In her article in the December 2022 issue of Stocks and Commodities, “Short-Term Continuation And Reversal Signals,” Barbara Star describes modifications to the classic directional movement indicator (DMI) and commodity channel index (CCI) that can aid in more easily identifying price reversals and continuations in a trend. Traditionally, the DMI is comprised of two lines: a positive line (+DI) and negative line (−DI).
In her article, Star creates a DMI oscillator by subtracting −DI from +DI. Historically, the DMI uses a default length of 14. In the article, this has been shortened to 10. The CCI has also been adjusted in the article to use a length of 13 instead of the usual 14 or 20. The oscillator is setup using an AIQ Color Study
The importable AIQ EDS file can be obtained on request via email to info@TradersEdgeSystems.com. The code is also shown here:
! Short-Term Continuation And Reversal Signals ! Author: Barbara Star, TASC Dec 2022 ! Coded by: Richard Denning, 10/21/2022 C is [close]. H is [high]. L is [low]. H1 is valresult(H,1). H2 is valresult(H,2). L1 is valresult(L,1). L2 is valresult(L,2). GreenDMI if [DirMov] > 0. RedDMI if [DirMov] < 0. StartOfDownTrend if C < simpleavg(C,18) and [DirMov] < 0 and H < H1 and H1 > H2. StartOfUpTrend if C >= simpleavg(C,18) and [DirMov] >= 0 and L > L1 and L1 < L2. GreenTrend if C >= simpleavg(C,18) and [DirMov] >= 0. RedTrend if C < simpleavg(C,18) and [DirMov] < 0.
Code for the author’s color study is set up in the AIQ EDS code file. Figure 7 shows the color studies set up in the charts module. Figure 8 shows the color studies on a chart of Apple, Inc. (AAPL). The black bars are potential entry points in the downtrend.
FIGURE 7: AIQ. The color bar setup in the charts module is demonstrated.
FIGURE 8: AIQ. This shows an example of the color studies applied to a chart of Apple, Inc. (AAPL) with a DMI histogram and an 18-bar simple moving average.
It’s been a challenging market this year, and making trading decisions has never been easy. Which direction the market is likely to move plays a huge part in stock trading decisions.
The Expert Rating system on the market with its combination of 400 rules on the Dow 30 index and the NYSE internals has always provided us an early indication of direction changes.
No system is infallible, and when the Expert System on the market was created, we noticed that ratings of 95 or higher to the upside or downside (maximum rating is 100 btw) were significant. We also noticed a marked improvement in the ratings accuracy if we used a confirmation technique with a a momentum indicator.
After much research we discovered that the Phase Indicator (a version of an MACD histogram) was the most accurate tool to confirm high ratings.
Here’s how we use Phase to confirm a high Expert Rating.
When a rating of 95 up or 95 down is triggered on the market, we look for the Phase histogram to change direction. The change in direction must be to the direction of the rating. This change does not have to happen on the day of the rating, but it must occur within 2 to 3 days either side of the rating day.
If the Phase does not change direction, the rating is considered not confirmed.
This short video analysis of the last 4 ratings shows this process in action.
The importable AIQ EDS file based on Vitali Apirine’s article in the February 2022 issue of Stocks & Commodities titled “Relative Strength Volume-Adjusted Exponential Moving Average” can be obtained on request via email to info@TradersEdgeSystems.com.
Synopsis: You can use calculations of the relative strength of price, volume, and volatility to filter price movement and help define turning points. In part 2, we explore the relative strength volume-adjusted exponential moving average.
The code is also available here:
! Relative Strength Volume Adjusted Exponential Moving Average ! Author: Vitali Apirine, TASC October 2022 ! Coded by: Richard Denning, 8/16/2022 Periods is 40. Pds is 40. Mltp is 10. C is [close]. v IS [volume]. Mltp1 is 2/(Periods+1). Vup is iff(C>valresult(C,1),V,0). Vdwn is iff(CMltp. Rate is Mltp1(1+RS1). HD if hasdatafor(Periods2+1) > Periods2. DaysInto is ReportDate() - RuleDate(). Stop if DaysInto > 50. stopesa is iff(stop,C,RS_VA_EMA). !myesa is alpha * [close] + beta * valresult( stopesa, 1 ). RS_VA_EMA is iff(HD,valresult(stopesa,1)+Rate(C-valresult(stopesa,1)),C). !If(Cum(1)=Periods2,C,PREV+Rate*(C-PREV)). ListValues if 1. EMAp is expavg(C,Periods).
Code for the author’s indicator is set up in the AIQ EDS code file. Figure 10 shows a comparison of the EMA(40) versus the RS_VA_EMA on a chart of SPY during three months of 2022.
FIGURE 10: AIQ. Here, the exponential moving average of close over 40 bars (smooth blue line) is compared to the RS_VA_EMA(40,40,10) (jagged red line) on SPY.
The AIQ TradingExpert Pro Market Timing signals are not a perfect system. If they were no doubt the founders of AIQ would have kept it secret and traded the signals themselves.
The signals that give us early waring of a change in direction of the market are proprietary. The 400 rules that are used by the Artificial Intelligence inference engine to determine change of market direction use many of the widely known technical tools.
