Jan 12, 2018 | EDS, EDS code, educational newsletters, jay kaeppel
First the brutal disclaimers: What follows is NOT a trading “system.” It is merely an “idea.” Even more brutally, I can’t even claim that it “works”. All the testing I have done so far is more anecdotal. Also to an extremely huge degree, the actual entry trigger and exit trigger that trader might choose to use will have – as always – at least as much if not more impact on overall trading results as the actual “alert” signal detailed below.
Got that? OK, then let’s proceed.
The Debate
The ongoing debate in trading is always – trend-following or countertrend? Which is the way to go? There are (conservatively) at least a bazillion and one ways to argue one way or the other. Figure 1 displays ticker TXN with upper and lower “Acceleration Bands” (code for TradingExpert Expert Design Studio EDS appears after disclaimer at end of article) drawn.
Want to start a debate? Ask this question: Is it better to buy when price hits the upper band or the lower band? Sometimes price hits the upper band and just keeps going. Sometimes it hits the upper band and the move peters out and reverses fairly quickly.
Going with the trend can lead to some big winning trades along the way, but typically involves a lot of whipsaws as well. Trading countertrend can lead to some great, quick profits – expect of course for when the initial trend never quite reverses and quick losses accrue instead.
What to do, what to do?
So the “idea” I mentioned at the outset generally goes like this:
*In an uptrend (which we will define in a moment)
*Wait for price to hit the Upper Band
*Then wait for a pullback
*Then wait for the uptrend to reassert itself
Got that? OK, me neither exactly. So let’s try to define things a little more clearly.
1. As long as the closing price remains above the 200-day moving average, we will call that an “uptrend”
2. Within an uptrend wait for the high of a trading day to reach or exceed the Upper Acceleration Band.
3. Following #2, wait for the 4-day RSI to drop to 32 or lower with the following caveats:
*If price touches the Lower Acceleration Band OR closes below the 200-day moving average
*Then the setup is invalidated
This is the “Setup”. For sake of example I will add an entry trigger as follows:
4. Following a valid #3 Alert Signal, buy when price exceeds the previous day’s high
I am going to purposely NOT add an exit trigger – just so that no one decides to “try it out” without at least giving it some thought on their own.
So Figure 2 shows the “Alerts” and “Entry Triggers” for the chart in Figure 1.
So Figure 3 shows the “Alerts” and “Entry Triggers” for ticker EBAY
So Figure 4 shows the “Alerts” and “Entry Triggers” for ticker CSCO
So are these signals any good? Well, like a lot of trading methods, some look pretty good and others do not. As I also mentioned earlier, a lot depends on the method or methods you use to exit each trade.
Summary
The reality is that there is a chance that the “idea” contained herein is just no darn good.
But also remember that there are other “trend filters” (besides the 200-day moving average), there are other “bands” (besides Acceleration Bands”), there are other oversold indicators (besides 4-day RSI) and there are other entry and exit triggers.
As such, this piece is essentially for people who are willing to do a little digging on their own and, a) become comfortable (or not) with the idea, and b) develop some position sizing, stop-loss and profit-taking criteria.
Jay Kaeppel
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
Acceleration Bands Code for AIQ Expert Design Studio EDS
a is ([high]-[low]).
b is ([high]+[low])/2.
c is (a / b).
d is (c*2).
e is (1+d).
f is (1-d).
g is ([high]*e).
h is ([low]*f).
AccelUB is Simpleavg(g, 20).
AccelLB is Simpleavg(h, 20).
Jan 3, 2018 | educational newsletters, jay kaeppel, sector funds
At first blush there might not seem to be much to connect biotech stocks and gold stocks.
One type of company hires people to engage in high tech biomedical engineering in order to develop potentially life-saving – or at least, life altering – medical breakthroughs…
…while the other hires people to (essentially) dig holes in the ground and mine stuff (granted, valuable stuff, but stuff mined out of the ground nevertheless).
But there is one other connection – stocks of both categories are quite volatile. And that alone may be enough to create a potential opportunity.
