November 21, 2018: member-only market studies


Here are the member-only market studies.
Let’s analyze the stock market’s price action by objectively quantifying technical analysis. For reference, here’s the random probability of the U.S. stock market going up on any given day, week, or month.

*Probability ≠ certainty.

New Lows

In today’s free market studies we looked at what happens next to the S&P 500 when the NYSE New Lows Index’s 50 day moving average is more than double that of its 200 day moving average.

Here’s what the Dow tends to do next

Here’s what the NASDAQ tends to do next

S&P vs Oil

In today’s free market studies we looked at what happens next to the S&P when the S&P:oil ratio’s 14 weekly RSI exceeded 69

Here’s what oil tends to do next

Equity Put/Call

In today’s free market studies we looked at what happens next to the S&P 500 when the Equity Put/Call ratio’s 50 day moving average is more than 4% above its 200 day moving average (i.e. Equity Put/Call Ratio is trending up).

Here’s what the Dow tends to do next

Here’s what the NASDAQ tends to do next

Here’s what the Russell 2000 tends to do next

8 comments add yours

    • Ahmad, technical studies can only tell you the market’s most probable direction. They can’t tell you exactly how much higher or lower the market will go. Predict direction and not price

  1. Troy,
    Your stop-loss approach (exit at 200 dma, then reenter when it hits back) looks bulletproof at a glance, and would’ve been ideal… if the stock exchange operated 24/7 and hence the market was to move continuously. But! The fact that there are gaps (maybe a few %) between previous close and subsequent open can seriously erode the investment, especially if a leveraged ETF is used and these re-entries happen e few times during the correction.
    Could you run a study illustrating the average historical erosion of a non-levered S&P ETF if that strategy were to be used in the past corrections/bear markets?
    Thanks!

    • Just to make myself clear: I meant the situations when, say, index opens below 200dma (previous day being above 200dma) and the sale is triggered BELOW 200 dma, then down the road it opens above 200dma after the day when it closed below it and the buy is triggered ABOVE 200dma, and so on. The differences between buy and sell triggers, added during the same correction, would constitute that notorious erosion. Obviously, if they happen during the trading sessions, the erosion due to that is virtually zero, as the buys/sells are triggered exactly at 200 dma.

      • E.g. if you don’t use the 200 dma stop loss with UPRO, the average annual return is 43% If you use the 20 dma stop loss, your average annual return is 38%. So you give up approximately 12% of your profits (5/43)

    • Hi Oskar,
      What do you mean by “erosion of a non-levered S&P ETF”? E.g. $SPY doesn’t have erosion/decay.

      • That’s a different type of erosion: say, today market closed 0.1% above 200dma, sell not triggered. But tomorrow it opens 2% below 200dma – sell triggered, 2% contributes to that “erosion”. At the same time, re-entry point will be lower as 200dma will have declined, that mitigates that “erosion”. You answered above, that “erosion” claws historically 12% off the thriple-levered ETF returns. Excellent strategy, thanks! God bless us to exit from current shit, I will be an avid follower of that cautious one come subsequent corrections 🙂
        Excellent job as always Troy, highly appreciated!

        • And well, another factor in favor of your strategy if levered ETFs are used: while the market wanders below 200 dma, levered ETFs erode if the decline is severe and/or prolonged. If you are sit in cash and laugh in the interim, that saves you from that erosion.
          Ehhh… Pity that you didn’t publish this 200dma strategy before October! But well, life is long, will implement it many times hopefully.

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