The rating calculation and the indicators contributing to the ratings have not been changed for many years. A decision was made some years ago to avoid constantly moving the goalposts as the constant optimizing or back fitting erodes the validity of the system.
High ratings to the upside or downside of notice have to be 95 or greater (the maximum is 100). the ratings are considered confirmed when the Phase indicator that is outside of the AI system, changes in the direction of the high rating.
So ratings have fired in the last few months how do we confirm them?
We look for the Phase indicator ( a derivative of MACD) to change in the direction of the signal. This needs to occur within a 3 day window before or after the rating.
The last 2 market timing signals illustrate this nicely.
August 18, 2022 97-2 up signal on the market
The up signal occurred during a a 3 day down period on the uptrend, however the Phase indicator did not change direction (it would need to turn up after going down) within the window for confirmation. This signal is therefore unconfirmed by Phase.
August 22, 2022 down signal on the market
The down signal occurred on 8-22-22. 100 down is the strongest signal the market timing generates. In this case the Phase turned down after a prolonged upward move, on the day before the signal. This is considered a confirmed down signal on the market.
The rules that contributed to 0-100 down on the market
The 100 down signal is the strongest signal the AI system generates. Here are the major technical events that contribute to this rating.
Trend Status has changed to a strong down trend. This indicates that a downward trend has started that may continue in this direction. This is a moderate bearish signal.
The 21 day stochastic has declined below the 80% line and the price phase indicator is decreasing. In this strongly downtrending market this is an indication that the downtrend will continue.
Volume accumulation percentage is decreasing and the 21 day stochastic has moved below the 80% line. In this strongly down market, this is taken as a very strong bearish signal that could be followed by a downward price movement.
The exponentially smoothed advance/decline line has turned negative when the up/down volume oscillator and the advance/decline oscillator are already negative. In this market, this is viewed as a bearish signal that could precede a downward price movement.
The up/down volume oscillator has turned negative when the exponentially smoothed advance/decline line and the advance/decline oscillator are already negative. In this market, this is viewed as a bearish signal that could precede a downward price movement.
The new high/new low indicator has reversed to the downside. This is a reliable bearish signal that is often followed by an downward price movement. In this market a continued strong downtrend can be expected.
The importable AIQ EDS file based on Markos Katsanos’ article in the August 2022 issue of Stocks & Commodities magazine, “Trading The Fear Index” and the “CUM1.csv” file can be obtained on request via email to info@TradersEdgeSystems.com. Code for the author’s system is set up in the AIQ code file.
Synopsis: Here is a long-short strategy to capitalize on stock market volatility using volatility-based exchange-traded funds (ETFs or ETNs)…
! VIX ETF SYSTEM ! This should be applied only to long VIX ETF. ! VIX ETF DAILY LONG-SHORT TRADING SYSTEM ! COPYRIGHT MARKOS KATSANOS 2022 ! To be applied on a daily chart of long VIX ETFs: ! VXX,VIXY,UVXY,VIXM,VXZ,SVOL ! INPUTS: C is [close]. H is [high]. L is [low]. VIXUPMAX is 50. ! VIX UP% MAX VBARS is 6. ! Number of bars to calculate VIXUP,VIXDN & RC STBARSL is 25. ! Number of bars to calculate slow stochastic STBARSS is 10. ! Number of bars to calculate fast stochastic ! COMPARISON INDEX VIXC is TickerUDF("VIX",C). VIXH is TickerUDF("VIX",H). VIXL is TickerUDF("VIX",L). SPYC is TickerUDF("SPY",C). SPYH is TickerUDF("SPY",H). SPYL is TickerUDF("SPY",L). ! STOCHASTIC STOCHVS is (VIXC-lowresult(VIXL,STBARSS))/(highresult(VIXH, STBARSS)-lowresult(VIXL, STBARSS)+0.0001)100. STVIXS is simpleavg(STOCHVS,3). STOCHSS is (SPYC-lowresult(SPYL,STBARSS))/(highresult(SPYH,STBARSS)-lowresult(SPYL,STBARSS)+0.0001)100. STSPYS is simpleavg(STOCHSS,3). STOCHVL is (VIXC-lowresult(VIXL,STBARSL))/(highresult(VIXH,STBARSL)-lowresult(VIXL,STBARSL)+0.0001)100. STVIXL is simpleavg(STOCHVL,3). STOCHSL is (SPYC-lowresult(SPYL,STBARSL))/(highresult(SPYH,STBARSL)-lowresult(SPYL,STBARSL)+0.0001)100. STSPYL is simpleavg(STOCHSL,3). !VIX VIXDN is (VIXC/valresult(highresult(VIXC,VBARS),1)-1)100. VIXUP is (VIXH/valresult(lowresult(VIXL,VBARS),1)-1)100. ! CORRELATION TREND PeriodToTest is VBARS-1. !CUM1 is a custom ticker from DTU import of a CSV file** !CUM1 file is required for this system to work ! PEARSON CORRELATION ValIndex is TickerUDF("VIX", [close]). ValTkr is TickerUDF("CUM1", [close]). SumXSquared is Sum(Power(ValIndex,2), PeriodToTest). SumX is Sum(ValIndex, PeriodToTest). SumYSquared is Sum(Power(ValTkr,2), PeriodToTest). SumY