The BioGold Index
I created an “index” (such as it is) that combines Fidelity Select Biotech (FBIOX) and Fidelity Select Gold (FSAGX). The index appears in Figure 1. Like every other index in the world this index fluctuates up and down.
The RSI32 Index
The RSI32 Index is simply a 2-day average of the standard 3-day RSI Index. The code for TradingExpert EDS is below:
Define days3 5.
U3 is [close]-val([close],1).
D3 is val([close],1)-[close].
AvgU3 is ExpAvg(iff(U3>0,U3,0),days3).
AvgD3 is ExpAvg(iff(D3>=0,D3,0),days3).
RSI3 is 100-(100/(1+(AvgU3/AvgD3))).
RSI32 is simpleavg(RSI3,2).
The RSI32 Index for the BioGold Index appears on the monthly bar chart in Figure 2.
Figure 2 – The BioGold Index with RSI32 (drop to 33 or below = BUY) (Courtesy
TradingExpert)
The BioGold “System”
The BioGold System works as follows:
*When the monthly RSI32 Index drops to 33 or lower, buy BOTH FBIOX and FSAGX
*After a “Buy Signal” then when the monthly RSI32 rises to 64 or higher, sell BOTH FBIOX and FSAGX
For testing purposes we will use monthly total return data for both FBIOX and FSAGX from the PEP Database from Callan Associates.
The Results
Figure 3 displays the results of the buy signals generated using the rules above (assumes that both FBIOX and FSAGX are bought after monthly RSI32 drops to 33 or lower and are held until monthly RSI32 rises to 64 or higher.
| Buy Signal |
Sell Signal |
FBIOX+FSAGX % +(-) |
| 4/30/1992 |
12/31/1992 |
+14.4% |
| 2/26/1993 |
4/30/1993 |
+14.7% |
| 4/29/1994 |
9/30/1994 |
+7.2% |
| 12/30/1994 |
4/28/1995 |
+9.8% |
| 4/30/1997 |
9/30/1997 |
+18.4% |
| 11/28/1997 |
4/30/1998 |
+10.4% |
| 6/30/1998 |
12/31/1998 |
+16.1% |
| 3/30/2001 |
6/29/2001 |
+22.7% |
| 7/31/2002 |
12/31/2002 |
+18.1% |
| 7/30/2004 |
10/29/2004 |
+11.2% |
| 3/31/2005 |
7/29/2005 |
+10.2% |
| 4/30/2008 |
7/31/2008 |
+9.4% |
| 9/30/2008 |
6/30/2009 |
+3.8% |
| 5/31/2012 |
9/28/2012 |
+20.0% |
| 2/28/2013 |
2/28/2014 |
+28.6% |
| 8/31/2015 |
4/29/2016 |
+22.2% |
| 12/30/2016 |
2/28/2017 |
+13.2% |
|
Average % |
+14.7% |
|
Median % |
+14.4% |
|
Std. Deviation % |
6.4% |
|
Max % +(-) |
+28.6% |
|
Min % +(-) |
+3.8% |
Figure 3 – Trade-by-Trade Results
For the record, the “System” has been in FBIOX and FSAGX only 28% of the time (88 months) and out of the market 72% of the time (223 months).
Figure 4 displays the trades in recent years.
Figure 4 – BioGold System trades; 2012-2017 (Courtesy
TradingExpert)
*The Good News is that all 17 signals since 1992 showed a profit, with an average gain if +14.7%.
*The Bad News is that, a) 17 trades in 25 years is a pretty small number of trades and, b) there are some not insignificant drawdowns along the way (-22.8% in 1998 and -22.4% in 2008, -14.1% in 2013 and -13.6% in 2016).
Still, for what it is worth the monthly equity curve appears in Figure 5.
Figure 5 – Growth of $1,000 invested using the “BioGold System”; 12/31/1991-12/29/2017
For the record, the “System” has been in FBIOX and FSAGX only 28% of the time (88 months) and out of the market 72% of the time (223 months).
For the record, the “System” has been in FBIOX and FSAGX only 28% of the time (88 months) and out of the market 72% of the time (223 months). No interest is assumed to be earned while out of the market in the test above.
