November 9, 2018: member-only market studies


*Special update: now that the S&P has climbed back above its 200 day moving average, I will implement the safer way to use the Medium-Long Term Model as I mentioned last weekend. I will remain 50% long SSO unless the S&P falls below its 200 day moving average.
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.

Housing

Housing is one of the earliest leading indicators for the stock market and economy.
As we’ve highlighted in our recent posts, the U.S. housing market is starting to deteriorate. This is not yet a long term bearish sign, but will be in 2019 if housing doesn’t start to trend upwards again.
New Home Sales’ 2 year % growth turned negative this June 2018.
Here’s what happened next to the S&P 500 (historically) when the 2 year % growth turned negative (first case in 2 years).

Granted, the long term warning sign isn’t immediately obvious unless you overlap the signal dates onto a chart of the S&P 500.

As you can see, this doesn’t consistently mark the bull market’s top. But it does mean that the long term direction is starting to change. Hence our call for a bull market top in 2019.

Oil

Oil has fallen 9 days in a row. From 1983 – present, it has never fallen 10 days in a row.
Here’s what oil did next (historically) when it fell 9 days in a row.

NASDAQ McClellan Summation Index

The NASDAQ’s McClellan Summation Index (breadth indicator) has rebounded. It has gone from less than -1000 to more than -800 in less than 2 weeks.

Historically, this has been neither consistently bullish nor bearish for the NASDAQ on any time frame.

2 comments add yours

  1. Hi Troy,
    I’ve been enjoying reading your blogs and posts for about a year now. I appreciate your objective analyses and your clear explanations. So I thought it time to subscribe!
    I am a little confused regarding the ‘safer way to use the MLT model’. Are you suggesting that IF S&P>200dma AND MLTM=BULL, then 100% long. Or at the moment, are you suggesting 50% long as per your personal position?

    • Following the model:
      if S&P > 200 dma and Medium-Long Term Model = BULL, then 100% long
      But my personal decision is “if S&P > 200 dma and Medium-Long Term Model = BULL, then 50% long”. Just as a safety precaution this late in the bull market

Leave a Comment