is Sum(ValTkr, PeriodToTest). SumXY is Sum(ValTkr*ValIndex, PeriodToTest). SP is SumXY - ( (SumX * SumY) / PeriodToTest ). SSx is SumXSquared - ( (SumX * SumX) / PeriodToTest ). SSy is SumYSquared - ( (SumY * SumY) / PeriodToTest ). RC is SP/SQRT(SSx*SSy). !LONG BR1 if HasDataFor(STBARSL+10)>STBARSL+3. BR2 if STVIXL>STSPYL . BR3 if STVIXS>STSPYS. BR4 if STVIXS>valresult(STVIXS,1). BR5 if VIXUP>VIXUPMAX. BR6 if RC>0.8. BR7 if RC>valresult(RC,1). BUY if BR1 and BR2 and BR3 and BR4 and BR5 and BR6 and BR7. SR1 is STSPYS>STVIXS. SR2 is STVIXS<valresult(STVIXS,1). SELL if SR1 or SR2. !SHORT SS1 if HasDataFor(STBARSS+10)>STBARSS+3. SS2 if VIXC<= lowresult(VIXC,3). SS3 if VIXUP15. SS6 if STSPYS>STVIXS. SS7 if STSPYS>valresult(STSPYS,1). SHORT if SS1 and SS2 and SS3 and SS4 and SS5 and SS6 and SS7. CR1 if VIXUP>VIXUPMAX. CR2 if STVIXS>valresult(STVIXS,1). CR3 if RC>0.8. COVER if CR1 and CR2 and CR3. TEST if 1=1.
Figure 6 shows the CUM1.csv file that must be created in Excel and then imported using the DTU utility to a new index ticker called “CUM1.” The file increments one unit, like an index, for each trading day starting on 10/1/2003 and continues to the current date. This file would have to be updated manually via the data manager function.
FIGURE 6: AIQ SYSTEMS. This shows the portion of the CUM1.csv file that must be created in Excel.
Figure 7 shows a summary EDS backtest of the system using the VXX and VXZ from 6/21/2018 to 6/21/2022.
FIGURE 7: AIQ SYSTEMS. This shows a summary EDS backtest of the system using the VXX and VXZ from 6/21/2018 to 6/21/2022.
High ER Up and ER Down signals as a color study on DJI
Hour-long recording of session with Steve Hill, CEO of AIQ Systems. We explored some indicator trading strategies and undertook some testing of effectiveness. Wenalso combined them together into one strategy, prior to adding them as a Color Study.
July 20, 2022 05:00 PM Eastern Time (US and Canada)
Topic: Indicator Trading Strategies and Custom Studies Hour-long session with Steve Hill, CEO of AIQ Systems. We’ll explore some indicator trading strategies and we’ll undertake some testing of effectiveness. We’ll also combine them together into one strategy, prior to adding them as a Color Study.
I hope all you are having a nice summer, and you are healthy and happy. At this time, there are so many global disruptions that are affecting markets simultaneously. If you look at history, daily markets are affected by short-term disruptions. Which is why being a Financial Advisor for as long as I have and watching the many disruptions that cause short-term spikes and dips, you tend to try to keep clients calm and remind them that “this too shall pass” and to stay the course on their long-term objectives.
My goal is to reassure everyone that the market over the LONG-TERM has done very well, but some years including this current year markets can go down. According to CNBC, 2022 has had the worst stock market year since 1970 and the worst Government Bond market since the 1860s. Since 1970 the market according to stockcharts.com has averaged over 10.46% per year, but in some years the markets drop, sometimes stocks and bonds drop, but it is normal. I can only advise you with the almost 42 years of being a financial advisor, out of fear people tend to panic and sell at bottoms and buy at the top.
How do financially independent people make money in the markets? They buy investments when no one else wants them, they are sticking to their long-term goals. When things are relatively cheap, they start accumulating good long-term investments, only.
So many stocks are down 40-80%, but if the companies are good and strong then they might a good investment when things turn around and they should be in my opinion over the next year. The main reason I write the Bartometer, is to keep you abreast of how best to navigate through market trends.
2021 Recap:
Most of 2021, last year I was saying do not buy, the markets are too overvalued and take some money off the table.
Current Market Trends:
Right now, I am saying to nibble and dollar cost average over the next 6 months to a year as I think you will be getting much better prices. If you are putting money in your 401(k) you may want to double up your investments for a while. This decline will pass in my opinion. You make money in the Bull Markets by Buying in the Bear Markets unless you are a trader.
The markets are still down 18-32% or more for the year and even Energy stocks were the biggest losers over the last month dropping about 18% over the last 30 days. Most of you have seen a decline in gas prices recently. Inflationary pressures are starting to subside somewhat. This is good news.
Last month on the Bartometer you all have I said the S&P 500 could drop to the 3500 to 3650 level and that could be a short term low or a good place to buy a little and the S&P 500 went to 3620 and rebounded, currently:
• S&P 500 is over 3900 again and the Federal Reserve may raise interest rates one or 2 more times based on the data that is coming out.
