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AIQ Market Timing update 6-28-20

Market volatility continues. In this update we’ll take a look at the current AI signals on the Dow Jones. For folks less familiar with our AI engine here’s a recap of what we do.

TradingExpert Pro uses two AI knowledge bases, one specifically designed to issue market timing signals and the other designed to issue stock timing signals.

Each contains approximately 400 rules, but only a few “fire” on any given day.  In the language of expert systems, those rules that are found to be valid on a particular day are described as having “fired”.  

Rules can fire in opposite directions.  When this happens, the bullish and bearish rules fight it out.  It’s only when bullish rules dominate that the Expert Rating signal is bullish, or when bearish rules dominate that the Expert Rating signal is bearish.

The Expert Rating consists of two values. 

The upside rating is the value on the left and the downside rating is on the right.  Expert Ratings are based on a scale of 0 to 100.  An Expert Rating of 95 to 100 is considered a strong signal that the Stock or market may change direction.  

An Expert Rating below 90 is considered meaningless.  A low rating means that there is not enough consistency in the rules that fired to translate to a signal.  The expert system has not found enough evidence to warrant a change from the last strong signal.

Using Relative Strength To Outperform The Market

The importable AIQ EDS file based on Markos Katsanos’ article in the March 2020 issue of Stocks & Commodities, “Using Relative Strength To Outperform The Market,” can be obtained on request via email to info@TradersEdgeSystems.com. The code is also available below.

I coded the indicator described by Katsanos in his article. Figure 5 shows the RSMK indicator with a 90-bar length on a chart of Fire Eye (FEYE). The trading system is also coded.

!USING RELATIVE STRENGTH TO OUTPERFORM THE MARKET !Author: Markos Katsanos, TASC March 2020 !coded by: Richard Denning, 01/13/2020 !www.TradersEdgeSystems.com !RSMK (Relative Strength) Indicator !Copyright Markos Katsanos 2020 
C is [close].
RSBARS is 90.
SK is 3.
SEC2 is tickerudf("SPY",C).

!RSMK:
RSMK is expavg(ln(C/(SEC2))-ln(valresult(C/(SEC2),RSBARS)),3)*100.

!RSMK System:
Buy if RSMK > 0 and valrule(RSMK<0,1) and hasdatafor(200) >= 150.
Sell if {position days} >= 9*21.
Sample Chart

FIGURE 5: AIQ. The RSMK indicator is shown on a chart of FEYE during 2018 and 2019.

—Richard Denning
info@TradersEdgeSystems.com
for AIQ Systems

The Bartometer

June 8, 2020

Hello Everyone,

I hope all of you are keeping healthy and staying safe during this COVID-19 pandemic. Over the last month, we have seen a significant drop in new cases of COVID-19 in most states, but now that most establishments of business have opened, there is some speculation that we may see a rise in COVID-19 cases again.

RECAP:

Over the last month, as COVID-19 cases have dropped, the stock and bond markets have risen dramatically. As of last Friday, however, most of the indexes are still slightly to moderately down. The technology-laden companies in the NASDAQ are the beneficiaries of this “stay at home” policy with returns up 10% this year.

The value sector, which contains the small to midcap companies, banks, energy companies, the retail sector, the airlines, telecommunications, restaurants, and more, are still down by 6-23% for 2020, but are rising dramatically as speculators try to get in now to buy cheap shares. The growth sector has done relatively well, but only a few large companies have contributed.

CURRENT TRENDS:

I continue to like the large tech and health care companies, however, the very large-cap NASDAQ stocks like Apple and Google should start to slow. If the market DOESN’T have a correction in the fall, then we should see the markets continue to recover, then the midcap to small-cap stocks may show a continuation of its upward trend. I am recommending clients move the large-cap growth profits towards the midcap sector somewhat. The Midcaps are down 6.7-11.76% depending on if its growth or value, and particular issues have more of a potential to move upward, in my opinion. A year or two out from this point, I think this sector and the markets should continue the trend nicely higher.

Can it go down from here into the fall and winter if we have a second wave down? Absolutely, but it is an excellent time to add money to your equity side in a diversified portfolio over the next 6 -12 months I like the corporate bond sector better than the government sector going forward. Many people are doubling up their contributions monthly. If you are more than five years before retirement, you may want to think about doing something similar. If stocks are cheap, then isn’t it smart to buy when they are reasonably priced if, over the long term, the market should be higher? But over the short term. I think the markets have risen too fast and over the short-term, I can see up to another 5% more but not much after that. If you are in or nearing retirement, this may be an excellent time to take a little money out of the stock market over the next few weeks.

Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until June 8, 2020. These are passive indexes.

Dow Jones -4.0%
S&P 500 -.50%
EQUAL WEIGHTED S&P 500 -4.0%
NASDAQ Aggressive growth +10%
Large Cap Value -12.5%
I Shares Russell 2000 ETF (IWM) Small cap -9.0%
Midcap stock funds -6.7-11.76%
International Index (MSCI – EAFE ex USA -8.2%
Financial stocks -14%
Energy stocks -23.53%
Healthcare Stocks +1.8%

Moderate Mutual Fund Investment Grade Bonds (AAA) Long duration -2.5%
High Yield Merrill Lynch High Yield Index -3.8%

Floating Rate Bond Funds -4.4%
Short Term Bond +1.1%
Fixed Bond Yields (10 year) .95% Yield

Classicalprinicples.com and Robert Genetskis Excerpts:

Stocks continued to move higher this past week. The major indexes added 2%-3%, while small-cap ETFs led with gains of 4%-6%. The S&P 500 is now within 3% of my estimate of its value. A replay of the failed Occupy Wall Street lawlessness will drive more support for law and order. Rather than hurt Trump, it should help to reelect him. There is also some good news on the virus. Despite the reopening of the economy, active cases have begun declining. Up to now, my expectation that stocks would begin consolidating has not materialized. The stock market assumes my forecast for a rapid recovery will occur without any setbacks. Hope so. Nonetheless, with both cautious state Governors and fed policy paying people not to work, a temporary setback can always arise. Although the market is fully-valued, the outlook for stocks remains mostly bullish.

