Stock Market Signals Are Piling Up

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A ton has happened the last two weeks, but you wouldn’t know it by looking at the S&P 500 chart. The post-election/vaccine news pop (Nov 9) pushed price above the red resistance line for a couple hours, but that’s it.

Despite the continued S&P 500 (and Nasdaq) trading range, there’ve actually been a number of historically rare signals … elsewhere or under the hood. 

Signal 1: The percentage of S&P 500 stocks above their 200-day SMA has cycled from below 10% to above 80% (currently 88%, the highest reading since January 2020). Over the past 20 years, this has happened only 4 other times.

The chart below plots the S&P 500 against the percentage of S&P 500 stocks above their 200-day SMA. The 10% and 80% level are marked in red and green. The exact forward performance (graph and table) after the signal triggered was published in the November 15 Profit Radar Report. 

Signal 2: It took over 26 months, but the Russell 2000 finally exceeded its 2018 high. Over the past 35 years, the Russell 2000 set a new all-time high after a correction that lasted at least a year seven other times. 

The green boxes highlight similar recoveries. The November 18 Profit Radar Report published the exact forward performance (graph and table) when the Russell 2000 did the same thing in the past. 

Signal 3: On November 2, 3, 5, 9, 80% or more of NYSE volume went into advancing stocks. Over the past 50 years, up volume exceeded 80% on 4 of 6 trading days only 7 other times.

How did the S&P 500 do after similar ‘volume thrusts’? The November 15 Profit Radar Report showed the exact forward performance (graph and table) after the last 7 times this happened.

What’s the benefit of knowing the forward performance of past signals?

The Profit Radar Report shows the performance for the next 1, 2, 3, 6, 9 and 12 month along with odds of positive returns for each time frame. This allows investors to gage future risk and reward based on similar setups.

There is much noise, but when the market delivers 3 historically rare signals in a short period of time, it’s usually worth listening.

Continued updates along with the most likely long-term forward path for the S&P 500 (this was just published) are available via the Profit Radar Report

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

Will the ‘Election Pop’ Last?

Subscribers to iSPYETF’s free e-mail newsletter receive a market outlook, usually once a week. The market outlook below was sent out on November 5. If you’d like to sign up for the free e-newsletter, you may do so here.

Will the ‘Election Pop’ Last?

Wednesday delivered the biggest post presidential election Tuesday pop ever! The S&P 500 gained 2.2%, yet only 45% of NYSE volume went into advancing stocks and only 55% of NYSE-traded stocks actually closed the day higher. 

This is another first. Since 1970, the S&P has never rallied more than 2% with less than 50% of volume moving into advancing stocks. Interesting times! 

Anyway, going back to the post-election pop: Of the 22 presidential elections since 1932, the S&P 500 was up the day after election Tuesday, 10 times, and down 12 times. The chart and performance tracker below shows the forward performance after the 5 post-election up days since 1970. 

Conversely, when the S&P 500 was down the day after election Tuesday, the forward performance was negative 75% of the time 2 weeks later and 50% of the time 3 months later. So a good first day has generally been a good omen (in a pandemic-free world). 

The last few Market Outlooks monitored the progress of the A-B-C decline from the September 2 high. Here is the Profit Radar Report’s assessment from October 28:

The green area on the 4-hr S&P 500 Futures chart shows a general target area for wave C. Wave C would equal wave A at 3,152 (dashed blue lines). Waves C tend to either fall short or exceed the prior wave A low to some degree.

Wave 3 of 3 (of C) may have concluded at today’s low. A couple more up/down sequences (waves 4 and 5) into the 3,235 – 3,152 range could conclude the leg lower, and if investors like the election results this correction.

S&P 500 Futures are up some 20 points in after hours trading, likely the start of a bounce.

As the bigger picture chart of the the S&P 500 below shows, price fell into the green support zone and jumped from there … and is now nearing a resistance zone. Sustained trade above resistance will likely eliminate any mid-term bearish Elliott Wave patterns, but as long as resistance holds, it should be respected.

Continued updates along with the most likely long-term forward path (this was just published) are available via the Profit Radar Report

The Profit Radar Report comes with a 30-day money back guarantee, but fair warning: 90% of users stay on beyond 30 days.

Barron’s rates iSPYETF a “trader with a good track record,” and Investor’s Business Daily writes “Simon says and the market is playing along.”

S&P 500 Update – The Sports Illustrated Jinx and Mean Reversion

The September 21 Profit Radar Report and September 24 Free Market Outlook (sign up here for free weekly Free Market Outlook e-mail) highlighted the the green S&P 500 support trend line as is was likely to spark a bounce. As the chart below shows, the line is derived by connecting the 2007 and 2018 highs.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.”  Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report

The bounce from trend line support happened, now we get to assess whether stocks will continue higher or relapse yet again.