• Job numbers just came out and they were better than expected so rates will probably go higher but there is talk now that the economy may not go into a hard recession but a soft landing.
If that is true, then the markets may not go as low as the Doomsday Sayers” of 2500 on the S&P 500. There are points where investors are looking for a turnaround in the market. So, if we are in a soft-landing scenario, and that is a big IF, we MAY have another 10+ percent down in the market to the 3200 to 3500 area but only if earnings are going to fall or are revised down significantly. For most of you the upside could be 4200 this year and from this point it could go down to 3200 to 3500 if earnings drop. But I am hopeful that over the next year or so the markets are up, and we get inflation under control and earnings turnaround. I think any dip of the S&P 500 to the 3200 to the 3500 could be major buying opportunity. I can’t guarantee it as it depends on data. Short term I see 3200 to 3500 as a possible short term low and 4200 on the upside if earnings are not revised down and rates stop going up.
Next year I see the market going higher because I see earnings rebounding and interest rates subsiding. THINK LONG TERM.
Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until July 08, 2022. These are passive indexes.
Market Outlook
Stocks moved higher this week with the major indexes up 2% to 5%. The S&P500 was up 2%, while the Nasdaq gained 5%. Economic news was mixed, as were business surveys, which gave conflicting signals on the strength of the economy. Positively, longer-term interest rates have remained relatively stable and inflationary expectations as measured with the 10-year T-Note continued to trend down. They were recently 2.3%, down from 2¾% a month ago. Another positive, the S&P500 and the Nasdaq moved above two key areas of resistance (the 10- and 21-day averages). A negative, the stock market gains all came on very light trading volume. In a healthy stock market, upward moves occur on strong volume.
My Epoch Times article on shortages highlights the government’s role in preventing businesses from getting goods to consumers. Another such government move comes from a California law directed against independent truckers and other independent contractors. If enforced, tens of thousands of independent truckers will not be able to operate in CA. This increases the potential for damage to CA and for more shortages throughout the country damaging the supply chain.
While the rally in stock prices provides some relief, stocks are 26% overvalued. With the Fed promising to sell securities and raise interest rates, the risks to owning stocks remains extremely high.
A Look Back Today’s job report shows strong gains for June. Private payroll jobs increased 381,000, a 3.6% annual rate. Total weekly hours worked and average weekly earnings increased at annual rates of 4% and 6%. Unemployment remained 3.6%.
This is a reduction of his stock allocation.
Dr Robert Genetski, American Strategic Advisors and LPL Financial are not affiliated. The opinions expressed in this material do necessarily reflect the views of LPL Financial.
SUPPORT AND RESISTANCE LEVELS ON THE S&P 500
RESISTANCE 3920 TO 3960 (RIGHT WHERE WE CLOSED FRIDAY) then 4178,4224 and 4322
SUPPORT 3645, 3506 the 50% Fibonacci Retracement, 3195 the 61.8% Fibonacci Retracement. These are areas not exact numbers
Bottom Line
• The market has had one of the worst years in 50 years in a long time dropping 18-50% The cause?? Overvaluation, Higher Interest rates, INFLATION, Recessionary pressures, Covid and the Russian War and China.
• Interest rates are rising and could rise 1 to 3 more times. At that time if interest rates peak because inflation is peaking then stocks and regular bonds may be a worthwhile investment.
• In addition, stocks with pricing power and with good consistent earnings can do better than aggressive companies that have potential but no earnings.
• Commodities have sold off somewhat leading me to believe that the Federal Reserve may not raise interest rates substantially from here.
• The market is at an inflection point where normally it would top as it is at resistance right now and will either push through short term resistance or sell off here.
I am still long term bullish on equities, but the short term could get very volatile over the next 2 to 4 months. The upside might be 4178 to 4400 on the S&P 500, but I would consider selling some if it goes there over the next 2 months but the downside could be the 3650 level or lower possibly to the 3500 level if we go into a soft recession then the 3180 to 3200 is possible if the recession is steeper. At that point the markets could be a great buying opportunity. This is predicated on the actions of the Federal Reserve. I will continue to do my analysis and inform you when a bottom looks imminent.
The Best to all of you, Joe Bartosiewicz, CFP® LPL Investment Advisor Representative Contact information: Joe Bartosiewicz, CFP® Partner Wealth Manager American Strategic Advisors 263 Tresser Blvd 1st Floor Stamford CT 06901 860-940-7020
SECURITIES AND ADVISORY SERVICES OFFERED THROUGH LPL Financial, a registered investment advisor, MEMBER FINRA/SIPC.
Charts provided by AIQ Systems
Disclaimer: The views expressed are not necessarily the view of LPL Financial or American Strategic Advisors, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. 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 the changes that may occur in the market.
The price of commodities is subject to substantial price fluctuations of short periods of time 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.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and there is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Stock investments include risks, including fluctuations in market price and loss of principal. No strategy assures success or protects against loss. Because of their narrow focus, sector investing includes risk subject to greater volatility than investing more broadly across multiple sectors.
