Rich Trend Trader's Blog

June 21, 2011

Market Action on 6/20/11 Produces Normal BUY Signal

Filed under: Trend Timing Model — Rich Trend Trader @ 4:36 am

Valuation indicators were below the required values on 6/15, 6/16, and 6/17 to produce a normal BUY signal within the current trend model BUY signal off of the SELL failure.  This BUY signal is obtained from the valuation service data only without the trend model indices producing a BUY signal given that their respective valuation indicators did not go below the required value during the latest market drop.  This signal type has been produced a total of 8 times using backtested data to Jan/96.  The dates of these BUY signals are as follows:

8/7/98 (Signal produce either no gain or a small loss with a subsequent SELL signal on 8/21/98)








If the S&P600, S&P400, and S&P500 all close below the low on 6/16/11 then, this signal will produce a failure on top of the market drop since the 5/31/11 local high for the current BUY signal.  Should this occur my personal recommendation would be cash given the propensity for the market to reverse nearly every signal except for the intraday BUY signal on 3/6/09 over the last few years.


June 15, 2011

Market Move on 6/14/11 Did Not Produce a Normal Trend Model BUY Signal

Filed under: Trend Timing Model — Rich Trend Trader @ 12:43 am

Would not be surprised if the market was to go back below the low on 6/13/11 before a meaningful rally higher (1300? +)from here.


June 14, 2011

Valuation Indicator Below Requirement for Normal BUY Signal

Filed under: Trend Timing Model — Rich Trend Trader @ 3:16 am

Although the trend model BUY signal is still in effect off of the SELL failure signal, the valuation indicator for the total market has now moved to a level to technically give a normal BUY signal should the market and other technical indicators move higher tomorrow.  However, this total market indicator rarely gives a BUY signal absent a BUY signal from at least one of the trend model indices.  The valuation indicator on each index is not yet at a value to give a normal BUY signal.  I did urge caution given that the signals, especially since the end of 09, have been whipsawed in almost every instance and the current signal is no different.  I am currently a maximum 1/2 long my 401K account and less than 1/4 long all other accounts.

I am beginning to have the feeling that trend models are not going to produce satisfactory results until the large wall street banks, FED, and other well connected entities have sufficiently reloaded their balance sheets to weather the massive losses that they have yet to realize.  Many trend models that I occasionally look at, including the one that I use as a part of my model, have overwhelmingly underperformed a simple buy and hold strategy since the 2009 time frame.  The valuation service portfolios have not shown a return greater than about 3% each of the last 2 years and some even have a negative return.  This is all during the time when the S&P500 is still up almost 2x its bottom level in Mar/09.

Backtested data indicates that there are occasions where the trend model would lag or just keep even with the market as a whole for 6-9 months but continuous and constant flat/negative signals are historically abnormal even for commercially available trend systems.  However, as I have said before, if you do not have a system to get in and out of the market then what are you going to use to determine when to get in and out?  My advice in these situations is to either stay in a fixed income type investment or roll the dice with a buy and hold strategy.  There have historically been many periods where a buy and hold strategy has done well for particular generations of investors but I know too many who lost 30-40% of their nest egg rolling right into retirement.  Not a fun proposition.


June 1, 2011

Trend Model BUY Signal EOD 5/31/11 – SELL Signal Failure

Filed under: Trend Timing Model — Rich Trend Trader @ 2:31 am

All trend model indices (S&P600, S&P400, and S&P500) have closed above their respective previous 5-Day highs with the S&P600 closing above its previous 10-Day high as well.  This is the indicator for a SELL signal failure from the signal issued EOD on 5/16/11.  This makes 5 of the previous 6 SELL signals of this type failures since Nov/09.  Prior to Nov/09 only 2 of 15 SELL signals of this type failed since Oct/96.  It should be noted that this SELL signal is generated by a down signal and subsequent market action from a commercially available market valuation service.  Market lows have occurred within a few days of the signal.  Not to sound conspiratorial, but the data from this commercially available service is undoubtedly well know among the large market traders on Wall Street and the big banks are still sitting on 1 trillion or more of losses that they have to some how make up.  It is much easier to take it from retail traders then it is from organic growth given the state of the national and world economy.  With this background, caution is well advised with all signals given the multiple flat or loss signals that have not been seen in such succession prior to 2009.


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