A Look-Back

Private employment increased by 3 million in May, close to my estimate of 4 million. The rebound was well above the widely predicted loss of 81⁄2 million jobs. Private payrolls remain 18 million less than at their peak in February. Earlier in the week, the ISM business surveys show the economy grew modestly going into early May. The improvement appears to have brought the economy from 80% of its peak performance to 85%. Auto sales went from 50% of normal levels in April to 70% in May. New orders for manufacturing and service companies also improved in May. Orders in May were 30% below their peak compared to 40% below in April. My forecast for job gains in May was based on Weekly insured unemployment claims which were 50% less than the number in April.


Dr. Genetski’s opinion is that every person and circumstance is different. Please call me to address your holistic goals to strategize. There are no guarantees expressed or implied in any part of this correspondence.

Dow Jones

As you can see the Dow Jones is now only down 4% for 2020. I do not see more than a 5% upward move before it is fully valued. There are three resistance points to the left, the first level of resistance is 27424 area, the second is 28404 area, and the third level is the 29000 area. You may be shocked that the market has gone this high. Remember, the stock and bond markets NEVER accommodates the majority of thinking. So when everyone that the markets are going lower it doesn’t, and when everyone it will continue higher it tops out.

The Momentum indicator signal of a BUY is when the pink line crosses above the blue line and a Sell signal is when it crosses on the downside. Currently it still is on the buy side. But it is getting long in the tooth and overbought.

The indicator to the lower left is call the SD-SK Stochastics indicator. When both of the lines go over 88 the market is very overbought and could be setting up for a fall. It is almost very overbought, but not yet.

Summary: I am still long term bullish, but only see the rally to continue for a short period more before I see a flattening or decline of the markets.

NASDAQ QQQ

The true Champ this year again has been the NASDAQ. These stocks include, Facebook, Amazon, Docusign, Paypal, Mcrosoft, Netflix, etc. All of the stocks that benefit by you and your businesses being home. The NASDAQ is now up 10% for the year while everything else in the normal world is down 6-33%. The NASDAQ is now getting a little OVERBOUGHT so I would not go out and buy a bunch of ultra large tech stocks here. In fact, the NASDAQ is right at its high for the year and if I had a lot of my money in the ultra large NASDAQ stocks I would probably redeploy some towards the midcap stocks with go balance sheets and prospects for a bright future. I will also get VERY CAUTIOUS if the NASDAQ closes below the lower trend line currently at the 9505 level. This trend line rises daily so please call me for a strategy session.

The MACD or momentum indicator is still positive, so as long as the trend is up, I am somewhat positive , but it is now getting over bought. Retirees may want to reduce a little at this point.

The SK-SD Stochastics is overbought just like it was in the Dow Jones.
On Balance Volume is showing great conviction. That is a Bullish signal as it has broken to a new high

  • Support levels on the S&P 500 area are 3140, 3070, 2944, and 2796. These might be accumulation levels, especially2649, or 2500. 2936 and 3015 is resistance.
  • Support levels on the NASDAQ are 9675, 9513, and 9326 Topping areas 9845 and 10000  On t
  • The Dow Jones support is at 25245, 24,900, and 23951. Topping areas 27377 and 28419, 29020 and 29561.
  • These may be safer areas to get into the equity markets on support levels slowly on the accumulation areas.

THE BOTTOM LINE:

The market has rebounded nicely over the last month, mainly on the decline in Covid19 cases, and the economy is reopening. The NASDAQ has done the best and should continue to do well IF the market continues higher, the Midcap and Small caps, both growth and value side would probably outperform if the rally continues from here. My thinking is that the market continues to rally a little more, but as the Euphoria continues, I feel the market may stall a little above where we are now. If there is a significant rise in the number of new cases of COVID-19 before any successful treatment or vaccine, then the market would probably selloff, not to new lows but down to a support level listed above. There are trend-lines right below the markets, and if they are broken and close below those areas, then the markets could start a correction again. Trend-lines are essential to hold. If they don’t hold, then there could be a setback to support the levels stated above. I still like the USA market better than the international one.

Best to all of you,

Joe Bartosiewicz, CFP®
Investment Advisor Representative
92 High Street
Thomaston, CT 06787

860-940-7020

Charts provided by AIQ Systems:

Technical Analysis is based on a study of historical price movements and past trend patterns. There is no assurance that these market changes or trends can or will be duplicated shortly. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the Technical Analysis section are personal opinions: and may not be construed as recommendations to buy or sell anything.

Disclaimer:

The views expressed are not necessarily the view of Sage Point Financial, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. Securities and Advisory services offered through Sage Point Financial Inc., Member FINRA/SIPC, an SEC-registered investment advisor.

Past performance cannot guarantee future results. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented in this letter should only be relied upon when coordinated with individual professional advice.

*There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.

It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market.

The price of commodities is subject to substantial price fluctuations of short periods and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated, and concentrated investing may lead to Sector investing may involve a greater degree of risk than investments with broader diversification.




Biotech and Gold Stocks – The Odd Couple

There are a lot of things that don’t make sense these days.  In fact, where would one even begin? So let’s move past all of that and look at something else that doesn’t seem to make sense one the face of it – i.e., the “Odd Couple” relationship between biotech and gold stocks.

The BIOGOLD Index

Using AIQ TradingExpert software I created my own “index” called “BIOGOLD” that simply combines ticker FBIOX (Fidelity Select Biotech) and ticker FSAGX (Fidelity Select Gold).  The index appears in Figure 1.

Editors note: Creating your own index is a function of creating a group list in AIQ Data Manager. Information on creating lists and groups can be found in this PDF on p 11 of 14.

