Rich Trend Trader's Blog

November 29, 2011

Trend Model BUY Signal Issued End of Day on 11/28/11

Filed under: Trend Timing Model — Rich Trend Trader @ 2:36 am

Valuation indicators had reached sufficiently low levels on 11/23 and 11/25 to produce a BUY signal which occurred with the market action on 11/28.  Technical indicators for a CASH signal during a market decline did not reach required levels during the recent market pullback.

The trend model indices low on 11/25 are now key for levels to watch for a trend model BUY-Failure.  If the S&P600, S&P400, and S&P500 should close below their respective lows from 11/25, a BUY-Failure signal will be issued.  Looking for a move to at least the 50-EMA on the S&P600 and S&P400 before another potential SELL signal is issued should the market want to continue back lower.

The SIGNAL DATES AND INDEX RETURNS data will be updated at the end of the day tomorrow.

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

November 22, 2011

Trend Model SELL Signal Issued End of Day 11/21/11

Filed under: Trend Timing Model — Rich Trend Trader @ 6:49 am

A trend model SELL signal has been issued.  This particular type of sell signal has been issued a total of 7 previous times since Jan/09 with 6 instances being failures.  The failures are indicated by the market trading high at some time prior to the valuation indicators becoming low enough to produce a market BUY signal.  Prior to Jan/09 there were 11 sell signals of this type with only 2 being failures.  There isn’t a consistent indicator across all 6 failed signals but in 4 instances, the local low was indicated by the following conditions:

– At least one of the S&P600, S&P400, and S&P500 closing below the lower Bollinger (20,2) band.

– At least one of the S&P600, S&P400, and S&P500 closing below the previous 20-day low.

– The corresponding 5-day RSI on the index satisfying the above at the 25 range or lower.

The above have been met.  However, without a consistent set of rules for all signal conditions I would not be jumping to conclusions.  There are other indicators that I have been looking at for CASH signals at local lows in the same sense as CASH signals at local high.  One such indicator would be when the $vix:$tnx (Volatility Index / 10 Year Treasury Yield) which is already a part of the trend model as a ‘fear’ indicator closing above the upper Bollinger (20,2) band on or after the indicator initiating the SELL signal.  This condition has not been met for the current SELL signal but is not necessarily required.  Therefore, I would not be surprised if the market made another lower closing low below the low of 11/21 even if the current SELL signal eventually produces a failed signal.

The time spent creating consistent and repeatable BUY and SELL signals over the past several months has left little time to work on the CASH signals.  However, the tentative CASH signal on 11/1/11 worked wonders.  I will keep plugging away at them in order to limit market risk at potential local highs and lows.  I envision that these signals would only work at partial positions of the current portfolio and not full positions due to potential continuations of the active market signal to new highs or new lows.

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

November 3, 2011

Review and Update of Trend Model Rules Is Complete – 11/2/11

Filed under: Trend Timing Model — Rich Trend Trader @ 7:55 am

I have finished a complete review of the trend model rules such that consistent application of all requirements are applied first, back to Oct/98 in which daily data is available and then to Jan/96 in which extrapolated weekly data is available.  The signal return data for 2011 as of 11/2/11 has been posted to the SIGNAL DATES AND INDEX RETURNS page.

I have not had time to work on the alternate CASH signal much but it would appear that this type of signal was issued at the end of the day on 11/1/11.  That is, at least one of the trend model indices closed above its upper Bollinger band (20,2) limit and subsequently at least 2 trend model indices closed below its previous 5-day low.  The twist to this signal is trying to use the Volatility Index (VIX) divided by the 10-Year Treasury Note Yield (TNX).  This is already a part of the trend model to gauge ‘fear’ in the market.  In many instances, when the VIX/TNX (symbol $vix:$tnx in stockcharts.com) does not close below its lower Bollinger band (20,2) limit there is not as much fear in the market and therefore the potential for a continued sell-off.  It has been said that bull markets like to climb the wall of worry and stock market corrections occur during periods of complacency.  Lets see how this 11/1/11 CASH signal plays out going forward.

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

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