S&P 500: Does Low Fear Portend High Risk?

Below is a free excerpt of the December 9, Profit Radar Report, which takes a detailed look at various sentiment, liquidity, breadth and moment indicators to gauge the down side risk. Since this update is published out of context with all the other updates, an additional “Summary” section is provided at the end of the December 9 Profit Radar Report to provide bigger picture context.

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.

                                       * * * * * December 9, 2018 Profit Radar Report * * * * *

The S&P 500 closed at 2,633.08 on Friday. That’s only 1.99 points higher than the November 23 low. If the S&P would have closed at a new low, it would have been interesting to see if there are any bullish divergences.

Well, futures are down 20+ points in Sunday’s trading, so let’s just pretend the S&P closed at new lows, and look for potential divergences anyway. The blue box highlights the price action since the September high.

  • RSI-35 did not confirm the ‘new low’ (RSI-2 is near over-sold)
  • The cumulative NY Composite a/d lines did not confirm
  • The NY Composite a/d ratio did not confirm
  • The percentage of stocks below their 50-day SMA did not confirm

How about different sentiment gauges?

  • The VIX is below its October extreme
  • The VIX/VIX3M ratio is below its October extreme
  • The CBOE equity put/call ratio is at the same level
  • Contango is above its October extreme
  • The SKEW carved out a new low
  • The CBOE equity put/call ratio (5-day SMA) is below its November extreme
  • NAAIM equity exposure is about even, but above its November extreme
  • Bullish Advisors polled by II are less bearish than last week
  • Bullish Investors polled by AAII are less bearish than last week

All the above indicators show that there is little panic, certainly less panic than in October or November. This could be viewed as either 1) a bullish divergence or 2) there is enough room for the market to fall further.

Based on Elliott Wave Theory, the S&P 500 could be 1) nearing the exhaustion point of this down leg, or 2) be in a strong and sustained wave 3 lower (S&P could still rally towards or into 2,700s before next down move). The summary section below discusses which scenario is more likely.

Another attention grabber was last week’s ‘death cross,’ where the 50-day SMA fell below the 200-day SMA.

The last time death cross that received a lot of attention was in May 2016, when the 50-week SMA fell below the 100-week SMA. This was supposed to be an ‘irrefutable sell signal,’ but ultimately turned out to be one of the best buying opportunities ever.

At best, SMA crossovers have a spotty track record, and we don’t base our anlysis on such lagging indicators. For those interested, the arrows in the weekly chart below mark all bearish and bullish 200/50-day SMA crosses over the past 20 years (weekly chart shown to capture longer-term history of signals).

Shown below are various support levels that may help navigate the coming weeks, and answer the question posed above: What’ next? Sustained move lower, or quick wash out decline followed by snap-back rally?

  • 2,618: Black trend channel
  • 2,607: Wave C = 61.8% wave A
  • 2,550: Wave C = 78.6% wave A
  • 2,500: Fibonacci support going back to 2011
  • 2,478: Wave C = 100% wave A
  • 2,385: Trend line support going back to 1998
  • 2,280: Trend channel support going back to 2009

The Russell 2000 IWM is in the general green support range, with trend channel support at 143.25 and 141.30. A bounce from 143.25 – 141.30 seems likely, but sustained trade below the lower trend channel would unlock lower targets.

The Nasdaq-100 QQQ has a general range of support at 161 – 157. A break below, would likely lead to a retest of the February/March lows at 154-150.

Summary: The above analysis was based on Friday’s closing price. The S&P 500 futures chart below includes Sunday’s 20+ point drop. Trade is right around black trend channel support. Anytime prices reaches support, odds of a bounce increase.

Based on the Elliott Wave Theory structure, we are trying to figure out whether we are nearing the end of this down leg (with a potential wash out decline), or if trade will accelerate lower (as a wave 3 would).

A brief drop (1-3 days) below 2,618 (with next support at 2,607, 2,550 and perhaps as low as 2,500) followed by a quick recovery would preserve the bullish divergences and suggest sellers got ‘washed out’ and a year-end rally is underway.

Persistent trade below 2,618 and 2,607 means we need to allow for more weakness.

We will take a stab at going long (only with a small amount as this correction may carve out lower lows eventually) if the S&P 500 drops below 2,607 and subsequently rallies above 2,620 (stop-loss to be set at that day’s low). The SPY buy level is thus linked to the S&P 500 (approximate corresponding SPY levels: buy on drop below 261 followed by move above 262.10 with stop-loss at day’s low).