Figure 1 – Jay’s BIOGOLD Index (Courtesy AIQ TradingExpert)

Also included in the lower clip is an indicator referred to as RSI32, which is the 2-day average of the standard 3-day RSI. The levels of 65, 50 and 35 are highlighted in red for reasons detailed below.

The Rules

For the record, I have changed “the rules” a few times over the years.  Call it curve-fitting if you’d like, but the goal is to generate the timeliest signals.  The rules now are as follows:

A “buy signal” occurs when either:

*The RSI32 drops to 35 or below

*The RSI32 drops below 50 (but not as low as 35) and then reverses to the upside for one month

After either of the buy signals above occurs, buy BOTH FBIOX and FSAGX

*After a buy signal, sell both funds when RSI32 rises to 64 or higher

To test results, we will:

*Assume that after a buy signal both FBIOX and FSAGX are bought in equal amounts

*We will assume that both funds are held until RSI32 reaches 64 or higher (i.e., there is no stop-loss provision in this test)

For testing purposes, we will not assume any interest earned while out of the market, in order to highlight only the performance during active buy signals. Figure 2 displays the hypothetical growth of $1,000 (using monthly total return data) using the “system”.

NOTE: All results are generated using total monthly return data for FBIOX and FSAGX, except for May 2020 which is based on price action only (my source of total return data does not update until sometime in June).

Figure 2 – Cumulative hypothetical % growth using Jay’s BIOGOLD System (1986-present)

*The most recent BUY signal occurred at the end of March 2020 when the RSI32 indicator for BIOGOLD closed at 33.67.

*The most recent SELL signal occurred at the end of May 2020 when the RSI32 indicator for BIOGOLD closed at 76.96.

Figures 3 and 4 display the price action for FBIOX and FSAGX during this two-month period.

Figure 3 – Ticker FBIOX (Courtesy AIQ TradingExpert)

Figure 4 – Ticker FSAGX (Courtesy AIQ TradingExpert)

Summary

Is this really a viable approach to investing?  That’s not for me to say.  But it seems to do a pretty good job of identifying favorable times to be in with that “Odd Couple” of biotech and gold. So there’s that…

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

See also Video – The Long-Term…Now More Important Than Ever

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

Vitali Apirine’s “On-Balance Volume Modified,”

The importable AIQ EDS file based on Vitali Apirine’s article in the April Stocks & Commodities issue, “On-Balance Volume Modified,” can be obtained on request via email to info@TradersEdgeSystems.com. The code is also available below.

I coded the indicator described by the author and also coded a simple buy-sell on crossovers of the indicator. I tested the long side in the AIQ EDS module. Figure 5 shows the backtest results over the last 10 years using the Nasdaq 100 list of stocks.

Sample Chart

FIGURE 5: AIQ. Sample backtest results are shown for the last 10 years using the Nasdaq 100 list of stocks.

!ON-BALANCE VOUUME MODIFIED (OBVM) 
!Author: Vitali Apirine, TASC Apr 2020 !Coded by: Richard Denning 2/9/20 !www.TradersEdgeSystems.com
!ON BALANCE VOLUME:
C is [close].
C1 is val([close],1).

!OBV THAT HAS SAME SHAPE AS BUILT-IN OBV INDICATOR
DaySum is hasdatafor(2000).
F is iff(C > C1,1,iff(C < C1,-1,0)).
VolSum1 is Sum([volume] / 1000 * F, DaySum).
VolSum2 is 1000 + VolSum1.
OBVv1 is iff(FirstDataDate() >= Reportdate(),1000,VolSum2).

!ON BALANCE VOLUME MODIFIED:
!Hard coded version:
len1 is 7. len2 is 10.
VVV is expavg(OBVv1,len1).
SigVVV is expavg(VVV,len2).

!ON BALANCE VOULUME MODIFIED (***preferred version***):
!Using built-in OBV indicator (runs much faster)
pd1 is 7.
pd2 is 10.
OBVM is expavg([OBV],pd1).
sigOBVM is expavg(OBVM,pd2).

—Richard Denning
info@TradersEdgeSystems.com
for AIQ Systems

It Still Doesn’t Have to Be Rocket Science

The old saying that “It Doesn’t Have to be Rocket Science” when it comes to the markets got to be an old saying by being true for all these years.  Despite all of the increases in technology and computer speed, in the end it mostly comes down to “Is price rising or falling?”  Let’s consider one the simpler approaches.

The Trend

Figure 1 displays four major indexes – The Dow, the S&P 500, the Nasdaq 100 and the Russell 2000. 

Figure 1 – 4 Major Indexes and their 200-day moving averages (Courtesy AIQ TradingExpert)

There is a great deal of useful information contained in these four charts.  To wit:

*3 of the 4 are presently below their respective 200-day moving averages, i.e., in “downtrends”

*The 200-day moving average for all but the Nasdaq has now “rolled over” and is declining

Interpretation can be fairly simple:

*If these trends do not change, more trouble lies ahead

That wasn’t so difficult, was it? 

Of course, for most people that’s “not good enough.”  We want to know in advance IF these trends will or will not persist.  My candid reply is “Good luck with that.”

My other response is “be patient, and keep a close eye on these indexes and these moving averages”:

*If the indexes fail to get back above these moving average, more pain is likely to unfold (see here and here)

*If the Nasdaq fails to hold above its moving average and joins the others, chances are serious defensive action (i.e., raise cash, hedge, etc.) is in order

*If the 3 down trending indexes follow the Nasdaq higher (and also this) then the worst is likely over and a much more aggressive investment stance would be warranted.

In the immortal words of Tom Petty: “The waiting is the hardest part.”

See also Jay’s “A Strategy You Probably Haven’t Considered” Video

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

The Bartometer

May 8, 2020

Hello Everyone,

I hope all of you are keeping healthy in this pandemic. Some of you may have had the COVID-19 virus or have a family member who may have contracted it, but for the most part as a whole, we are working together to get through this and doing okay.