The importable AIQ EDS file based on Markos Katsanos’ article in April 2022 issue of Stocks and Commodities magazine, “Stock Market Seasonality,” can be obtained on request via email to info@TradersEdgeSystems.com. The code is also available below.
Synopsis:
Should you sell in May, or later in the summer, or never? Is October the best reentry month? Which are the best and worst months for the stock market? And are there statistically significant seasonal patterns in the equity markets? Can we improve on a seasonal system using other technical conditions?
Code for the author’s system is set up in the AIQ code file. Figure 9 shows a summary EDS backtest of the system using the SPY ETF from 1/1/2000 to 2/17/2022.
FIGURE 9: AIQ. This shows the summary EDS backtest of the system using the SPY ETF from 1/1/2000 to 2/17/2022.
!Stock Market Seasonality
!Author: Markos Katsanos, TASC April 2022
!Coded by: Richard Denning, 2/10/2022
C is [close].
C1 is valresult(C,1).
H is [high].
L is [low].
V is [volume].
Avg is (H+L+C)/3.
VIXc is TickerUDF(“VIX”,C).
VIXc1 is valresult(VIXc,1).
VIXllv is lowresult(VIXc,25).
VIXllv1 is valresult(VIXllv,1).
VIXhhv is highresult(VIXc,25).
VIXhhv1 is valresult(VIXhhv,1).
VIXDN is (VIXc1 / VIXhhv1)100.
VIXUP is (VIXc1 / VIXllv1)100.
TR is max(max(C1-L,H-C1),H-L).
ATR is expavg(TR,152-1).
ATR1 is valresult(ATR,1).
ATRllv is highresult(ATR,25).
ATRllv1 is valresult(ATRllv,1).
ATRhhv is highresult(ATR,25).
ATRhhv1 is valresult(ATRhhv,1).
ATRDN is (ATR1 / ATRhhv1)100.
ATRUP is (ATR1 / ATRllv1)*100.
!VFI
Period is 130.
Coef is 0.2.
VCoef is 2.5.
inter is ln( Avg ) – ln( valresult( Avg, 1) ).
Vinter is Sqrt(variance(inter, 30 )).
Cutoff is Coef * Vinter * C.
Vave is valresult( simpleavg( V, Period ), 1 ).
Vmax is Vave * Vcoef.
VC is Min( V, Vmax ).
MF is Avg – valresult( Avg, 1 ).
VCP is iff(MF > Cutoff, VC, iff(MF < -Cutoff, -VC, 0 )).
VFI1 is Sum( VCP, Period ) / Vave.
VFI is expavg( VFI1, 3 ).
SELLMONTH is 8.
VIXUPMAX is 60.
CRIT is -20. !VFI SELL
K is 1.5. !ATR/VIX RATIO
VOLCONDITION is (VIXUPCRIT.
BUY if (Month()>=10 OR Month()2*VIXUPMAX. !VOLATILITY EXIT
SELLMF if CRIT > VFI AND valrule(CRIT < VFI,1) AND simpleavg(VFI,10)<valresult(simpleavg(VFI,10),1).
Sell if SELLSEASONAL OR valrule(SELLVOLATILITY,1) OR valrule(SELLMF,1).
Potentially Higher interest rates over the next few months.
Potential recession in 2023.
Potentially Slowing earnings growth.
Putins war in the Ukraine and now possibilities with China.
Inflation numbers came in last week with an annualized rate of 11%. These numbers cemented the fact that the prices are continuing to rise at an alarming pace. Now 2-3% inflation is could be good for the economy in some ways as it allows growth in prices and profits, but high rapid inflation like we have now is destructive to the economy and unless it retreats to a manageable number the Federal reserve has no other alternative but to continue to raise rates to slow the economy. Next month the Federal Reserve should raise interest rates .5 to 1% and again over the next couple of months. In my opinion they were behind the curve and should have raised rates last year but didn’t. Now they are in a quandary where instead of tapping on the brakes, they will slam on the brakes. This should cause the stock and bond markets to continue to be volatile and cause the economy to either go into a soft-landing recession, hopefully, or worse.
The S&P 500 could fall to the 3500 to 3700 falling another 10-14% if we have the soft-landing recession and 3180 if it is worse. The S&P 500 according to CNBC, is selling at 17 times this year’s earnings. This is relatively cheap, but if we go into a recession then earning revisions will go down and the Price to Earnings of the S&P 500 will go up to 18 to 20 times earnings depending on the revisions. Those revisions can drive the market down to a cheaper level. Therefore over the short-term having a little more cash in your portfolio makes sense. In addition, a reduction high flying tech stocks should be replaced by more consumer staples and solid blue-chip stocks in those sectors.
Even though I have been somewhat negative on the stock and bond markets since last November, which has not shaken me out of the idea that equities over the long term are one of the best investments in which to invest. Short term the markets go into a fall every 4 to 7 years according to CNBC. This time it is a little different when everything including bond and real estate market is falling. The only sector that has risen has been the energy sector.
I continue to be Cautious and, on any rally, you may want to sell a little of your equities depending on your risk tolerance, your goals and time horizon. But as Warren Buffet always says, “Buy when there is blood in the streets” We are not there yet as the Volatility index has not risen to panic extremes yet, but with another 5 to 10% decline they should be.
