Is the Stock Market Rigged? … and a More Important Question

Is the stock market rigged? Many believe it is … and rightfully so.

However, there are more interesting and pertinent questions, such as:

  • To what extent is the market rigged, and how does it affect me?
  • Why do allegations of a rigged market sprout up right now?

Different Ways to Rig the Market

There are different ways to ‘rig’ the market, and there are different entities to do so.

  • High frequency traders attempt to gain a time advantage.
  • Inside traders try to get information ahead of the crowd.
  • The Federal Reserve and central banks around the globe aim to prop up equity markets via various types of quantitative easing or low interest rates. The chart below plots the S&P 500 against the actual QE liquidity flow to illustrate the correlation (or lack thereof, may the reader judge) between stocks and QE.

Regardless of the exact correlation between QE and stocks, even the Federal Reserve’s own research admitted that FOMC meetings drove the S&P 55% above fair value (more details here).

But none of the above is new or shocking.

Why Now?

Perhaps more interesting than who and how is why now?

Isn’t it curious that articles and charts (like below) about central bank liquidity driving up stocks are popping up just as the S&P 500 is breaking to new all-time highs?

There were no such claims last August or early this year when the S&P traded below 1,900. Seems like investors (and fund mangers) are fishing for excuses.

As the chart below shows, investors and fund managers were clearly under-invested at the recent lows. 3 out of 4 large cap fund managers got beaten by the S&P 500 in 2015. How to explain such dismal performance?

Central bank liquidity is a welcome scapegoat. Fund managers could (and do) essential argue: “Our research suggested lower prices, but central banks stepped in and unexpectedly buoyed stocks.”

Boycotting Yourself Out of Profits

This is the most hated stock market rally ever, that’s why it’s gone on for so long.

Today’s market hater is tomorrow’s buyer (disgruntled, but ‘better late than never’). As long as this cycle perpetuates, there’s more up side. We observed this back in 2013: QE Haters are Driving Stocks Higher

Boycotting the market by avoiding stocks may feel like the ethical thing to do, but it hurts the portfolio.

There is no question the market is rigged to some degree, but that’s not necessarily a disadvantage for open-minded investors.

Rigged or not, the stock market has responded reasonably well to time-tested indicators. A number of them pointed to a strong stock market rally.

The key question is not whether the market is rigged, it’s how do you handle a rigged market? Now is the time to be the best informed investor you know.

The latest indicator-based S&P 500 forecast is available here: Stock Market Melt-Up Alert?

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 profile 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, and 24.52% in 2015.

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

 

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Good, Bad and Ugly – How (Former) Subscribers Rate the Profit Radar Report

What do subscribers think about the Profit Radar Report? How about FORMER subscribers? This might be the most candid real life testimonial page you’ve ever seen. Here is a selection of comments ranging from complimentary to brutally honest.

The iSPYETF inbox has received quite some feedback in 2016. Most of it was complimentary, but we also received some downright angry criticism too.

Below is a selection of unedited comments. Prior permission to publish comments was not obtained. Therefore, the last name is abbreviated for privacy reasons.

About 1 out of 10 subscribers cancel within the 30-day money back guarantee period. In an effort to constantly improve the Profit Radar Report, we usually try to find out why. Some of the reasons are published below (see cancellation feedback).

Comments are sub-divided into four categories:

  • Feedback of new subscribers
  • Feedback after a missed trade
  • Feedback of subscribers who wanted to cancel their service
  • Feedback of subscribers whose credit card was declined at renewal

New Subscriber Feedback

Hi Simon, I am so glad that I subscribed to your family of subscribers! Went through your recent reports as well as recent ones. I must say they are simply brilliant!! I do subscribe to the Tom McClellan financial publications, but I think your analysis is far more comprehensive and insightful. Thanks for having such a brilliant piece of research. — Mohit T, India

You’re a genius Simon. Your website, its name, its logos, the annual fee, the colors in the website, the boat with the 4 engines and the timeliness of your hunches are all AWESOME. Man, that’s ONE SLEEK boat. It’s taken me 20 years to carve my way here, one lost dollar at a time 😦  You can post my comment on your website as a ‘testimonial of initial impression’ Simon. — Chris S, British Columbia