RECAP:

Last month I illustrated the previous time we have a virus that was similar to the Coronavirus, and that was the Spanish Flu back in 1918. It was a horrible time where more than 51 million and some estimates are up to 100 million people died. More than 675,000 people died from the Spanish flu in the U.S. It infected more than 50 million people worldwide and was a disaster. There was very little anyone could do during that time, and there was little medicinal relief. The Spanish Flu is called the most significant
medical holocaust in history. And yet the stock markets in this country fell 34% from the beginning of the flu to the lowest part in the stock market. A year later, it went up 80% approximately from its low to its high. Am I saying this will happen again? No, I’m not planning on it, but if the world recovered from a 50 million person loss and a massive pandemic it had when the world population was much smaller, then we should recover and move beyond this as well.

Over the last month, the stock and bond markets, especially the NASDAQ, have soared with the NASDAQ now up 1.66% for the year. The reason is that with most people confined to their homes, stocks like Amazon, Google, Netflix, Facebook, Microsoft, Zoom, DocuSign, and more are being used, contributing to their earnings and revenues dramatically. Stocks like Airlines, cruise ships, restaurants, manufacturing, and many more are not doing well. That is why you will see below that the sectors in terms of which areas are declining and which are growing are very different.

CURRENT TRENDS:

The growth sector has done relatively well, but only a few large companies have contributed. These few large companies are why the Equal Weighted S&P 500 is -16.2% but the regular S&P is down 9%. I continue to like the large tech and health care companies, the NASDAQ is nearing the end of its game, and it is not much below its high it hit in February. The Midcaps are down 18-23% this year, and particular issues have more of a potential move upward, in my opinion. A year or two out from this point, I think this sector and the markets should be nicely higher. Can it go down from here into the fall and winter if we have a second wave down? Absolutely, but it is an excellent time to add money to your equity side in a diversified portfolio over the next 6 months. Many people are doubling up their contributions on a monthly basis. If you are more than five years before retirement, you may want to think about doing something similar. If stocks are cheap then isn’t it smart to buy when they are reasonably priced if over the long term the market should be higher?

Have we gone down this much over the last 50 years? Yes, many times. Has it recovered each time? Yes. Because capitalism works and good companies over the long term make money, we are all in this together.

Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until May 8, 2020. These are passive indexes.
Dow Jones -14.0%
S&P 500 -9.0%
EQUAL WEIGHTED S&P 500 -16.1%
NASDAQ Aggressive growth +1.66%
I Shares Russell 2000 ETF (IWM) Small cap -20%
Midcap stock funds -18-23%
International Index (MSCI – EAFE ex USA -19.0%
Financial stocks -27%
Energy stocks -34%
Healthcare Stocks -.50%

Moderate Mutual Fund Investment Grade Bonds (AAA) Long duration -8.5%
High Yield Merrill Lynch High Yield Index -9.4% Floating Rate Bond Funds -7.3%
Short Term Bond -3.52%
Fixed Bond Yields (10 year) .68% Yield
As you see above, the only index doing well is Large tech. You should have this sector, but most everything else is starting to recover.

Classicalprinicples.com and Robert Genetskis Excerpts:

After soaring a week ago, stock prices turned mixed. The Nasdaq and Nasdaq 100 were up 1% and 4%, while the S&P 500 and Dow fell 1%, and small caps were down 2% to 4%.

The economic collapse in April has led forecasters to revise downward estimates of the decline in output, employment, and profits. Last week I expected the economy would begin to recover in May. It will. Unfortunately, ongoing restrictions from Governors and the stimulus bill will limit the initial stage of the recovery. Due to these current restrictions, means the economy will not show signs of a meaningful recovery until June at the earliest.

As a result, the financial damage to the economy in terms of lost output, jobs, wages and salaries, profits and debt will continue for another month

While several technology companies are holding up well, non-tech companies are suffering. And few companies are willing to guide earnings.

The 800-pound gorilla continues to be the outlook for the virus. Containing the spread of the virus remains a crucial problem.

Some countries and states succeed without a lockdown, while others are less successful. Due to the differing results, it raises the near-term uncertainties over how quickly the economy can recover. If setbacks occur, stocks will be vulnerable.

Despite a 15%+ unemployment rate in April and probably higher in May, the stock prices continue to anticipate better times and a recovery in the markets. I am optimistic longer term for the stock markets, although the short term could be more volatile.

Dr. Genetski’s opinion is that every person and circumstance is different. There are no guarantees expressed or implied in any part of this correspondence.
Source: Classical Principles.com

DOW JONES

As you can see the Dow went down to the 18,300 level and has risen to the 50% Fibonacci Level at 23,901. In other words when markets decline, they tend to retrace much of the decline at the 23.8%, the 50% the 61.8% and the 78.6% level and stall and reverse. Notice at the 23901 level the Dow tended to hang around there for a couple of weeks and tried to go up to the next level at the 25236 level. This is the next level where the Dow Jones could stall if it keeps rising. The Dow Jones is made up of a lot of large industrial, and value stocks that have really not participating in the rally as much as the NASDAQ tech stocks seen on the next page. Watch for a trend line break of 23901 to confirm another down leg to the 22565 if it is on big volume. This is short term. Long term I am still positive over the next 2 years or so, when we get a vaccine and a treatment, and more herd immunity.

The SK-SD stochastics model. If it is above the 88 level like it is now the market is a little over bought and this means don’t buy now short term.
Volume over the last month or so the market has been rising on low volume. This means people are afraid to commit and there may not be a lot of conviction on the rally.

NASDAQ QQQ

The true Champ this year again has been the NASDAQ. These stocks include, Facebook, Amazon, Docusign, Paypal, Mcrosoft, Netflix, etc. All of the stocks that benefit by you and your businesses being home. This QQQ are the top 100 NASDAQ stocks and is now up 3% plus for the year while everything else in the normal world is down 16-38%. The QQQ is now getting a little OVERBOUGHT so I would not go out and buy a bunch of tech stocks here. In fact, the QQQ is approaching a pretty substantial resistance level. The first is a gap fill and could bring the QQQ to 230.55 and reverse or it could reach its old high of 237 and reverse. Longer term I think it will break through the old high, but we are now getting to a point I think the QQQ has gone up as far as it should. So watch the 230.55 to fill the gap and reverses or the old high of 237 area.