Mean Reversion & the Sports Illustrated Jinx

The concept of mean reversion wasn’t discovered until the late 1800s (some 200 years after Newton was credited with discovering gravity) and is still misunderstood. 

There is a fascinating correlation between mean reversion and the Sports Illustrated (SI) jinx. According to the ‘jinx,’ athletes  are jinxed to perform poorly after appearing on the magazine’s cover. There’s a simple explanation for the so called jinx:

To make it on the SI cover, an athlete (or team of athletes) must have performed exceptionally well for a period of time. Appearing on the cover usually means that the athlete has performed above his average skill level (aided by a measure of luck and ‘being in the zone’) for too long and is bound to revert to the mean.

What does the SI jinx have to do with stocks?

The above-mentioned trend line has been acting as a mean reversion average of sort. When price rallied above the trend line for the first time (November 2019 – February 2020) it reversed lower, so much lower that price snapped back and once again exceeded it (July 2020 – September 2020). Last week, price once again came back to the trend line. 

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The chart below includes two more mean reversion gauges. The Bollinger Bands and RegressionDivergence. The center Bollinger Band converged with the support trend line at the time of the low (Sep 24) and the RegressionDivergence was smack dab neutral.

Based on the concept of mean reversion, the S&P 500 corrected enough to allow for the next rally.

Two Options

This is consistent with the S&P 500 projection and commentary published in the September 27 Profit Radar Report:

Since price broke above purple diagonal/wedge resistance, we assume wave B is now underway. Waves B are the most difficult waves to predict, with no real price targets and patterns ranging from very choppy to grinding and relentless.  Please note that the projections are not in scale in terms of time.

The alternative interpretation is that last week’s low was more important and will lead to new all-time highs (dashed green arrow). For the initial portion of this rally (or perhaps much of the rally, if it extends) it will be difficult to distinguish which option is playing out.”

Due to seasonality and pre-election uncertainty, stocks may still turn lower over the next 3 weeks, but more and more indicators are re-affirming a bullish fourth quarter tilt.

Continued updates are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

Confession: I didn’t See this Coming. Why?

From the March 2020 low, the S&P 500 rallied 63.70% in less than 6 months. This rally dwarfed my already bullish chart projection and outlook shared in the March 26 Profit Radar Report: “We anticipate a recovery towards 3,000 (for the S&P 500) over the next couple months and quite possibly new all-time highs in 2020.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.”  Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report

Although the March 26 Profit Radar Report outlined that new all-time highs were quite possible even in 2020, I expected a deeper pullback before actually reaching those all-time highs. Aside from a hitting a small speed bump in June, stocks never delivered such a pullback.

Throughout this rally, the S&P never dropped below key support, so reluctantly I had to allow for momentum to drive stocks higher even though stocks were over-bought and over-loved.

Fold or Stick to Your Guns?

Quite frankly, it was painful watching the market grind higher throughout August, and as an analyst I had to make a choice between:

  1. Throwing all caution to the wind and buy (because it’s been working) or
  2. Remaining true to historical facts and patterns.

What were the facts?

In early August, the S&P 500 came within striking distance of its February 2020 all-time high. The August 8 Profit Radar Report analyzed how the S&P 500 performed after it dropped 30% or more and subsequently rallied within 2% of an all-time high.

That forward performance was illustrated via the chart below. Forward performance was decent, but almost every time, the S&P 500 gave back all gains accrued.

This was not the only study suggesting that any accrued gains will eventually be erased. The chart below, which plots the Nasdaq-100 against its distance from the 200-day SMA (also published in the August 9 Profit Radar Report) projected one of two possible outcomes:

  1. The Nasdaq-100 will either correct fairly quickly or
  2. The Nasdaq-100 will continue grinding higher but eventually give back accrued gains (horizontal red lines)

Throughout August, stocks continued higher and risk of a pullback increased. The August 23 Profit Radar Report showed that there were 6 days where the S&P closed higher, but more stocks declined than advanced. The dashed purple arrow showed the most likely price trajectory. 

The August 30 Profit Radar Report showed that the Nadsaq-100 almost tagged long-term trend channel resistance and warned that: “S&P 500 Futures are in nosebleed territory.” For the first time since the start of this rally I actually suggested shorting stocks as a speculative trade for aggressive investors.