If we invest in short-term treasuries (1-3 yr.) while not in the stock market we get the results shown in Figure 6.
In Figure 6:
*The blue line represents the growth of $1,000 achieved by holding FBIOX and FSAGX when the BioGold System is on a “buy signal” and 1-3 yr. treasuries the rest of the time.
*The red line represents the growth of $1,000 achieved by buying and holding both FBIOX and FSAGX and then rebalancing at the end of each year.
The “System” grew to $19,863 and the “split” grew to $12,844.
Figure 6 – Growth of $1,000 using BioGold System plus 1-3 yr. treasuries when out of stocks (blue) versus buying and holding FBIOX and FSAGX and rebalancing each year (red);12/31/1991-12/29/2017
Summary
So is the “BioGold System” really a viable investment idea? That’s not for me to say. The per trade returns are pretty good but there aren’t a whole lot of trades and if history is a guide an investor would likely have to ride some significant drawdowns in order to reap the gains.
Still, market-beating performance is market-beating performance, so who knows?
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
Dec 14, 2017 | educational newsletters, jay kaeppel
First off, for the record I am an “Old Dog” and Bitcoin is a “New Trick”. That creates a problem right there. The truth is also that can’t honestly say that I fully understand what Bitcoin actually is or how it actually works (which technically means I am in pretty good company with a lot of people who are actually trading it, but I digress). And as a “grizzled veteran” (of the markets) there is a part of me that instinctively wants to dismissively shout “bubble” and sneeringly walk away. It’s not like it hasn’t been seen before – tulip bulbs, the Nifty 50, silver, technology/dot.com stocks, interest only mortgages and so on.
Most of you know the drill:
*Some form of “investment” catches lightning in a bottle
*The investment world (for lack of a more professional phrase) “wet’s itself”
*Price soars beyond all rational levels
You know, sort of like what you see in Figure 1…
Figure 1 – Bitcoin price (Bitcoin.com)
…And then it all ultimately plummets painfully to earth.
Well, at least temporarily. I mean sure tulip bubbles never ascended the heights again, but a lot of the Nifty 50 went on to still be major companies even after their stock cratered. The same for a lot of the major dot.com era companies. Silver is still trading as a serious commodity and real estate seems to have rebounded.
In sum: Is Bitcoin forming a price “bubble”? It’s hard to look at Figure 1 and not think so. Of course, even if it is the questions no one can answer for sure are “When” and “from what level”?
The other question is “if it is a bubble and the bubble bursts, will crypto currencies go the way of tulip bulbs (as an investment) or is there a future for them in the long run?”
A Recent Bubble History Lesson
In the late 90’s into 2000 a bubble formed in tech stocks. And the bubble burst and it was ugly. And many “hot” companies folded and vanished. But not all of them and certainly not the major players. And certainly not the industry as a whole. Like I said before I don’t truly understand Bitcoin and crypto currencies. So I can’t say for sure if they are a “craze” – like tulip bulbs in the 1600’s during “Tulipmania” or something more viable and sustainable – like technology stocks. To understand why this distinction matters, consider the stocks listed in Figure 2.
Figure 2 – Dot.com bubble stocks that survived and thrived
As you can see in Figure 2 through 7 each of these stocks experienced a “bubble” and a “crash”. Interestingly, the companies themselves ultimately rebounded and thrived.
The average “crash” was -87% and the average post-crash advance (so far) is about 16,000%.
Summary
The only thing we can say for sure is that some people will make a great deal of money from Bitcoin/crypto currencies and others will likely get wiped out. The danger is obvious: whenever you have a lot of investors “chasing” something – especially something that many of them don’t even understand – it is a recipe for trouble.
That being said, in my (market addled) mind the real “long-term” question is, will crypto currencies still be “a thing” after the bottom falls out? If Bitcoin is a bubble, then if history is a guide we can look or a decline in price somewhere in the 80% to 99% range after the top is ultimately made.