Simon, as a new subscriber, I must say that I am really enjoying your newsletter. I find it quite thorough and very informative. I would like to request that you please include more frequent updates for Crude oil. I did read that due to the volatility of the commodity, you don’t trade it as much. If possible though, please include it for those of us that trade it and would greatly benefit from your analysis. Thank you again and have a wonderful day! — Keena B, FL

Dear Mr. Maierhofer, just started reading your sight and may I complement you on some of the finest analysis I have ever read. My question and comment today is do you use the measured move technique in your analysis among your other tools. If you observe the last 3 big downturns, October 2014, Sept 2015, and Feb 2016, if you calculate the bottom of the SPY downturn in each case to the top of the rise up,each is a 25 point increase. I look forward to your response. Warmly. — Stuart S, PA

Hi I’m new to your newsletter and subscription. I need to clarify short ETF’s. 1) Are they traded after hours or before the market opens? 2) When you short a stock there is a time limit ( I think), is there a time limit on short ETFs? When I buy an ETF I always put a stop loss order on it between 3 and 5 %, allowing for fluctuation, is that about right? Your articles have really helped me focus my trading, before I was floundering. Thank-you! — Robert J, MT

Comments After Missed Trade

Simon, a wonderful intraday update. Thank you. Last night 5 minutes before market close, I passed up an opportunity to place $200,000 in SH at $19.77 because I listened to you. When I heard the surprising vote in the middle of the night, I haven’t even thought once to regret my missing out. Because I completely understood your reasoning. We do not gamble, this is not betting. We are trying to shift the odds ever so slightly to our favor, by insightful analysis hoping few out there do the same so that we can exploit. Please continue your disciplined approach, which is refreshing and although missed out on SH, the thought behind why we missed out gave me so much more confidence to play along with your advice going forward. Keep up the great work. I enjoy your commentaries, and always personal approach to respond. Warmly. — Gordon Y, Ohio

Hello Simon: I am a relatively experienced trader. I am very impressed with your detailed careful analysis and thoughtful money management. I did not take the spy short you recommended thinking the market was going to breakout to new high without a deep retracement. I was 50% long, 50% cash at the market close on  Thursday June 24. I had to deal with the huge gap Friday morning. I bought with the 50% cash SSO at the open on Friday and sold SSO and my long holdings after the bounce and made money. I am now flat. But what I did was wrong and what you did by closing SH Thursday was right. Looking forward to learning from you and profiting from your recommendations, Sincerely. — Mazin K, North Carolina

Thank you so much for your honest evaluation and extensive market knowledge. We appreciate. Market is market, it is two way streets.  When we are trying to make money, at the same time we should prepare to lose money. Thanks for your dedication and good work. — Matthew Cheng, TX

Don’t sweat it. You’ve had many more good calls than bad in the few years I’ve been following and your insight is more valuable (to me) than ever. Have a good weekend. — Mike M.

Cancellation Reasons/Feedback

Please cancel. Not what I am looking for. — Robert H, TX
Robert H. re-subscribed and sent the following e-mail (following a login trouble shoot) four months later:
Sorry. You are right. I am using my I phone and the main computer is on auto for login. Thanks for you insight into the market. I am impressed. Have a good evening. — Robert H, TX

Please cancel my subscription. — Doug F, MA
Doug re-subscribed three months later and sent the following e-mail:
Simon, you do meticulous work, thanks for all your insight! — Doug F, MA

Hi Simon, I love your service and your work; in fact in the time following you have taught me a lot. I have used this knowledge to home my own investing model based on the IBD’s CAN SLIM approach. I have been back testing my model through the up/down bull cycle that started late in 2008. It is simply now time to use this model on my own without help from others. I am reducing out all of my investment expenses (advisory publications) so that this money is going to my capital. Thanks for wonderful service and I wish you the best. At this time, I do want to cancel my subscription when the current period ends. Kind regards. — David F, IN