The September decline has erased all the August gains, which was the minimum expected down side. As the weekly S&P 500 chart shows, price is below double resistance, but above support. While below resistance, we need to allow for further down side, but a break below support is needed to get lower targets.

The question I keep asking myself is: How can I avoid underestimating a stock market move?

Lessons Learned

I will let you know when I’ve found a solution. For now, here are two lessons I’ve learned:

We are living in an age of extremes, and sometimes stocks just defy the odds

  1. Don’t become emotional with everyone else.
  2. One of my fellow market analyst wrote on September 2 that there is no sign of a top. Over the next 3 days the Nasdaq-100 lost some 10%. Investing peer pressure is powerful and as it becomes more intense it becomes more dangerous.

Continued updates are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

What Do Those Rare Stock Market Anomalies Mean?

Relentless is one way to describe the stock market rally from the March low. Unusual is another, and recently it’s gotten plain odd.

Relentless & Unusual

The chart below shows the relentless and unusual nature. I first published the chart on April 7, when it became clear that this rally was going to be strong. The various graphs below show the trajectory of the fastest rallies from a 52-week low.

As the performance tracker shows (based on forward performance as of April 7), initial strength always continued, but this rally has broken all record.

Odd – Exhibit #1

Here is where things get odd. On July 20, the S&P 500 closed 0.84% higher, but 57% of all NYSE-traded stocks ended lower. This anomaly occurred 7 more times since.

The chart below plots the S&P 500 against the daily percentage change and percentage of declining stocks. The red arrows highlight days when the S&P closed higher despite a majority of stocks closing lower.

S&P 500 rallies despite more declining than advancing stocks have only occurred in two other distinct periods over the past 50 years.

Odd – Exhibit #2

Yesterday (August 26), the S&P 500 ended the day with a 1.02% gain, but the VIX rose 5.63%. Since there is an inverse relationship between the S&P 500 and the VIX, this is a very unusual reading.

In fact, since 1997, there’s been only one other time when the S&P 500 gained more than 1% and the VIX gained more than 5%. It was on June 8, 2020 (see chart below).

If we relax the parameters to include every instance where the S&P gained more than 1% and the VIX more than 3%, we get 10 other instances over the past 20 years.

Do Oddities Matter

The March 26 Profit Radar Report looked at a number of indicators (including liquidity) and concluded that: “We anticipate a recovery towards 3,000 (for the S&P 500) over the next couple months and quite possibly new all-time highs in 2020.”

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.”  Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report

New all-time highs are no surprise to subscribers of the Profit Radar Report, but that stocks got there without any significant pullback is unusual, even unprecedented.

But we are here now, and I’ve found that most investors approach the market in one of three ways:

  1. Get out of the market because it doesn’t make sense anymore
  2. Buy because the Federal Reserve will keep stocks afloat
  3. Stay informed and look at indicators that work most of the time (the kind of indicators that sniffed out the March low and projected a powerful rally) and put the odds in your favor.

If option #3 sounds most appealing to you, and if you would like to find out the other rare and unique times in history when 1) S&P 500 and VIX went up at the same time and 2) S&P 500 rallied with more declining than advancing stocks, you will find the Profit Radar Report of interest.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

Would a New S&P 500 All-time High be Bullish or Bearish?

Who would have thought that 2020 will see the S&P 500 drop 32.80% from its all-time high and come within striking distance of recovering all of its losses.

To subscribers of the Profit Radar Report, that’s not big news, because the March 26, 2020 updated stated that: “We anticipate a recovery towards 3,000 (for the S&P 500) over the next couple months and quite possibly new all-time highs in 2020.”

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.”  Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report

Now that we are here, its a good time to ask: Would a new S&P 500 all-time high be bullish or bearish?

Historical Parallels

Sunday’s Profit Radar Report included the following study, which provides the best possible answer:

Over the last 50 years, the S&P 500 has lost 30% (or more) and subsequently rallied back within 2% of its prior all-time high 5 other times.

The chart below shows the forward performance of each individual occurrence along with the average forward performance. Here are the key takeaways:

  • Only the 1980 rally relapsed immediately
  • The 2007 rally eventually turned into a bear market
  • Average returns were slightly negative for the first 3-4 months
  • Aside from 2008, the S&P 500 traded higher 9 and 12 months later with an average gain of 5.88% and 7.30%
  • After 4 months, the S&P 500 was either negative or gave up (most of) its gains every time (dashed red line)
  • This study suggests that chasing the breakout doesn’t come with a sustainable reward
  • This study has been included in the Risk/Reward Heat Map

Technical Analysis

In terms of technical analysis, the July 20 Profit Radar Report stated the following:

Price broke out today, but breadth did not confirm, a bi-polar breakout. There are plenty of reasons to view this breakout as suspect, but while 3,220 and 3,190 holds as support, momentum could push price higher, erase the bearish divergences, and target the open chart gap at 3,328.45. Aggressive investors afraid of missing out on any upside may consider going long with a stop-loss below support.