The very first graph of today’s update (S&P 500 in 2011 – blue box) illustrates what a wash out decline may look like.

                                        * * * * * December 9, 2018 Profit Radar Report * * * * *

SUMMARY: The lack of fear, expressed by various ‘bullish divergences,’ is likely to result in a short-term bounce. Back in September, we expected a correction toward 2,400, and that seems still likely (longer-ter S&P 500 outlook available here). A drop toward 2,400 (or at least below 2,500), would probably trigger the kind of ‘panic readings’ commensurate with a more significant bottom.

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.

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Stock Market Update: This is the Clearest Chart Right Now

There’s never been a time when articles on iSPYETF.com have been posted at the snail-pace of about one per month … until now.

Unless you are a stock picker, there’s simply been nothing worthwhile to write about.

The October 1 Profit Radar Report warned of just such a period of inactivity:

The bullish Elliott Wave Theory count would see stocks grind higher for a number of weeks in a 2 steps forward, 1 step back pattern. A real unexciting, unstimulating and uninspiring grind higher to 2,600+/-. Unless the S&P drops below 2,500, this is now the most likely outcome.

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

This ‘real unexciting, unstimulating and uninspiring grind higher to 2,600+/-‘ has already lasted more than 7 weeks.

The Clearest Chart Right Now

One of the best tell-tale since during this 7-week period came from the Russell 2000. The chart and commentary below were published in the November 15 Profit Radar Report:

The Russell 2000 is leaking lower. RSI-2 is now oversold with support around 1,452. The correction since the October 5 high looks like a wave 4. The 38.2% Fibonacci retracement level (a common target for waves 4) is at 1,451.35 (just 3 points below today’s low). The R2K appears to be nearing a bounce, there’s even a possibility today’s low was a more sizeable low.”

Below is an updated Russell 2000 chart. Trade touched support around 1,450 on November 15, and rallied strongly. The minimum requirement for wave 5 is to reach new highs (which it already did), but the convergence of resistance levels around 1,542 (red oval) is the next most logical up side target (higher is also possible).

S&P 500 Update

The S&P 500 has basically reached our up side target around 2,600. The post-Thanksgiving week is seasonally weak, but as long as trade stays above 2,590, the S&P is likely to move towards the next resistance cluster around 2,650.

Continued analysis for the S&P 500, Russell 2000, gold, silver, euro, dollar and other equity indexes is provided 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.

Top Shelf Traders Features iSPYETF’s Profit Radar Report

Top Shelf Traders, a monthly eMagazine for active investors and traders, just featured iSPYETF’s Profit Radar Report.

Every month, Top Shelf Trader introduces unique approaches to trading stocks, options, futures, and Forex.

The Profit Radar Report is featured in the “Stock” section.

A complimentary look at Top Shelf Trader is available here.

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.

If you enjoy quality, hand-crafted research, >> Sign up for the FREE iSPYETF Newsletter

Russell 2000 Delivers New All-time High with Bearish Divergence

The Russell 2000 has been on a tear. On November 28, the R2K ended a 15-day winning streak when it touched red trend line resistance at 1,349 mentioned by the Profit Radar Report.

This pullback was to be temporary. The November 30 Profit Radar Report stated that: “The R2k is nearing an oversold condition and strong support at 1,309 – 1,296,” and recommended to buy R2k at 1,305. The corresponding level for the iShares Russell 2000 ETF (IWM) was 129.90.

Now the R2K is back at trend line resistance, but this time it carved out a bearish RSI divergence. There was no such divergence on November 25, which strongly suggested new all-time highs.

Bearish RSI Divergence, a Red Flag?

Under normal conditions, this bearish RSI divergence would be a serious red flag. However, the November 13 Profit Radar Report included the following observation:

The DJIA and Russell 2000 ended the week overbought, which normally will cause a pullback. However, if the S&P is truly in a wave 3 advance, stocks will continue to plow higher without much letup.”

The Russell 2000 has plowed higher ever since. The unique condition that allows for continuous gains despite on overbought condition is discussed here: S&P 500 Update – Expect the Abnormal?

Here is another statistic in favor of higher prices: Since 1979, there’ve been 12 other times when the R2K rallied at least 12 days in a row. A month later, the R2K was higher 10 times. 3 month later, the R2k was higher 7 times. 6 months later the R2k was higher 10 times.