The SK-SD Stochastics is overbought just like it was in the Dow Jones.
The Momentum indicator gave a Buy signal at the blue arrow as it as the pink crossed the blue line, if it crosses the blue lien going down it is a SELL. This large tech area is still long term bullish, but short term I would take a few chips off the table as an index. The midcap, small cap and large cap value sector has a lot more to recover.

If the QQQ falls or closes below 216.8 or breaks the trend line I am getting Cautious to very Cautious.

SUPPORT LEVELS:

 Support levels on the S&P 500 area are 2882, 2796, 2649, and 2500. These might be accumulation levels, especially 2649, or 2500. 2936 and 3015 is resistance.
 Support levels on the NASDAQ are 9036, 8612, and 7856 Topping areas 9323 to 9573.
 On the Dow Jones support is at 23,901, 22,569, and 20912. Topping areas 25,236 and 27,077.
 These may be safer areas to get into the equity markets on support levels slowly on the accumulation areas.

THE BOTTOM LINE:

The market has rebounded nicely over the last month mainly on the NASDAQ tech stocks that benefit from people staying at home and using all of the tech companies to their benefits. This stay “at home” policy has increased demand for technology, and why the internet stocks have done so well. The other part of the markets from the financial to energy and other value stocks are still down from 18-33%. It is all about the growth sector that is benefiting the most. Over the long term, I am very bullish on the market, but over a short time, I can see a topping or sideways to down on the large growth companies as they are now reasonably priced. If the market continues to do well, I would expect the Midcaps to start to outperform. But there is a caveat. There are trend-line right below the markets, and if they are broken and close below those areas, then the markets could start a correction again. Trend-lines are essential to hold. If they don’t hold, then there could be a setback to support the levels stated above. I still like the USA market better than the international one.

Best to all of you,

Joe Bartosiewicz, CFP®
Investment Advisor Representative
5 Colby Way
Avon, CT 06001
860-940-7020 or 860-404-0408



SECURITIES AND ADVISORY SERVICES OFFERED THROUGH SAGE POINT FINANCIAL INC., MEMBER FINRA/SIPC, AND SEC-REGISTERED INVESTMENT ADVISOR.

Charts provided by AIQ Systems:

Technical Analysis is based on a study of historical price movements and past trend patterns. There is no assurance that these market changes or trends can or will be duplicated shortly. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the Technical Analysis section are personal opinions: and may not be construed as recommendations to buy or sell anything.

Disclaimer: The views expressed are not necessarily the view of Sage Point Financial, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. Securities and Advisory services offered through Sage Point Financial Inc., Member FINRA/SIPC, and an SEC-registered investment advisor.

Past performance cannot guarantee future results. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented in this letter should only be relied upon when coordinated with individual professional advice. *There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.
It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market.
The price of commodities is subject to substantial price fluctuations of short periods and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated, and concentrated investing may lead to Sector investing may involve a greater degree of risk than investments with broader diversification.
Indexes cannot be invested indirectly, are unmanaged, and do not incur management fees, costs, and expenses.

Dow Jones Industrial Average: A weighted price average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
S&P 500: The S&P 500 is an unmanaged indexed comprised of 500 widely held securities considered to be representative of the stock market in general.

NASDAQ: the NASDAQ Composite Index is an unmanaged, market-weighted index of all over the counter common stocks traded on the National Association of Securities Dealers Automated Quotation System
(IWM) I Shares Russell 2000 ETF: Which tracks the Russell 2000 index: which measures the performance of the small capitalization sector of the U.S. equity market.

A Moderate Mutual Fund risk mutual has approximately 50-70% of its portfolio in different equities, from growth, income stocks, international and emerging markets stocks to 30-50% of its portfolio in different categories of bonds and cash. It seeks capital appreciation with a low to moderate level of current income.

The Merrill Lynch High Yield Master Index: A broad-based measure of the performance of non-investment grade US Bonds

MSCI EAFE: the MSCI EAFE Index (Morgan Stanley Capital International Europe, Australia, and Far East Index) is a widely recognized benchmark of non-US markets. It is an unmanaged index composed of a sample of companies’ representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends.
Investment grade bond index: The S&P 500 Investment-grade corporate bond index, a sub-index of the S&P 500 Bond Index, seeks to measure the performance of the US corporate debt issued by constituents in the S&P 500 with an investment-grade rating. The S&P 500 Bond index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap US equities.

Floating Rate Bond Index is a rule-based, market-value weighted index engineered to measure the performance and characteristics of floating-rate coupon U.S. Treasuries, which have a maturity greater than 12 months.

Money Flow; The Money Flow Index (MFI) is a momentum indicator that measures the flow of money into and out of a security over a specified period. It is related to the Relative Strength Index (RSI) but incorporates volume, whereas the RSI only considers SK-SD Stochastics. When an oversold stochastic moves up through its MA, a buy signal is produced. Furthermore, Lane recommends that the stochastic line be smoothed twice with three-period simple moving averages: SK is the three-period simple moving average of K, and SD is the three-period simple moving average of SK

Rising Wedge; A rising wedge is a technical indicator, suggesting a reversal pattern frequently seen in bear markets. This pattern shows up in charts when the price moves upward with pivot highs and lows converging toward a single point known as the apex

Financials – Danger or Opportunity? Or Both?

To say that there is has been and remains a great deal of angst in the financial markets is a bit of an understatement. This is especially true when it comes to the financial sector.  The financial sector has a fairly high correlation to treasury yields (ticker FSRBX – Fidelity Select Banking Portfolio has a 0.52 correlation to ticker TNX – which tracks 10-year treasury yields).  As yields have plummeted so has the financial sector.  During the recent decline, FSRBX plunged -51% from its December 2019 peak.  With little expectation of higher rates anytime soon a lot of investors are understandably wary of diving into this sector.