A break of 3900 should drop the S&P to 3810-3815. A break of 3810 could drop the S&P to 3700 or lower. In my opinion, a CONVINCING break of 3810 could bring the S&P 500 to the 3700 area first the 3500 too 3650 where I think market could look very interesting for BUYS but I will analyze at the time.
Overall, I feel the market will go to a new low, but aggressive and younger investors may want to use the recession and the decline to buy equities as Capitalism works and equities over the long term makes sense for most people. I do believe a reduction of equities for a time is appropriate as I feel we may hit new lows.
Some of the INDEXES of the markets both equities and interest rates are below.
Excerpts from Dr. Robert Genetski
Market Outlook
After two consecutive weeks of sharp increases, stock prices moved erratically lower. Although the Dow rose by 1⁄2%, the Nasdaq fell 3% and the rest of the indexes fell 1% to 2%.
The economic news was not good. Oil prices rose to $122 from $117 a week ago. Interest rates are also higher, with the 10-year Treasury yield moving above 3%. Although weekly unemployment data are highly erratic, it didn’t help that initial unemployment claims continued to rise.
For some time, the market’s technical indicators have been very negative. The latest downturn lower took out keep support areas for all key indexes. Stock prices are down 11% to 26% from their all-time highs. Technical indicators point to likely further loses.
This remains a highly risky environment for stocks, particularly with the Fed intending to restrict the money supply. If the Fed is successful in reducing the amount of money in the economy, it will drive interest rates higher and drive stock prices still lower. The combination of an overvalued stock market, weak technical indicators and the Fed’s attempt to restrict money provide for a highly risky environment for stocks. With these elevated risks, I’m increasing the cash portion of my portfolio and suggest you do the same.
A Look Back
Today’s inflation report shows May consumer prices increased at an 11% annual rate from April; core inflation rose at a 6% rate. The yearly increases were 9% for all prices and 6% for prices ex-food and energy.
With energy prices soaring in June, and with business surveys showing little in the way of relief, the Fed will be under pressure to become even more aggressive in its efforts to adopt higher interest rates and sell securities.
Economic Fundamentals Weakening
Stock Valuation Over-Valued 24%
Monetary Policy: Expansive
Recommended Stock Exposure: 25%
This is a reduction of his stock allocation.
Dr Robert Genetski, American Strategic Advisors and LPL Financial are not affiliated. The opinions expressed in this material do necessarily reflect the views of LPL Financial.
S&P 500
Chart source AIQ Systems
Above is the S&P 500. It is currently down 18.2% for the year and the NASDAQ is now down 28%. There is currently minor buying support at 3810-3815, if that breaks and I think there is a good possibility of breaking that level over the next few days or weeks the 3700, is minor support then the 200-day moving average of 3500-3644 is MAJOR SUPPORT This is also the 50% Fibonacci Retracement so this level is very important and good support. It would also be Wave 5 of Elliott Wave Theory which could be the bottom over the next few months. If we go into a larger Recession then the 61.8% Fibonacci Ratio or 3180 would be the lowest decline I see. On the upside if 4200 to 4400 happens over the next 3 months then I would sell into that level.
Next are three indicators that are important to determine over bought or oversold levels.
The first is SK-SD Stochastics. When the levels of 32 is broken then the market is OVERSOLD, and it is currently, but it still doesn’t mean its cheap, It just means it’s over sold and could bounce.
The next indicator is momentum or MACD. This is how this indicator works. When the pink line crosses above or below the aqua line it’s a BUY or SELL. Notice it has been on a SELL since January,
The last indicator is On Balance Volume. This is a very powerful indicator which shows when the markets are confirming the upside or downside. As the markets goes down if there is more volume when the market is falling then indicator will fall more and that is very negative as it confirms the downside. Notice the black line is trending down when the market is going horizontal above. This is negative.
SUPPORT AND RESISTANCE LEVELS ON THE S&P 500
SUPPORT 3810 t0 3815 then 3700, 3645, 3506 the 50% Fibonacci Retracement, 3195 the 61.8% Fibonacci Retracement. These are areas not exact numbers
RESISTANCE 4178, 4224, 4322, and 4434
Bottom Line
The market has had one of the worst years in a long time dropping 18-55% The cause?? Overvaluation, Higher Interest rates, INFLATION, Recessionary pressures, Covid and the Russian War and China. If interest rates are rising and could rise 3 to 5 times like the Federal Reserve says that is why we should consider reducing regular bonds for at least another few months. At that time if interest rates peak because inflation is peaking then stocks and regular bonds may be a worthwhile investment. In addition, stocks with pricing power and with good consistent earnings can do better than aggressive companies that have potential but no earnings. Commodities tend to do well in an inflationary environment. Look for companies with revenue growth that has the potential of beating inflation. I am still long term bullish on equities, but the short term could get very volatile over the next 2 to 4 months. The upside might be 4178 to 4400, but I would Sell some if it goes there over the next 2 months but the downside could be the 3650 level if we go into a soft recession then the 3180 to 3200 is possible if the recession is steeper. At that point the markets could be a great buying opportunity. This is predicated on the actions of the Federal Reserve. I will continue to do my analysis and inform you when a bottom looks imminent.