The chart above provides long-term context for the R2K. The red trend line going back to 2011 is obvious resistance. If (and as long as) the R2K is able to sustain a break above this line, it may just continue higher.

Until it does, some caution is warranted.

Continuous updates for the Russell 2000, S&P 500 and other asset classes 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.

 

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.

 

S&P 500 Update

A lot has happened the last week or two, and it appears like the S&P 500 has entered the ‘post panic’ stage. Before we discuss the typical ‘post panic’ pattern, here is a brief recap.

On June 9, we went short the S&P 500 at 2,110. This was our insurance trade against lower prices (unlike an actual insurance policy, this trade didn’t cost anything).

On June 19, which was five days before the Brexit vote, the Profit Radar Report was looking for “an early week bounce, followed by a late week sell off,” which is pretty much what happened.

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

Somewhere in between the bounce and sell off is an interesting tale about what happened to our short position. This tale is told here.

The question, after the S&P lost 122 points in three days, is: What’s next?

What’s Next?

The chart below, initially published by the June 19 Profit Radar Report, along with the following commentary, may have the answer:

Based on Elliott Wave Theory, the S&P finished 5-waves up to complete wave 1 on June 8 at 2,120.55. Next should be a wave 2 decline. Waves 2 tend to retrace a Fibonacci 50% – 61.8% of the prior move. The ideal target range for a wave 2 correction is 1,970 – 1,925.”

The S&P 500 has not reached the ideal target zone, but odds are decent it will (eventually).

The June 27 Profit Radar Report painted the following picture: “Two separate price patterns suggest a bounce is brewing. Today’s decline didn’t hit any specific support level, but it closed the open chart gap at 1,992.63. The panic decline is nearing its end. Next should be a choppy bounce.”

It appears like the S&P is now tracing out this ‘choppy bounce.’ Tuesday’s strong surge brought the S&P 500 almost back to 2,040, which was prior support, and is now resistance.

Normally we’d say that a move above 2,040 would unlock further up side (and it probably will), but post panic moves tend to be choppy and unpredictable, likely to seesaw across support/resistance levels.

While the daily price action may become irrational, the Profit Radar Report identified a post panic pattern the S&P adheres to about 7 of 10 times. We discussed this pattern after the initial January panic decline here … and it ultimately helped us to buy on February 11 at S&P 1,828.

Most indicators thus far suggest this post panic pattern will be one of the 7. The latest Profit Radar Report update outlines this specific pattern. Of course, we never completely rely on any particular patterns, but use our indicators to either confirm or invalidate, and adjust accordingly. 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.

 

How to Minimize the Risk Associated with Higher Returns

“What it means to be a successful investor in 2016 can be summed up in four words: bigger gambles, lower returns.” – Wall Street Journal

The Wall Street Journal just reported that investors need to pile on more risk just to get a reasonable return.

According to the WSJ and research by Callan Associates, in 1995, a portfolio of save bonds would return 7.5% with little risk and volatility.

Thanks to rock-bottom interest rates, and lackluster growth, investors are now forced to take on much more risk just to get close to a 7.5% return. How much more risk?

To eek out 7.5% in 2015, investors had to shrink their save bond position from 100% to just 12% and pump the remainder of their portfolio into much riskier assets.

The chart below illustrated the progression from high returns/low risk to high risk/low returns.

How to Reduce Risk

There are two approaches to reduce risk:

  1. Price: Only enter trades with a favorable risk/reward ratio
  2. Time: Not to be (fully) invested all the time

The Profit Radar Report utilizes both strategies to reduce risk.

Price

The Profit Radar Report recommends about 25 carefully selected trades per year. Trades that pass our intense qualifications are:

a) Low risk trades: Risk is reduced to a bare minimum or

b) High probability trades: The odds of being right are exceptionally high

This page explains our trade selection process.

The Profit Radar Report has outperformed the S&P 500 every year since inception. Performance details are available here.

Time

Because we only take the best trade setups, we are only invested a fraction of the year, and don’t have permanent default exposure to risk. For example, the Profit Radar Report did not have any equity exposure during the August 2015 and January 2016 mini-meltdowns.

If you are looking for a low-maintenance way to reduce risk and juice returns, the Profit Radar Report may be for you.

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.

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