A subset of data that I had looked at up until this signal indicated that when the 5-Day RSI on any index moves below 30 then the current correction is done if the trend model BUY signal is in effect.  This is true but only on a partial basis.  The latest UNOFFICIAL CASH signal saw the S&P600, S&P400, and S&P500 5-Day RSI move below 30 on 23-Feb just one day after the CASH signal.  The market subsequently rallied such that the S&P600 and S&P400 moved back above their respective previous 5-Day highs on 03-Mar-11.  As we have seen, the market has subsequently pulled back from this level and the end of day on 10-Mar-11 all indices have once again closed below their previous 5-Day low.

I have re-examined a subset of the previous instances of this CASH signal setup and have found that in every instance thus far a close below the previous 20-Day low and the CCI technical indicator going below at least -100 are preconditions for what would be at least a local low.  The market may and has on a few of the historical data points tried to rally after this occurrence only to trade back down below the previous 5-Day low and making another new 20-Day low.

Although the trend model BUY signal is still active (and has produced greater than 21% combined gain since 03-Sep-10), I am looking for the market to produce another low in the days to come and advise caution until there is an actual SELL signal or the market achieves the close below the previous 20-Day low and CCI below at least -100.

DISCLAIMER: https://richtrendtrader.wordpress.com/disclaimer-on-information-presented-in-this-blog/

March 4, 2011

UNOFFICIAL BUY RE-ENTRY

Filed under: Trend Timing Model — Rich Trend Trader @ 2:46 am

The market keeps whip-sawing these 5-Day CASH signals. The S&P600 and S&P400 have closed above their previous 5-Day high. I have been looking at market data back to Jan 1992 and have found that during internal trend model UP signals that local bottoms off of these is defined by the 5-Day RSI on any trend model index going below 30. This happened the day after the last three instances and the local low has been the next day. As I previously indicated there are whip-saws with this signal but on occasion it works well as in the end of Apr/10 just before the big market drop on 5/6. Current trend model BUY signal since 9/3/10 has produced good gains and it appears that there may be more to come.

DISCLAIMER: https://richtrendtrader.wordpress.com/disclaimer-on-information-presented-in-this-blog/

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