Rich Trend Trader's Blog

April 18, 2013

Trend Model SELL Signal Issued EOD 04/17/2013

Filed under: Trend Timing Model — Rich Trend Trader @ 5:02 am

A trend model SELL signal has been issued.  Given that the VIX has closed above its upper Bollinger band and the BPSPX close above its lower Bollinger band, look for a rally for a potential rally for a day or two before the market goes down should that be the ultimate direction that it wants to go.  Note that this type of sell signal has not been too successful since 2009 therefore will be looking for the CASH signals to be issued during this signal to hopefully realize profits.

MARKET UPDATE (4/26/2013): The previous 5-day and 10-day high values for the potential SELL failure signal has now moved to those registered on 4/25.  However, given the market rise in the face of mediocure growth and rising level of those not in the workforce, I would not be the least bit surprised that the current signal fails (just as this type of signal has most of the time since 2009).  I will be relegated to taking a loss on this signal and just move on to the next.  However, I have found that using the mechanical system is much more profitable over the long run than just guessing.  This market seems to be bullet proof and given the liquidity injections that the FED has been performing since 2009 it does not appear that there will be any sizable corrections until this stops.  As I have explained to some over the past few years, it does not matter what the economic data says or where you believe the market should go when trillions of dollars are being funneled to large banks all in an effort for Bernanke to prove his theory on the cure for the Great Depression correct.

MARKET UPDATE (4/23/2013): The market has rallied in a manner that is not inconsistent during the type of market SELL signal that was issued at the end of day on 4/17/13.  I have reviewed this type of SELL signal historical charts going back to 1996 and there is typically a 50/50 chance that this type of reaction especially given the VIX and BPSPX closing values relative to the upper and lower Bollinger bands.  This is why I scaled out of my long positions and into short positions on the 19th and 22nd rather than take the market values on the 18th.  I also trade some short term options with a small amount of cash and purchased put options on the SPY today.  The key levels for the current SELL signal with respect to a failure is the high for the previous 5-day and 10-day values and the high on 4/15 (the day in which the SELL signal initial trigger was issued).  A SELL Failure Signal will be issued is one of the following occurs:

– All trend model indices (RUT/SML, MID, and SPX) close above the 4/15 high on the same day.

– At least one of the trend model indices (RUT/SML, MID, and SPX) close above its previous 10-day high (and above the 4/15 high) and all other trend model indices close above their previous 5-day high.

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