Rich Trend Trader's Blog

October 15, 2011

Trend Model BUY Signal End of Day 10/14/2011 – SELL Failure Signal

Filed under: Trend Timing Model — Rich Trend Trader @ 5:34 am

The upside down world continues.  The last SELL signal was only the 5th signal of this type since Jan/1996 with only 1 of these previous signals resulting in a failure.  Therefore, the market will head back down to create another failed signal in the next week or so.  Looking at the historical data of the trend service that I use as a part of the model I have found the following statistics amazing.

– Since Jan/2007 the failure rate (signal negative return) is running at 43%

– Prior to Jan/2007 going back to 1989 the failure rate (signal negative return) was 10%

Do not misconstrue the concept of the failure rate with the concept of market out-performance.  In some instances, the trend signal may have had a positive gain but the combination of several signals may have underperformed the market.  This is the nature of trying to trade rising and falling markets.  The objective of a trend system is to not get every signal right or every sequence of several signals right but to out-perform the market over several years worth of trading.  It is obvious that the big trading entities are driving trend systems into losses for retail traders over the past few years.  Lets see if the latest signal is no exception.


October 11, 2011

Update to the Signal Data and Returns Page – 10/10/2011

Filed under: Trend Timing Model — Rich Trend Trader @ 4:49 am

I have been beyond busy with my full time job, part time job, and a graduate systems engineering certification course to keep on top off all information available on the trend model blog.  I will be working on updating the Signal Data and Returns Page with all data going back to Jan/96 over the next week or so.  Not making any promise but I have had this requirement in the back of my mind over the last couple of months.


Trend Model SELL Signal Issued End of Day 10/10/2011

Filed under: Trend Timing Model — Rich Trend Trader @ 4:44 am

A fairly rare type of SELL signal has been issued the end of day on 10/10/2011.  In most historical cases the previous local low was not breached on all indices prior to another BUY signal.  Previous signals of this type are as follows:

15-Apr-92 (Valuation service data is not available prior to 9/30/98 therefore, BUY signal data is not reproducible off of a market low.  Trend service data is available however, the BUY signals from this service is usually at higher market values than using the valuation data.  BUY signal was issued on 29-May-92 however, the look of the RUT, MID, and COMPQ suggest that a trend model BUY signal would most likely have been issued either 29 or 30-Apr-92)

28-Apr-00 with BUY signal issued on 30-May-00

19-Aug-02 with BUY signal issued on 11-Oct-02

15-Oct-02 Failed signal with a BUY signal issued on 17-Oct-02

The market may continue a little higher and a BUY signal from the valuation service total market data (extremely rare) only and the trend service.  Considering previous SELL signals of this type I would be looking to exit short positions when at least one of the trend model indices close below its previous 20-Day low.  However, with the difficulties with the trend service signals and trend model signals not producing reasonable positive gains lately, I am only trading a small portion of my accounts and would not be at all surprised by anything going forward.


October 6, 2011

Trend Model BUY Signal Issued End of Day 10/5/2011

Filed under: Trend Timing Model — Rich Trend Trader @ 2:18 am

The rally during the last 2 days has created a trend model BUY signal.  Now look for the market to move back down based upon the experience recently and possibly another BUY-FAILURE signal.  The key to the current BUY signal is the market low on 10/4/2011.  If the S&P600, S&P400, and S&P500 all close below their respective lows on 10/4/2011 then another BUY-FAILURE signal will be issued.  Trying to take advantage of any pullback, I will be looking to exit short positions if the S&P500 retrace at least 50% of the rally from the 10/4 low to the 10/5 high or around 1110.00.  I have been using retracement values and charts from ‘EW Trends and Charts’ ( and Daneric ( at potential counter moves to reduce the overall loss on signals that are not successful.  Specifically, the RSI value on the ‘EW Trends and Charts’ link given above provide a relatively decent area to exit.  The market gets oversold when the RSI goes below 30 and overbought when it goes above 70.  Note that the RSI chart on this chart is 66.46 as of 10/5/2011.


October 4, 2011

SELL Signal Issued End of Day 10/3/20121 – BUY-FAILURE Signal

Filed under: Trend Timing Model — Rich Trend Trader @ 1:07 am

As suspected, the market completely reversed the BUY signal and the S&P600, S&P400, and S&P500 have closed below the low on 9/22/11.  A SELL signal has been issued being only the second such BUY-FAILURE signal issued using the full market signals and valuation data going back to Jan/96.  The last BUY-FAILURE signal was issued on 10/16/08 with the market valuations being very oversold as they are today.  As with many other signals since the end of 2007, I would not be surprised if this signal is completely reversed after a few days of the market going down.

Reason for a significant rally from here:

1. Of the 1500 total stocks in the S&P600, S&P400, and S&P500, only 1.5% are rated a BUY by the valuation service.

2. The 30-minute chart of the S&P500 saw the RSI (14) go below 30 which is an indication of an oversold market.

3. Trend model signal is now a SELL.

Reason for a significant decline to continue:

1. I am waiting for a rally to get out of my long indices.

2. Elliott wave counts are targeting the 1000 range on the S&P500.

3. The rally after the last BUY-FAILURE signal is not going to matter one bit as with most other signal conditions since the end of 2007.


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