The Best to all of you,
Joe Bartosiewicz, CFP® Partner Wealth Manager American Strategic Advisors 263 Tresser Blvd Ste 100 Stamford CT 06901 860-940-702
SECURITIES AND ADVISORY SERVICES OFFERED THROUGH LPL Financial, a registered investment advisor, MEMBER FINRA/SIPC.
Charts provided by AIQ Systems:
Disclaimer: The views expressed are not necessarily the view of LPL Financial or American Strategic Advisors, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. 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 of time 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 in directly, are unmanaged and do not incur management fees, costs, and expenses.
Dow Jones Industrial Average: A price weighted 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.
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 rules 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. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and there is no guarantee of future results. All indices are unmanaged an may not be invested into directly. Stock investments include risks, including fluctuations in market price and loss of principal. No strategy assures success or protects against loss. Because of their narrow focus, sector investing includes risk subject to greater volatility than investing more broadly across multiple sectors.
Hour-long session with Steve Hill, CEO of AIQ Systems. Many of the issues currently listed on the New York Stock Exchange are not really stocks but closed end funds, bond funds, ADRs. This has been the principal cause of the false signals given off by the Advance-Decline indicator. Using AIQ’s Breadth Builder Steve will show you how we have a fix for that.
Jun 16, 2022 05:00 PM Eastern Time (US and Canada)
Hour-long session with David Wozniak CMT, founder of Trading Floor Research (TFR), and Steve Hill, CEO of AIQ Systems. David will talk about his experiences as a Portfolio Manager and how risk management can be applied to your trading today. David is a decades long AIQ client.
Steve will cover a couple of recent trades from the TFR newsletter/alerts service. The service includes 2 newsletters a week, trade alerts and stop alerts.
Jun 30, 2022 05:00 PM Eastern Time (US and Canada)
Steve will cover a couple of recent trades from the TFR newsletter/alerts service. The service includes 2 newsletters a week, trade alerts and stop alerts.
Advance-Decline data is calculated from daily issues reported on the New York Stock exchange. The Basic formula for calculating the Advance-Decline is the difference between the number of Advancing Issues and the number of Declining Issues per day, and adding it to or subtracting it from the previous day’s total.
In simple terms, the AdvanceDecline Line shows the direction in which the majority of stocks are headed. In a more important sense, it can show whether buying enthusiasm during a rally is spread across a broad number of stocks (a positive indication), or whether buying is narrowly focused on just a few industry groups or sectors (a generally negative sign).
An Advance-Decline Line is a contract/expanding/short-term market indicator. It is also referred to as an “order of magnitude” indicator because it provides a quick estimate of the market’s internal strength by showing how the overall market (or a specific sector) is trading in relation to a moving average.
One of the most popular ways of judging the market strength of the overall market is by using the advancedecline line (ADVs), also known as the “AD Line.” This metric is calculated by subtracting the number of decliners from the number of advancers in a market index. During a strong bull market (when a bull market begins), an AD line that is rising indicates growing market breadth (better market breadth) and indicates that money is continuing to move into the market. Conversely, falling AD lines indicate shrinking market breadth (worse market breadth) and indicate that money is leaving the broader market.
Because of its elegant simplicity, and the valuable insights it has provided at market turning points, the AD Line has become a highly prized indicator by both fundamentalists and technicians throughout the decades. But, in recent years, something seems to have gone astray.
The AD Line against the DJIA 9/1/2021 clearly shows the indicator making a new high, however the market drops precipitously shortly after
How could the time-tested Advance-Decline Line give off such obviously false signals? The answer is simple, but not easily seen. The change has occurred, not in the indicator, but in the data it measures. Over the past 3 decades, the New York Stock Exchange has allowed trading in a growing number of issues that are not, or do not trade like, domestic common stocks.
The truth is that most of the issues currently listed on the NYSE are not really stocks, at least not what investors generally define as stocks. Their inclusion has created turbulence in the sea of securities that has been amplified by the Advance-Decline Line. These stock-like issues include closed end funds (CEFs), American Depository Receipts (ADRs), and exchange-traded funds (ETFs).
In other words, the common stock components of the Advance-Decline Line offset one another, while the bond-related components were rising strongly, giving the Advance-Decline Line a positive bias. In other words, during those periods, the Advance-Decline Line was, in essence, measuring the strength of the bond market, not the stock market. It’s no wonder that the signals were misleading!
In an upcoming free zoom meeting we will be discussing making an AD line indicator that more closely measures the stocks on the NYSE and may improve the signals on the market.
Creating An Advance-Decline Line ‘Without the Flaws’ – FREE webinar
Hour-long session with Steve Hill, CEO of AIQ Systems. Many of the issues currently listed on the New York Stock Exchange are not really stocks but closed end funds, bond funds, ADRs. This has been the principal cause of the false signals given off by the Advance-Decline indicator. Using AIQ’s Breadth Builder Steve will show you how we have a fix for that.