The chart gap (dashed purple line) was closed August 5, but – courtesy of strong up side momentum – price continues to grind higher.

Grinding higher is what momentum markets do … until a nasty pullback brings investors back to reality. Predicting such a rude wakeup call is nearly impossible, but a break below the convergence of support (blue oval) would be a yellow flag.

Continued updates, projections, buy/sell recommendations are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

S&P 500 Update

On March 26, the Profit Radar Report published the projection below and stated: “We anticipate a recovery towards 3,000 (for the S&P 500) over the next couple months and quite possibly new all-time highs in 2020.”

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

Less then two month later, the S&P 500 reached and exceeded 3,000. Are new all-time highs next?

To answer this question, we will take a chronological look at many indicators and studies published (in the Profit Radar Report) over the past couple of months.

April 6, 2020 Profit Radar Report

90.43% of NYSE-traded stocks closed higher for the day. We have seen large clusters of 80% or 90% ‘all or nothing’ days (where 80% or 90% of NYSE-traded stocks and/or volume occur to the up or down side). This too is rare, and has been longer-term bullish (S&P 500 traded higher 6 and 12 months later 90% of the time).”

April 7, 2020 Profit Radar Report

It took the S&P 500 just 11 days to retrace more than a Fibonacci 38.2% of the previous losses. This is a very quick retracement. Since 1970, there were only 5 other times where the S&P retraced more than 34% that quickly. The chart below shows the forward performance of those 5 times along with the average. As you can see, returns were rock solid.” Note: Chart below was updated to include price action until May 27.

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April 12, 2020 Profit Radar Report

More than 90% of volume went into advancing stocks on 2 days last week (April 6: 91.87%, April 8: 93.13%). This is rare and usually significant. The chart below plots the forward performance of the 6 other times when there were more than 2 90% up volume days in a 3-day period within 1 month of a 52-week low.

April 19, 2020 Profit Radar Report

Historically, rising stocks despite falling earnings are not unusual. Since 1970, there were 8 other earnings seasons following a 30% drop in the S&P 500. The chart below shows the 1-year forward performance of every instance along with the average forward performance.

April 19, 2020 Profit Radar Report 

The March and April PRRs included a ton of data points and studies analyzing the market from all sorts of different angles. Most of the studies and projections pointed to a signifiant rally with a minimum target of 2,900 – 3,000 … and potentially new all-time highs later in 2020.

The S&P 500 has almost reached the ‘first phase’ of our forecast (2,900 – 3,000). While the up side has become more risky, price may continue to move higher as long as the S&P does not fall below support at 2,730 – 2,700.”

May 3, 2020 Profit Radar Report

The April 11 Profit Radar Report fiirst remarked on the strength of this rally, which implied further gains. Below is an updated look at the same chart, which shows that even the strongest rallies from a 52-week low started to take a pause right about 29 days after the low was struck.”

Summary

In late April the S&P 500 got very close to our up side target and I was looking for a pullback. This pullback was more shallow than expected. Instead of providing a better buying opportunity at even lower prices, it sparked another rally leg.

The S&P 500 is now trading above the upper Bollinger Band with RSI-2 nearing short-term over-bought. RSI-35 on the other hand continues to confirm new price highs.

Short-term, this leaves the S&P 500 in ‘melt up’ mode. Usually it does not pay to chase an over-bought market (in fact the risk of a nasty pullback is high), but this could be one of those rare times where stocks defy the odds and grind higher.

At some point, however, there should be a pullback. The weight of evidence suggests that any pullback will be a buying opportunity (minimum target: open chart gap at 3,328.45).

Continued updates, projections, buy/sell recommendations are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

S&P 500 Update – What Will Follow the Fasted Drop and Pop Ever?

It’s been kind of quiet the last 2 weeks, but lets not forget stocks distinctive performance prior to this relative calm.

For some perspective, the chart below compares the first 48 days of the 2020 bear market with the first 48 days of the 1929, 1987 and 2007 bear markets. By day 12, the Dow Jones Industrial Average (DJIA) showed it was intent on carving out its own path. By day 29, it was down 37.09% an destroyed any correlation to prior crashes.

It was around the crash low, on March 26, when the Profit Radar Report stated that: “We anticipate a recovery towards 3,000 for the S&P 500 over the next couple months,” which implied a 36% rally from the low.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

Such a strong rally would be quite unusual. How unusual?