From there, if history is also a guide then depending on whether or not crypto currencies prove to be a viable thing, we can expect them to either:
a) Vanish altogether
OR
b) Rise 15-20 fold from the bottom
So here is my Bitcoin/crypto currency investing guide:
*It is OK to pile in and buy Bitcoin in hopes of getting rich (as long as you do not “bet the ranch”, invest only a small portion of your capital and acknowledge that a 100% loss is absolutely a possibility and that you are willing and able to accept that risk).
*It is also OK to sneer and shout “bubble” and not invest. But if and when the bottom drops out and prices crater remember to peruse the wreckage. There just might be an opportunity there (remember, Priceline lost -99% when the dot.com bubble burst, then gained 32,000%).
In any event, hold on tight people, this is NOT going to be a smooth ride.
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
Nov 14, 2017 | educational newsletters, ETFs, group and sector, jay kaeppel
In a recent article I highlighted some stocks that appeared to have a chance of “putting in a low”. In another article, I highlighted the potential usefulness of “horizontal lines” on a chart. The phrase “putting in a low” is essentially a kindler, gentler version of the phrase “Hey, let’s pick a bottom”.
The reality is that the ability to “pick tops and/or bottoms” on any kind of a consistent basis is a skill that roughly 99.2% of all investors and traders do not possess. That being said, there is such a thing as a legitimate “bottom formation” (at least in my market addled opinion). A security that bounces several or more times off a particular price is sending information that the sellers may be running out of ammunition. These levels can be observed by drawing horizontal trend lines across a price chart – connecting recent highs and/or lows at roughly similar prices.
“Loading up” in this situation is not recommended. But committing an acceptable percentage of one’s portfolio (a level which each investor must decide on their own) to such opportunities is a perfectly acceptable form of speculation.
So for arguments sake, below is a “Bottom Pickers Portfolio”. As always, I am not recommending this as an investment, simply highlighting an alternative idea for your further consideration.
The Tickers
The tickers included in this portfolio are mostly all commodity related. That is not a purposeful choice; they simply “fit the model”.
First is ticker BAL – an ETF that tracks the price of cotton futures. The critical level for BAL is roughly the $43.50 area.
Ticker GDX tracks a gold stock index and has been consolidating in a relatively tight range after last year’s sharp rally and subsequent pullback.
Ticker JO tracks the price of coffee futures. This is one of the weakest charts on the list and is dangerously close to failing to the downside. However, if the low holds this will strengthen the outlook a great deal.
Ticker SGG tracks the price of sugar futures. SGG has been consolidating in a narrow range for about four months. Key price levels on the downside are $26.50 and the August 2015 low of $24.79.
Ticker SWN is Southwestern Energy Co. After a long, devastating decline the stock is attempting to form a low in the $5 a share range.
Ticker UNG tracks natural gas futures. Thanks to the advent of fracking – which is made natural gas abundantly available – the price of natural gas has collapsed in recent years. In the past week it retested its 2016 low and then ticked higher. Like JO, this one is precariously close to “failing”. But for now…
The Bottom Pickers Portfolio
I use AIQ TradingExpert software to create my own “Groups”. So I created one called “Lows” to include the six tickers above. The group consists of an equal dollar investment in each ticker. The chart for this combination of tickers appears in Figure 7.EDITORS NOTE: Creating your own groups is accomplished in the TradingExpert Data Manager information can be found in this article ‘Adding groups and sectors to your Group/Sector List’
Summary
Let me be blunt. There is every chance that the majority of the tickers highlighted above will continue their long-term bearish trends and break down to the downside causing further losses for those holding these shares.
The primary thing to highlight in this piece is a personal preference. I prefer “horizontal” lines on a chart – i.e., straight across, left to right – to the more typical slanted trend lines that most traders use. The reason is simply – upward or downward slanting trend lines require a trader to decide which two (or more) highs (or lows) to connect in order to draw the trend line. At the end of the day this is often a subjective decision.
Horizontal trend lines – which connect to (at least roughly equal) highs or lows – are generated by the market itself and as such, are more objective in nature. In other words, investor buying and selling determines these levels.
Will my “Bottom Pickers Portfolio” move to the upside or fail to the downside? We’ll just have to wait to find out.