Dear Simon, The analysis just seems spot on. I like the way you can tie together different disciplines, such as Elliot Wave, classical charting, sentiment measures and the like. I find your accuracy almost startling. I believe if I were retired and had the time to trade profitably, I’d love to take your trades and the slight commitment they involve.  At this stage however I mostly auto-trade, but I see that you have a number of asset classes in play, and also variable trade sizing and the like, which I think would probably require a little more attention to implement than I can give at this stage. What I am wondering is have you ever considered offering your work on Collective2 so that subscribers can follow simply by allocating the service a portion of their portfolio, and that way they’d have all the ‘hard work’ done for them. Your trade record speaks for itself and I certainly would not hesitate to subscribe if you listed on Collective. With sincere apologies again for the inconvenience, I’d be grateful for a cancellation of my account. — Gregory S, Australia

Simon, my need to cancel is motivated by a personal “issue” that will take some time to resolve. Your service appears to be well worth the $199 per year. I’m afraid I must remain within the 10% that cancel. — Stephen W, WA

Dear Sir/Madam I would like to withdraw my 30-day trial subscription begun on 7 March. The research is very good, but I would like more trade set ups. However, I think the time difference from New Zealand to New York may deter me from trading at all on the NYSE. Thank you for the opportunity to view your site and please credit my credit card account. Kind regards. — Bruce R, New Zealand

Hi Simon, thanks for the refund. It’s pity I’m not in the position to use your profit radar report. However, I will continue to be one of your reader and to follow your e-Newsletter and your articles. Thanks again for your time. Best Regards. — Domenico B, Italy

Thank you Simon, I appreciate how you’ve handled things from the start and with very fast, timely service. All the best to you too, take care. — Steve B, OR

Simon: Thanks, but please cancel my subscription. I may reconsider in the future as my needs change, though I understand it would probably be at the full price. — Daniel Talheim, MI

I canceled my subscription a year ago, received confirmation and now you took it off my credit card again. Unbelievable. I request immediately to pay my money back plus interest (I’m paying 19.9% on my credit card). I hope you understand that I will make this now public. To me this is almost criminal how you screw your customers! Thats probably why there is no real contact on your website as well. — Rolf H, British Columbia
Ralf was right, we accidentially charged his credit card even though he cancelled. We appologized and issued a full refund … and he continued to throw insults. BTW, the ‘Contact Us’ section is right here.

Simon, thank you for the offer, but I would like a full refund. I think you do good work, but I’m not in a position to take full advantage of it at this time. Thanks. — Roger P, IL

Please cancel my account and process my refund, I will stay on any newsletters you publish and when we start trading stocks and ETFs I will reactivate, thanks for the service! — Thomas D, IL

Hello Simon, I would like you to process a Full Refund right away. I appreciate your analysis and I think your Service is for sure one of the better ones around but the main reason for me to quit your service is that my trading approach differs too much from your approach.  Again, thanks for the trouble.  Have a good Time, Greetings from Hamburg, Germany. — Tobias B, Germany

Since I am not going to be trading in the future, this information will not be useful to me. Please cancel the subscription and give me the credit to my credit card. — Kasi R, CA

Hello Simon, Due to some unexpected developments I will not be able to extend my subscription past the trial period at this time. I very much appreciate the opportunity & will continue to follow your website & posts. All the best. — Alan S, FL

Hi, Simon, Great to hear from you. Please just cancel my account and refund me for now. I am extremely busy with career now. Will take up on investing and trading later on. Thanks so much for all valuable insight all the way. Li W.