But much like with the energy sector, the old adage that the time to buy is when there is “blood in the streets”, should give one pause before they turn their back completely on the financial sector.  For the time being I am keeping my eye on a little-known indicator called “Vixfixaverageave” (yes, I agree it is a really bad name).  The calculations for this indicator appear at the end of this article.  The reason I am watching it right now is that it recently reached a very oversold level that has helped to highlight some useful buying opportunities for financials in the past.

Ticker FSRBX

Figure 1 displays a monthly chart for FSRBX in the top clip and the Vixfixaverageave indicator in the bottom clip.  Note that the indicator rose above 72 at the end of April 2020.  As you can see there have been four previous occasions when this indicator, a) exceeded 72 and then b) reversed lower for one month.  For arguments sake we will call that a buy signal.

Figure 1 – Ticker FSRBX with indicator Vixfixaverageave (Courtesy AIQ TradingExpert)

Figure 2 displays the 1 to 5 year % + (-) for FSRBX following the four previous signals.  As you can see, they all proved to be exceptional buying opportunities.

Figure 2 – FSRBX returns 1 to 5 years after signal

Now for the disappointing news: if you are thinking that all we have to do is wait for this indicator to finally top out and that big profits are “guaranteed” to roll in, you are making a mistake.  As they say, “past performance is no guarantee of future results.”  (Sorry, I don’t make the rules).  So, when the Vixfixaverageave monthly reading for FSRBX does finally roll over, the proper course of action would be to:

*Decide if you really want to act based on the signal

*Decide how much capital you are willing to commit

*Decide how much of that capital you are actually willing to risk – i.e. will you stop out if a loss exceeds x%, or do you plan to simply hold it for 1 to 5 years regardless?

Summary

There are a million and one ways to trigger an entry signal.  The one discussed herein is just one more.  What really separates the winners from the losers is the answers to the three questions just posed.

Vixfixaverageave Calculations 

EDITTORS NOTE: The code sections can be copied and pasted into AIQ EDS or you can download the indicator code in an EDS file from here and save it to your /wintes32/EDS Strategies folder.

This indicator is based on another indicator called VixFix which was developed many years ago by Larry Williams.

hivalclose is hival([close],22).  <<<<<The high closing price in that last 22 periods

vixfix is (((hivalclose-[low])/hivalclose)*100)+50. <<<(highest closing price in last 22 periods minus current period low) divided by highest closing price in last 22 periods (then multiplied by 100 and 50 added to arrive at vixfix value)

vixfixaverage is Expavg(vixfix,3). <<< 3-period exponential average of vixfix

vixfixaverageave is Expavg(vixfixaverage,7). <<<7-period exponential average of vixfixaverage

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented represents the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.

The Bartometer

April 7, 2020

Hello Everyone,

The 2020 COVID-19 Virus has adversely affected the entire world, and this will go down as one of the most volatile years in the stock and bond market in generations and even more volatile than the 2008 Bear Market.

CURRENT MARKET CONDITIONS:

This reason is that the declines came over eight days and not like the 2007-2009 decline which took a year and one half. The great recession of 2008 was a humanmade financial problem and this is a virus where very few are working. In the Recession of 2008, people were at least going to work and going out and spending money to support the economy. Now we are all destined to stay in the house unless we have an essential business. But the U.S. Government is doing everything it can to give grants and forgivable loans so that the economy doesn’t totally crash. That is better than in 2008. It is still serial to be confined to your house or go for a walk.

When we get our statement of our investments from our 401(k) s or from these accounts, you will see pretty large drops in values in the investment account and you will wonder if this is all worth it to stay in it or are we all destined just to make 1-3% in a savings account or a 3% fixed annuity with me. Right now getting 3% with no fees looks pretty good.

If you believe that good stocks and funds from successful growing businesses do well over the long term and this sell-off in the markets are BUYING opportunities over the next few months you may want to dollar cost average into the markets. If you believe that this COVID-19 virus will soon be over within months and that 1 to 3 years from now the markets will be higher than they are now is it worth holding on OR Buying more when markets are lower? The question is if you are buying or investing for the next 1-20 years. Do you like suitable stock and bond investments that are cheap now or more expensive? If your answer is yes, than you may want to average into the markets over the next few months as it is down during this pandemic.

MARKET RECAP:

On my last 3 Bartometers I was getting and got Very Cautious about the stock and bond markets, but did I expect this? Not really. I said if the NASDAQ broke 9200, I will get very Cautious but a 25 to 35% decline I did not expect. The markets had rallied 20%+ from the low hit a couple of weeks ago but still, the markets are down 17-20% into 2020. Are we in a recession now? I’d say yes, but it is forced because of COVID-19, but it will be one just because of the number of people laid off.

In the following pages are discussions of the long term of the markets, what do in a Bear market and my technicals of the markets going forward. But above I would like to say that even though American Capitalism is under fire, and also though the market got hurt as well as our portfolios, we will rise to the COVID-19 challenge like any other war or attack on the United States of America going back to the Revolutionary War to WW1, WW2, and all the other wars we had in our history. This country and its citizens will find a vaccine to this virus and I believe in my heart that 1 to 2 years from now this market should be nicely higher. Dollar-cost averaging currently buying a lower priced shares of good companies should, with no guarantees expressed or implied, be a good deal higher over the next few years. What do you think? Have we gone down this much over the last 50 years? Yes, many times. Has it recovered each time? Yes. Because capitalism works and good companies over the long term make money.

Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until April 7, 2020. These are passive indexes.
*Dow Jones -20%
S&P 500 -17%
NASDAQ Aggressive growth -9%
I Shares Russell 2000 ETF (IWM) Small cap -31%
Midcap stock funds -29%
International Index (MSCI – EAFE ex USA -22%
Investment Grade Bond -4%
High Yield Bond -13%
Government bond +4%
The average Moderate Fund is down -16% this year fully invested as a 65% in stocks and 35% in bonds and nothing in the money market.

