After several weeks, we finally got a SELL signal. When everyone started saying market is due for correction, market kept going higher and after so many weeks we got the actual signal. That's why having a strategy/plan works in our favor. If we continued listening to news and TV noise then you would have exited market long back and missed all the remaining upside, Isn't it!!!! See below chart, how BPNYA index stayed above 70 mark for more than 2 months before triggering a SELL signal [BPNYA crossing EMA(30) downwards] last week. Does it mean market will start going down from here!!! Not necessarily, most likely market may make another attempt for breakout before going down or this might be start of a actual correction, we will find out in time. Keep an eye on the $VIX shown in below chart, if it starts moving higher above 23 then we shall see deeper correction with lot of wide daily swings in the market.... Information: (No need to worry about this, just for your knowledge...) You may have heard someone saying we see lot of divergences, even if market is making new high it is not convincing as other indicators are showing divergences. What does it really mean? Below NYSE Index chart shows what that really means. At this point do not worry about what those indicator mean, just understand what "divergence" means. See how NYSE Index in middle of below chart is rising higher but at the same time see how RSI (top indicator) and MACD (bottom indicator) are not making new highs. the RED arrows are going down and GREEN arrow is moving up showing both are moving in opposite direction. When this happens, it is called divergence and is a warning sign that says sooner or later market will correct. However, it does not tell you when will the actual correction start, it ONLY indicates that it will occur sometime in near future. Hence it is NOT a timing indicator but instead a warning indicator. What does all this mean for us?
401K Portfolio: By now you should have got out of the market and move your money to money market or cash funds. Preserve the gains and protect your capital, wait for market to setup again and BUY signal. ETF/Stocks: You can look for Bear ETF list and see if it offers any good entry points but make sure you have STOP LOSS set on your positions. Regarding Stocks, this may not be a good time to BUY or enter new positions, instead wait for good opportunities to show up. If you are already invested in stocks then have STOP LOSS set on your open positions. Good Luck trading!!!
andre
4/11/2012 03:47:58 am
So I think I found the best way to use your system. I love the signals it generates but if we look back on late last summer into early Dec there were so many whipsaws with your signal that could have spelled trouble. On stockcharts what I do is plot the price of $vix below your bpnya chart. If the $vix is above 25 I think we should be in cash and not follow any signals. This would have saved you from that mess last year. It also would have let you go back in late Dec when the enormous rise in equities began. And now we'd be back out in cash, LOVELY!
Admin
4/11/2012 07:41:04 am
We are glad you found your own method, that is the intention of the website. However we were aware of this and hence included VIX in our BPNYA chart from last couple of weeks. But before we conclude that it is indeed correct, we will need to perform more analysis going back for several years to make a reliable hypothesis.... :-)
andre
4/20/2012 09:36:45 am
have you backtested the bpnya with the vix for several years like you mentioned you would? I'm VERY interested to see the results.
Admin
4/21/2012 11:55:05 am
Analysis might take a while as the data is not easily available but feel free to perform your analysis and come up with your hypothesis... Comments are closed.
|
Details
What is NYUD?
What is BPNYA?Archives
January 2020
Categories
All
|