I would like to cancel my subscription. No specific reason. I found another service that I would like to try. So, I may be back. — Arthur G, NM

Simon: I was really hoping to use your service to help time/trade my 401 k by telling me when, and when not to be, in the S&P 500. I can only make two trades a month in my account. Perhaps if your service included a simple long/short the S&P 500 signal that was sufficiently backtested and produced better than a buy and hold return…that would be something I’m very interested in. Thank you for issuing a full refund. I wish you all the best. You have a good service, but one that is not yet quite right for me and my needs. Have a great and blessed day/weekend!  🙂 — Kevin F, FL

Simon, I trade at Rydex and your advisory isn’t helping me. Please cancel my subscription. Thanks. Please send cancellation confirmation. — Donald M, IL

Please cancel and refund the full amount. I am sure I will return at a future date. Would like to see your Wednesday report if within the 30 day period. — Richard  A, FL

Please cancel my subscription to ispyetf. I find that it is very similar to another publication that I receive. Thanks in advance for crediting my credit card and thanks also for the ability to look at your good work. — Paul H, C

Please discontinue my trial subscription, and do not charge my credit card. I admire the effort that goes into you site and messages, but it’s not the service I am looking for. Thank you. — Howard H, NH

Honestly, your site is very poor and results are ‘snipits’ from past reports. Your site is borderline fraudulent. Please, I demand an immediately refund of my money. This is a terrible site and potentially fraudulent operation. Please reconsider what you are doing here. — Tim B, TX

After credit card was declined:

I really appreciate the loyalty discount. Most of all I appreciate what you do. While often your analysis is over my head technically, I am still able to glean the clearest picture of likely outcomes from your work. I always expected that when I retried, I would invest in bonds, live a relatively stress-free life and maybe have something left to pass on to my children. Instead, investing has become an incredibly treacherous and anxiety-inducing undertaking, and without your newsletter I would truly be adrift at sea without aid of navigation.  — Frank O.

Simon, First of all, I hope you had a good weekend. I am sure you work long hours, and deserve a break. Secondly, I want to thank you for your patience during my SCREW UP, last week. It does my heart good to know there are caring people out there, in this upside down world. I sent you my credit card information this morning on your website under: “update payment information”. I hope it came through. Rather you agree with me or not, I would appreciate it if, when you send the charge to my account, you add a prorated amount back to my original enrollment date. I wasted a lot of your time, and really was not off line very long during my confusion. It would help my comfort zone a lot. I like your site for several reasons. I am an ETF timer, and have had some success using RS movement off of a site, for a several months. — John S, SC

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 profile 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, and 24.52% in 2015.

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

 

Stock Market Melt-Up Alert?

The S&P 500 is at new all-time highs, so it may be appropriate to call to mind – and then discgard – all the bear market chatter of recent months.

Here is just a small selection of bear market headlines:

  • Barron’s: “Bracing for a Bear Market” – February 19, 2016
  • Forbes: “Investor Alert: We’re Firmly in a Bear Market” – January 25, 2016
  • MarketWatch: “If it Looks Like a Bear and Feels Like a Bear, it Probably is a Bear” – January 14, 2016
  • Benzinga: “The Bear Market is not Over Yet” – September 30, 2015
  • Forbes: “Here Comes the Recession and Bear Market” – January 6, 2016
  • Kiplinger: “Best Funds for Riding out a Bear Market” – September 15, 2016
  • Time: “The Next Bear Market Won’t Roar a Warning Just for You” – September 12, 2015
  • Motley Fool: “3 Timeless Tips for Surviving a Bear Market” – September 11, 2015
  • Investorplace: “Why the Bears will Keep Winning” – February 9, 2016

We never bought into the bear market idea.

The Profit Radar Report’s 2016 S&P 500 Forecast expected new all-time highs in 2016, as illustrated by this projection published at the beginning of the year.

Barron’s rates iSPYETF as a “trader with a good track record.” Click here for Barron’s assessment of the Profit Radar Report.

Double Kickoff

Our bullish outlook was confirmed by the February ‘Kickoff’ rally, which was discussed in this article: 2016 Bear Market Risk is Zero Based on this Rare but Consistent Pattern

The April 17 Profit Radar Report featured another liquidity study and a more detailed S&P 500 projection (see chart below) along with the following commentary: “The most likely longer-term implications of our liquidity study remain in harmony with our 2016 S&P 500 Forecast: New all-time highs.”