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
Oct 30, 2017 | educational newsletters, ETFs, jay kaeppel, sector funds
I know I repeat it a lot but the purpose of this blog is not to offer recommendations but rather to share ideas. So here is one that I am not quite sure about but am keeping an eye on.
The FourNonCorr Portfolio
Somewhere awhile back I started looking at trying to pair non correlated – or even inversely correlated – securities in a portfolio that had the potential to outperform the overall market. What follows is what I refer to as the FourNonCorr Portfolio. For the record I do not trade this portfolio with real money. I am still trying to figure out if there is something to it or not. But given that it has outperformed the S&P 500 by a factor of 3-to-1 (granted, using hypothetical results) since December of 2007, I figure it might be worth monitoring for awhile.
The portfolio consists of four ETFs:
Ticker FXE – Guggenheim CurrencyShares Euro Trust
Ticker UUP – PowerShares DB US Dollar Index Bullish
Ticker TLT – iShares Barclays 20+ Yr Treas. Bond
Ticker XIV – VelocityShares Daily Inverse VIX ST ETN
The monthly charts for each appear in Figure 1.
As you can see there is a lot of “zigging” by one accompanied by “zagging” for another. No surprise that when the Euro rises the dollar falls and vice versa. Also, TLT often seems to move opposite XIV. That is essentially the purpose of these pairings.
Figure 2 displays the correlations between the four ETFs in the portfolio (using AIQ TradingExpert Matchmaker function from 8/31/2012 through 8/31/2017 using weekly data). A reading of 1000 indicates a perfect correlation, a reading of -1000 indicates a perfectly inverse correlation.
|
FXE |
UUP |
TLT |
XIV |
| FXE |
|
(913) |
77 |
(13) |
| UUP |
(913) |
|
(117) |
43 |
| TLT |
77 |
(117) |
|
(234) |
| XIV |
(13) |
43 |
(234) |
|
Figure 2 – Correlations for the FourNonCorr Portfolio ETFs (Source:
AIQ TradingExpert)
Clearly there is a whole lot of “not correlating much” going on.
Results
For testing purposes I used monthly total return data for each ETF from the PEP Database from Callan Associates. The one exception is ticker XIV which did not start actual trading until December 2010. For January 2008 through November 2010 I used index data for the index that ticker XIV tracks inversely (
S&P 500 VIX SHORT-TERM FUTURES INDEX). Actual XIV ETF data is used starting in December 2010.
As a benchmark, I also tracked the cumulative total return for ticker SPY (that tracks the S&P 500 Index).
Figure 3 displays the cumulative percent gain or loss for both the FourNonCorr Portfolio and ticker SPY.
Figure 3 – Cumulative % gain/loss for The FourNonCorr Portfolio (blue) versus SPY (red); 12/31/2007-9/30/2017
Year-by-year results appear in Figure 4
|
4 NonCorr |
SPY |
Diff |
| 2008 |
(6.0) |
(37.0) |
31.0 |
| 2009 |
26.1 |
26.4 |
(0.3) |
| 2010 |
45.2 |
14.9 |
30.3 |
| 2011 |
(1.3) |
2.1 |
(3.4) |
| 2012 |
34.3 |
15.8 |
18.5 |
| 2013 |
19.3 |
32.2 |
(12.9) |
| 2014 |
5.3 |
13.5 |
(8.2) |
| 2015 |
0.6 |
1.3 |
(0.8) |
| 2016 |
21.0 |
11.8 |
9.2 |
| 2017* |
24.4 |
14.1 |
10.2 |
Figure 4 – Year-by-Year Results
The results by the numbers appear in Figure 5.
|
4NonCorr |
SPY |
| Average 12mo % +/- |
17.8 |
11.2 |
| Median 12mo % +/- |
14.9 |
15.0 |
| Std. Deviation |
17.1 |
16.8 |
| Ave/Std. Dev. |
1.04 |
0.67 |
| Worst 12mo % |
(11.9) |
(43.2) |
| Max. Drawdown % |
(17.8) |
(48.4) |
Figure 5 – By the numbers
All told The FourNonCorr Portfolio:
*Gained +334% versus +110% for SPY since 12/31/2007
*Experienced a maximum drawdown of -17.8% versus-48.4% for SPY
Thoughts
On paper, The FourNonCorr Portfolio looks pretty decent, particularly compared to the S&P 500 Index. But you will recall that I stated earlier that I don’t actually trade this portfolio with real money. Why not? A few concerns:
*Interest rates tend to move in long-term waves up and down. How beneficial will it be to have TLT in the portfolio if and when interest rates embark on a long-term wave up?