WANT TO SHOW YOU THE YEAR BY YEAR RETURNS OF THE S&P 500 TOTAL RETURNS BY YEAR

WHAT HAPPENED TO THE MARKETS DURING THE PANDEMIC AND SPANISH FLU IN 1917-1918:

The stock market today is looking a lot like it did a century ago, and if Great Hill Capital’s Thomas Hayes’s interpretation of the trendlines is on point, the bottom could be approaching.

“Just as the market started discounting the worst-case scenario in 1917,” he wrote, “it was already discounting a recovery months before the worst-case scenario occurred in 1918.”

What was going on in 1917? The Spanish Flu was just starting to bubble up, with the deadliest month of the whole pandemic not hitting until October 1918 — by then, as you can see from this chart, the Dow Jones Industrial Average DJIA, -1.68% had already begun to heal.


Hayes then posted this chart of the modern-day market plunge, noting that the nasty drawdowns amid the early stages of both pandemics were virtually the same.

More than 51 million people died globally in the Spanish Flu Pandemic, and the market rebounded more than 80% in the following two years from its bottom to top. This is no guarantee the market will rally that much or at all, but the USA is now better equipped to handle a massive Pandemic then in 1918 to 1919. Also, many companies are internet companies that could do well as people shop and do business over the internet; in addition, it is much more diversified and global than it was in 1918. For these reasons and more, I believe that the long term is more promising now for a recovery over the next 1 to 2 years.

There is one caveat; the Commodity index is right near its low of 2009, where it found it at a 29-year support level. If that breaks through that level, then we can go into a deeper recession for a more extended period.
The market rebound depends on how quickly the government fixes this problem and people go back to work. I am optimistic over the next two years; but understand a recession should happen at least for a few quarters. I think the Recession should be relatively short term.

Since this graph was made a week ago, look at the next page and it is up to date. COMPARE the next graph to the Pandemic of 1918 and it is starting to look more like it. There is no guarantee expressed or implied, but look at the Pandemic and then the updated Dow on the next page.

The Dow Jones is above. This is the Daily Chart. As you can see, the decline of the Dow Jones Average was relatively very quick. Current is sitting at 22653 right BELOW THE 50% Fibonacci retracement level. A normal BEAR market usually tops on a countertrend rally right at a 50% or 61.8% Fibonacci level and declines or puts in a short top. So if this is true in this case there could be resistance at 23,901 or 25,236 area. There is also some resistance at the 200 day moving average at 26,660 and sloping downward. My AIQ models gave a BUY on 3/24/2020, but only a short term Buy not a longer term Weekly Buy. So even though the market is somewhat short term Bullish, there could be a short term top at 23,901, 25,236 or the 26,660 areas.

Momentum is good but can change quickly on the downside after earnings come out that will be bad. A buy signal is giving when the lavender line crosses blue line and Sell signal when it does it on the downside

One thing I don’t like is the On Balance Volume Line. Notice as the market is going up it is going up on low relative volume. This is somewhat negative. Over all I think the market should be higher when this is all done and when there is a vaccine and people go on living their normal lives it should be better. This market will be volatile. The market may continue on the upside but over the short term I think the rally is limited to the levels I said above on the Fibonacci levels and the 200 day moving average. In addition, the market may not like the earnings numbers over the next couple of weeks and the market could drop again towards 20000 or below again.

Key investor Points to remember in a Bear Market:

  • Stay calm and keep a long-term perspective.
  • Maintain a balanced and broadly diversified portfolio.
  • Balance equity portfolios with a mix of dividend-paying companies and growth stocks.
  • Choose funds with a strong history of weathering market declines.
  • Use high-quality bonds to help offset equity volatility.
  • Advisors can help investors navigate periods of market volatility

THE BOTTOM LINE:

The market has had its worst decline in 10 years. It has recovered about 35% of the loss over the last week. It is not a time to sell during this decline in my opinion but for some of you it would a great time to start to nibble in your mutual funds on setbacks because the COV19 virus should be controlled over the next year and if you look at all of the virus pandemics we have had, it has been a good time to Buy if your goals are longer term. It is not a time to throw caution to the wind but call me to make selective dollar-cost average buys. In addition, when EARNINGS come out in the next 2 weeks the stock market could go back down again. Remember you buy when there is blood in the streets. Bonds should be more in the investment-grade or short- term investment grade side. If you are a long-term investor and have 20 years+ towards retirement use sell-offs to add through dollar-cost averaging. Diversification is essential but portfolios should be somewhat safer.

Best to all of you,

Joe Bartosiewicz, CFP®
Investment Advisor Representative
5 Colby Way
Avon, CT 06001
860-940-7020 or 860-404-0408



SECURITIES AND ADVISORY SERVICES OFFERED THROUGH SAGE POINT FINANCIAL INC., MEMBER FINRA/SIPC, AND SEC-REGISTERED INVESTMENT ADVISOR.

Charts provided by AIQ Systems:

Technical Analysis is based on a study of historical price movements and past trend patterns. There is no assurance that these market changes or trends can or will be duplicated shortly. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the Technical Analysis section are personal opinions: and may not be construed as recommendations to buy or sell anything.

Disclaimer: The views expressed are not necessarily the view of Sage Point Financial, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. Securities and Advisory services offered through Sage Point Financial Inc., Member FINRA/SIPC, and an SEC-registered investment advisor.

Past performance cannot guarantee future results. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary. Therefore, the information presented in this letter should only be relied upon when coordinated with individual professional advice. *There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.
It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market.
The price of commodities is subject to substantial price fluctuations of short periods and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated, and concentrated investing may lead to Sector investing may involve a greater degree of risk than investments with broader diversification.
Indexes cannot be invested indirectly, are unmanaged, and do not incur management fees, costs, and expenses.