Another breadth thrust, or kickoff rally, launched in late June, two trading days after the Brexit vote (see chart below).

The post-Brexit kickoff rally sported three bullish developments:

  • Up volume surge
  • Advancing stocks surge
  • New NY Composite a/d highs

The July 4 Profit Radar Report included a detailed analysis of this triple breadth thrust and concluded: “The NY Composite a/d lines are already at new highs, although the S&P 500 is not yet. This, along with the breadth thrust, strongly suggests that the S&P will follow in the not so distant future.”

The ‘not so distant future’ became reality five trading days later.

Buoyed by the breadth thrust, the S&P 500 gained the escape velocity needed to break above the glass ceiling near 2,130, which now serves as initial support (horizontal green bar).

Stocks may pull back due to short-term overbought conditions, but with or without pullback, higher highs are likely. It’s a buy the dip market.

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 profile 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, and 24.52% in 2015.

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

 

S&P 500 Update – Refocus on What Matters

Brexit! What Brexit? The Brexit reaction doesn’t even register on the monthly S&P 500 chart. ‘A tempest in the teapot’ as the British would say. This is yet another example why we do not focus (and sometimes ignore) news events.

The Brexit vote did cause undeniable ripple effects, but only temporarily. It’s time to tune out the noise and stop using Brexit as excuse or cause for everything that happens.

As the headlines below show, Brexit can’t be savior and scapegoat at the same time:

  • Morningstar: Stocks Climb as Investors Shake off Brexit Concerns
  • MarketWatch: US Stocks Open Lower as Brexit-Inspired Selloff Continues
  • MarketWatch: Dow Ends up 270 Points as Brexit Fears Abate
  • Morningstar: Stocks fall as Brexit Worries Resurface

Chart Analysis

The June 19 Profit Radar Report expected a temporary drop to 2,002 – 1,928 followed by a resumption of the rally. The ideal down side target was 1,970 – 1,925 (original chart is available here).

Barron’s rates iSPYETF as a “trader with a good track record.” Click here for Barron’s assessment of the Profit Radar Report.

The structure of the post-Brexit selloff confirmed that the decline would turn out to be temporary. In a section titled “Chart Gaps and Major Market Tops” the June 26 Profit Radar Report noted open chart gaps and stated the following:

Following a tumultuous night, the SPDR S&P 500 ETF (SPY) opened Friday 3.42% lower than Thursday’s close (see chart). Since the inception of SPY (1/22/1993), there’ve only been 7 bigger gap down opens, and a total of 11 opening gaps with losses in excess of 3%. Five days later, the S&P traded higher 10 out of 11 times with an average post gap gain of 4.96%.

One of the reasons we continuously anticipated new all-time highs in recent years were open chart gaps left near the top. This is again the case now. There are open gaps at 2,104.57 and 2,117.96”

On June 27, the S&P fell as low as 1,991.68. This was in the general target zone, but short of our ideal target zone at 1,970 – 1,925. Nevertheless, the June 27 Profit Radar Report stated that: “two separate price patterns suggest a bounce is brewing.”

Initially, we anticipated this bounce to be choppy and relapse into the ideal 1,970 – 1,925 zone, but as the June 29 Profit Radar Report brought out, “this bounce has been stronger (in terms of breadth) than it was ‘supposed’ to be. Preliminary data suggests that the S&P may be experiencing a breadth thrust similar to what we saw in mid-February (see February 21 PRR). Based on the strong kick off from Monday’s low, we must consider the possibility that a more lasting low is already in.”

The February kickoff analysis, originally published in the February 21 Profit Radar Report, is available here: 2016 Bear Market Risk is Zero Based on this Rare but Consistent Pattern

Summary

Last week’s kickoff rally suggested a short-term digestive lull (with initial support near 2,070) followed by higher prices eventually. However, we never put all our eggs in our basket. No matter how compelling last week’s breadth thrust is, we are waiting for price to meet our parameters (buy triggers) before going long.

Until this happens, we may see more choppiness, and even more down side (although unlikely). 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 profile 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, and 24.52% in 2015.

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