The April 7 Profit Radar Report pointed out that: “It took the S&P 500 just 11 days to retrace more than a Fibonacci 38.2% of the previous losses. This is a very quick retracement. Since 1970, there were only 5 other times where the S&P retraced more than 34% that quickly. The chart below shows the forward performance of those 5 times along with the average. As you can see, returns were rock solid.”

Below is an updated version of the chart first published on April 7. The red graph represents the 2020 rally, which has been even more ‘fast and furious’ than the previous set of ‘most furious rallies from a 52-week low.’

In a nutshell, we just witnessed the fastest ever drop and pop in history. What’s next?

The S&P 500 is nearing 3,000, the up side target mentioned in the March 26 Profit Radar Report, and the April 15 Profit Radar Report warned that: “The S&P 500 has almost reached our target and up side potential has become less attractive.”

Here is one reason why: At 2,885, wave C equaled wave A, which is natural resistance. There are many different ways to interpret the structure (according to Elliott Wave Theory), but at this point the rally from the March low appears to be 3 waves.

We’ll have to see if it stays at 3 waves (usually indicative of a counter trend move) or turns into 5 waves (usually indicative of a directional change, in this instance from down to up).

Regardless, a break below support shown at 2,730 – 2,700 is needed to unlock more down side risk.

A break above 2,900 could lead to 3,000+, but such a rally may not stick.

Continued updates, projections, buy/sell recommendations are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

Nasdaq-100 QQQ near Triple Support/Resistance

The February 19, 2020 PRR highlighted the Nasdaq-100 and QQQ wedge (purple lines) and stated: “The QQQ chart shows a rising wedge (ascending purple lines), subsequent breakout, and measured target (242.06). Fibonacci projection resistance is at 243.46 (red line), Those levels are 2 – 2.5% above today’s close.”

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

QQQ missed the measured target for the wedge breakout by a couple percent before falling hard. More interestingly, QQQ is now back at original wedge resistance (around 201), which is reinforced by the 200-day SMA and the 50% Fibonacci retracement level (February 19 high – March 23 low).

Just a couple of weeks ago, QQQ traded 17% below its 200-day SMA, and now it’s above the 200-day SMA, the quickest such recovery ever.

There’ve been 11 other times when QQQ clawed back from a 10% or more drop below its 200-day SMA to above the 200-day SMA rather quickly. The forward returns were inconsistent, but if QQQ relapsed, it tended to happen fairly quickly after the initial bounce back above the 200-day SMA.

In summary, there is a triple support/resistance zone at 200-202 for the QQQ, and how price behaves around this zone may set the stage for the coming days and weeks.

Continued updates, projections, buy/sell recommendations are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

S&P 500 is the Latest Coronavirus ‘Casualty’

The ‘death cross’ has struck again, demanding the next ‘casualty,’ the S&P 500.

Yesterday, the S&P 500’s 50-day SMA crossed below the 200-day SMA, commonly – and ominously – considered the ‘death cross.’

Something with such a dire name has got to be bearish, right?

There were 5 other S&P 500 death crosses in the last decade (red lines, chart below). None of them was particularly bearish. But, all of those happened during one of the greatest bull markets of all time.

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Let’s expand the look-back period to 50 years and apply the following two filters to get the most similar precedents:

  1. First crossover (50-day SMA below 200-day SMA) in at least 10 months
  2. Crossover preceded by a 5% decline over the prior 4 weeks

Here are the signals: 2/1984, 11/1987, 4/1994, 7/2010, 8/2011, 8/2015, 12/2018.

The chart below shows the performance of each signal 40 trading days before the crossover and 250 trading days (1 year) thereafter. 

Short-term, the performance was rocky, but long-term performance was solid:

  • 1 month later: S&P 500 down 5 of 7 times (average loss: 1.47%)
  • 2 month later: S&P 500 up 6 of 7 times (average gain: 2.29%)
  • 3 month later: S&P 500 up 7 of 7 times (average gain: 4.58)
  • 6 month later: S&P 500 up 6 of 7 times (average gain: 7.00%)
  • 12 month later: S&P 500 up 7 of 7 times (average gain: 16.06%)

The chart below shows the S&P 500 performance for the past 40 days and the average forward performance of the past 7 signals projected forward.

Based on the past 50 years of history, the death cross has not been a bearish signal. The caveat is that the 2020 stock market has already defied many historic patterns.

Some of those historic extremes along with the short-term S&P 500 forecast are available here.

Continued updates, projections, buy/sell recommendations are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

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