*I don’t entirely trust ticker XIV. Because of the way it is built it seems to have the benefit of upward bias due to contango in the VIX futures market (the opposite of ticker VXX – please Google “VXX” and/or “contango” for an actual explanation) it also holds the potential to sell off in shocking fashion. Using the index data as I did in order to replicate hypothetical performance from Jan 2008 through Nov 2010, XIV declined a stunning -72% between the end of May 2008 and the end of November 2008. It also experienced a -60% decline in 2015-2016. Need to give some thought to adding a security that is even capable of that to a permanent portfolio.
*On the flip side, XIV has been the driving force for gains in recent years and shows a cumulative gain of +416% since 12/31/2007. If (and when?) we ever do see a bear market and/or a significant pickup in volatility will XIV have a large negative influence on performance? That seems to be the $64,000 question.
Summary
As a thought experiment, The FourNonCorr Portfolio shows a pretty decent track record and seems to hold some interesting promise. As a real money, real world experience – questions remain.
Stay tuned, tinker and experiment if you wish,and don’t be too quick to “dive in.”
Disclaimer: The data presented herein were obtained from various third-party sources. Whilne I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
Aug 18, 2017 | chart patterns, educational newsletters, jay kaeppel
If I were the type to make bold proclamations I would probably consider “taking my shot” right here and shout “This is the Top” and/or “The Market May Crash.” Unfortunately, on those occasions (well) in the past when I would make bold public predictions of what was about to happen in the financial markets I would almost invariably end up looking pretty stupid. So even if I did make a “bold proclamation” it wouldn’t necessarily mean that anyone should pay any attention.
Besides all that the last thing I want is for “the party to end”. Even if you do think the market is about to tank it’s a pretty crummy thing to have to root for. Even if you did manage to “call the top”, the ripple effect of the ramifications associated with a serious stock market decline can have pretty negative effect on just about everyone’s life.
So let’s put it this way: I am concerned – and prepared to act defensively if necessary – but still have money in the market and am still hoping for the best.
Reasons for Caution (Indexes)
Figure 1 displays four major indexes. The Dow keeps hitting new highs day after day while the others – at the moment – are failing to confirm. That doesn’t mean that they won’t in the days ahead. But the longer this trend persists the more negative the potential implications.
Figure 1 – Dow at new highs, small-caps, Nasdaq and S&P 500 not quite (Courtesy
TradingExpert)
Reasons for Caution (Bellwethers)
Figure 2 displays 4 “bellwethers” that I follow which may give some early warning signs.
Figure 2 – Market Bellwethers possibly flashing some warning signs (Courtesy
TradingExpert)
*SMH soared to a high in early June and has been floundering a bit since.
*Dow Transports tried to break out to the upside in July but failed miserably.
*XIV is comfortably in new high territory.
*BID tried to break out in July and then collapsed. It is presently about 12% off of its high.
In a nutshell – 3 of the 4 are presently flashing warning signs.
Reasons for Caution (Market Churn)
In this article I wrote about an indicator that I follow that can be useful in identify market “churn” – which can often be a precursor to market declines. Spikes above 100 by the blue line often signify impending market trouble
It should be noted that the indicators signals are often early and occasionally flat out wrong. Still, a churning market with the Dow making new highs has often served as a “classic” warning sign.
Figure 3 – JK HiLo Index (blue) versus Nasdaq Compsite / 20 (red); 12/31/2006-present
Summary
Again, and for the record, I do not possess the ability to “predict” the markets. But I have seen a few “warning signs” flash bright red at times in the past. As a general rule, it is best to at least pay attention – and maybe make a few “contingency plans” – you know, just in case.
Here’s hoping my gut is wrong – again.
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
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