Dow Jones Industrial Average: A weighted price average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
S&P 500: The S&P 500 is an unmanaged indexed comprised of 500 widely held securities considered to be representative of the stock market in general.

NASDAQ: the NASDAQ Composite Index is an unmanaged, market-weighted index of all over the counter common stocks traded on the National Association of Securities Dealers Automated Quotation System
(IWM) I Shares Russell 2000 ETF: Which tracks the Russell 2000 index: which measures the performance of the small capitalization sector of the U.S. equity market.

A Moderate Mutual Fund risk mutual has approximately 50-70% of its portfolio in different equities, from growth, income stocks, international and emerging markets stocks to 30-50% of its portfolio in different categories of bonds and cash. It seeks capital appreciation with a low to moderate level of current income.

The Merrill Lynch High Yield Master Index: A broad-based measure of the performance of non-investment grade US Bonds

MSCI EAFE: the MSCI EAFE Index (Morgan Stanley Capital International Europe, Australia, and Far East Index) is a widely recognized benchmark of non-US markets. It is an unmanaged index composed of a sample of companies’ representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends.
Investment grade bond index: The S&P 500 Investment-grade corporate bond index, a sub-index of the S&P 500 Bond Index, seeks to measure the performance of the US corporate debt issued by constituents in the S&P 500 with an investment-grade rating. The S&P 500 Bond index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap US equities.

Floating Rate Bond Index is a rule-based, market-value weighted index engineered to measure the performance and characteristics of floating-rate coupon U.S. Treasuries, which have a maturity greater than 12 months.

Money Flow; The Money Flow Index (MFI) is a momentum indicator that measures the flow of money into and out of a security over a specified period. It is related to the Relative Strength Index (RSI) but incorporates volume, whereas the RSI only considers SK-SD Stochastics. When an oversold stochastic moves up through its MA, a buy signal is produced. Furthermore, Lane recommends that the stochastic line be smoothed twice with three-period simple moving averages: SK is the three-period simple moving average of K, and SD is the three-period simple moving average of SK

Rising Wedge; A rising wedge is a technical indicator, suggesting a reversal pattern frequently seen in bear markets. This pattern shows up in charts when the price moves upward with pivot highs and lows converging toward a single point known as the apex

The Ultimate Ugly Contrarian Play

They always say you should buy when there is “blood in the street.”  They also say, “buy them when nobody wants them.”  So, let’s consider today what could be the most unloved, bombed out, everybody hates it “thing” in the world – coal.

Ugh, just the mention of the word coal elicits a recoiling response.  “Dirty energy!”  “Climate change inducing filth!” “Ban coal!”.  And so and so forth.  And maybe they have a point.  But “they” also say “facts are stubborn things” (OK, for the record, I think it’s a different “they” who says that but never mind about that right now).

So here is a stubborn fact: coal supplies about a quarter of the world’s primary energy and two-fifths of its electricity.  As I write, two of the fastest growing economies (at least they were as of a few months ago) – China and India – are not only heavily reliant upon coal for energy, but are still building more and more coal-fired plants.  Now I am making no comment on whether this is a good thing or a bad thing but the point is, it most definitely is a “thing.”

So however one feels about coal, the reality is that it is not going to go away anytime soon.  Does this mean it will “soar in value” anytime soon – or even ever for that matter?  Not necessarily.  But as an unloved commodity it’s sure is hard to beat coal.  And as “they” (they sure are a bunch of know it all’s they?) say, “opportunity is where you find it.” 

Ticker KOL is an ETF that invests in coal industry related companies.  And what a dog it has been.  Figure 1 displays a monthly chart of price action.  Since peaking in June 2008 at $60.80 a share, it now stands at a measly $6.29 a share, a cool -89.6% below its peak.  And like a lot of things it has been in a freefall of late.

Figure 1 – Ticker KOL Monthly chart (Courtesy AIQ TradingExpert)

So, is this a great time to buy KOL?  That’s not for me to say.  But for argument’s sake, Figure 2 displays a weekly chart of KOL with an indicator I call Vixfixaverageave (I know, I know), which is a version of an indicator developed a number of years ago by Larry Williams (Indicator code is at the end of the article).

Figure 2 – KOL weekly chart with Vixfixaverageave indicator (Courtesy AIQ TradingExpert)

Note that Vixfixaverageave is presently above 90 on the weekly chart.  This level has been reached twice before – once in 2008 and once in 2016.  Following these two previous instances, once the indicator actually peaked and ticked lower for one week, KOL enjoyed some pretty spectacular moves. 

To wit:

*Following the 12/19/08 Vixfixaverageave peak and reversal KOL advanced +252% over the next 27.5 months

*Following the 2/19/16 Vixfixaverageave peak and reversal KOL advanced +182% over the next 23.5 months

When will Vixfixaverageave peak and reverse on the weekly KOL chart?  There is no way to know.  One must just wait for it to happen.  And will it be time to buy KOL when this happens?  Again, that is not for me to say.  None of this is meant to imply that the bottom for KOL is an hand nor that a massive rally is imminent.

Still, if there is anything at all to contrarian investing, its hard to envision anything more contrarian that KOL.

Vixfixaverageave Calculations

hivalclose is hival([close],22).  <<<<<The high closing price in that last 22 periods

vixfix is (((hivalclose-[low])/hivalclose)*100)+50. <<<(highest closing price in last 22 periods minus current period low) divided by highest closing price in last 22 periods (then multiplied by 100 and 50 added to arrive at vixfix value)

vixfixaverage is Expavg(vixfix,3). <<< 3-period exponential average of vixfix

vixfixaverageave is Expavg(vixfixaverage,7). <<<7-period exponential average of vixfixaverage

Jay Kaeppel

Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author.  The information presented does not represent the views of the author only and does not constitute a complete description of any investment service.  In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security.  The data presented herein were obtained from various third-party sources.  While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets.  Past performance is no guarantee of future results.  There is risk of loss in all trading.  Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance.  Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.