I’ll be posting the monthly results for the strategies in short order. Suffice to say they all did well – not exactly shocking in this rally – you really could have thrown a dart and be looking like a genius right now. In any case, we have 3 stocks for purchase tomorrow at the close being generated by MOMO1 – SLX, GDX and EWS. We also have the Skills Index about to go on Buy again.
Archive for the ‘Skills Index’ Category
That is all for today – the index is now, once again, on sell. That means we’ll look for short side opportunities here.
Madoff goes to prison – frankly I am amazed that he plead guilty and it was all over so quickly. I figured that he’d try and prove himself innocent – I wonder what he got in return? A better prison? An agreement to leave his wife alone? I expect we’ll know the deal in the next few weeks as it comes out. Bottom line – this guy deserves nothing except pain.
Ok – onto the market: one of my measures for the level of “overboughtness” in the market is the number of stocks hitting RSI2 greater 90 and the number stocks hitting RSI2 of less than 10. Right now, on the S&P 500, we have 51.6% of stocks with an RSI2 of greater than 90, while the number of stocks with an RSI2 of less than is at 0.2%.
And, at the same time, we have the Skills Index going on a buy. So, how to play this? Short term, I’m looking at shorts (or longs in inverse ETFs), including (but not limited to): SDS, DUG, TWM, SMN and MZZ. On a retracement, we’ll look at whether or not it makes sense to go long. Again, we’ll look for a rise in the percent of stocks in the S&P 500 with an RSI2 of less than 10. Now, this isn’t a timing indicator – it is meant to be a macro view of the market and where we are likely to go – but not necessarily when. RSI2, like an oscillator, can get pegged. So what makes sense here is to start legging into the trades.
The Skills Index is back on sell again. This is a tough market, no doubt about it. Short term, though, I wouldn’t be adding to short positions here with RSI2 on the SPY down to around 3, and the percent of stocks in the SP-500 with RSI2 of less than 10 approaching 60% – pretty close to other times where we saw reversals. So what to here? Well, I’ll watch the trade during the day for a reversal. Other than that, for short positions I’d look for a retracement on this move to establish positions, but honestly there really has been no strong trend (except the overall down trend), so I’d limit both long and short positions. I think if you are trading here, keep it small.
Suffice to say that all the positions established in my prior post from MR1 and MR2 are underwater – I’ve got one new position coming from MR2 – QLD.
Not really shocking based on the mini-rally we’ve been experiencing. Anyone notice that SLX has been killing it? We’re approaching resistance across the board – rising number of stocks with RSI2 of greater than 90 – so we are probably looking at a pullback next week.
I’ll be writing more about what I’m seeing in the market but I wanted to do a quick update on the Skills Index. We now have a sell signal after the index quickly climbed to over 70. Two interesting points about the performance:
- It rose very quickly to 70 – probably too quickly in my mind. As a result, I was hesistant to put money to work on the long side while it was that high.
- The performance of the index in bear markets is consistent with what we’ve seen in past bear markets. Meaning, we have a quick, large bear-market rally and then a swift retracement. I’m thinking a lot about how to model for this in a system.
Here’s the index:
Now – similar to the way we trade the index on the upside, we don’t enter immediate but will, rather, wait for a retracement of this down move to look to enter on the short side. More to come.