On my last Bartometer the S&P 500 was around 4580 and I stated the market was again overbought and to Sell some equities and bonds. I stated I saw the S&P retreating to the 4200 level and if that broke then the 3800-3850 level would be the next support. Last Thursday the S&P declined to the 3840 level and bounced to the 4000 area in one day. Even though the markets are now VERY OVERSOLD and can rally a bit more, there is no major upside driver to now start a new Bull Market. Even though the market retreated so much this year, with the NASDAQ down 30% off its highs, the markets are now very oversold, but I only see minor rallies from here and more volatility until inflation and interest rates peak.
We still have the same concerns:
High Inflation.
Potentially Higher interest rates over the next few months.
Potential recession in 2023.
Potentially Slowing earnings growth.
Putins war in the Ukraine and more.
In my opinion, any rally into the 4200 to 4400 area is still a place to consider reducing exposure to equities and bonds depending on your individual circumstances. This however is one of the worst 4.5 months we have had in a long time. As reported by Morningstar, the stock markets down anywhere from 11-50% and bonds down from 5 to 22%. Most investors are seeing their investments go down.
The only major sector that has done well recently is energy sector. Other than that, everything else is falling. Does that mean to stop investing? No, as a matter of fact, I believe the opportunities in the stock and bond markets are going to give many of you opportunities that you have not seen in a while. Dollar cost averaging can be a beneficial way to enter the markets. Consider increasing purchases over the next 1 year as the markets are lower. Warren Buffets frequently states “buy when there is blood in the streets.” There is blood in the streets now for many stocks and its possible it may get worse. Nothing is guaranteed, but if you believe in capitalism and that great companies and markets do well over time this may become a buying opportunity. When markets are down like this you may want to take advantage of these drops. Look on page 4 to see the last 52 year of the S&P 500.
Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until May 14, 2022 These are passive indexes.
Excerpts from Dr. Robert Genetski
Market Outlook . A Look Back
The bloodbath on Wall Street has taken the Nasdaq and other indexes down almost 30% from their highs.
Among the better relative performers, the S&P500 is down 18% and the Dow 14%.
Economic news is mixed. April business surveys show a sharp decline in output in China and Russia. Much of the rest of the world, including the US, continues to grow at a moderate pace amid rapid inflation.
The stock market’s technical signals remain very negative. My technical guru, Joe Bartosiewicz, CFP, wrote about major support for the S&P 500 at about 3800-3850. The index fell to a low of 3840 yesterday before rebounding to 3930. While this could be the bottom, no one can say for certain if it is.
On a positive note, the IBD ratio of bulls to bears is just about where it was in late March, 2020, during the worst fears of the Covid outbreak. Amid such extreme pessimism markets often change direction. Stocks often reflect the collective wisdom of all investors. If so, they are pointing to a much weaker economy than our forecast suggests. The key unknown is how badly shortages of food, diesel fuel and other raw materials will slow both the economy and spending. If the economy stalls or dips into a downturn, there will be some relief from inflation, but at a serious cost in jobs.
With China, Russia and Ukraine creating SupplySide problems, our forecast is for the economy to weaken this summer without going into a downturn. By the end of the summer, the economy will either be soft with continued high inflation or will be flat to down with some relief on prices. Neither scenario is very attractive. Amid all the uncertainty, my stock portfolio remains 50% in stocks and 50% in cash.
A Look Back This week’s April inflation reports showed no relief from soaring inflation. April’s total cpi index slowed to a 4% annual rate while the monthly cpi ex-food and energy increased a 7% annual rate.
Economic Fundamentals Weakening
Stock Valuation Over-Valued 19%
Monetary Policy: Expansive
Recommended Stock Exposure: 50% This is a reduction of his stock allocation.
Dr Robert Genetski, American Strategic Advisors and LPL Financial are not affiliated. The opinions expressed in this material do necessarily reflect the views of LPL Financial.
S & P 500
Charts Source: AIQSystems.com
Above is the WEEKLY Chart of the S&P 500. This chart goes over the last 1.5 years in the S&P. As you can see the S&P is down about 20% off its high and down 15.2% in 2022. As you can see, I said that the 4200 level was support and if it broke that support then The 3580 to 3850 should find some buying support. That did happen bottoming at 3840 on Thursday and closed up 2.29% on Friday, Closing at 4023.89. It has substantial Selling resistance from here to the 4200 first then 4400 area next where it can top out again. I am not thinking the S&P can start a new Bull market anytime soon. I do believe the stock market should bottom over the next year so that is why we can consider buying more equities through dollar cost averaging monthly over the next year.
SK-SD stochastics is next. This indicator was the reason I got negative last month right near the top. This today is the weekly chart, last month was the daily chart. But last week the SK-SD Stochastics was showing an 82 reading meaning it was over bought again. Now, however it is at 16 on the Daily graph and below 32 on the weekly graph. Meaning? The markets are very OVERSOLD and can potentially have a Rally at anytime.
Next is the MACD or Momentum graph. This shows that the momentum is engrained in a strong down trend for a while. A trend change to the upside would happen if the pink line crosses over the purple line. But as of this moment, I see volatility and a rally or two.
The last indicator is the RSI Wilder index. This is very interesting as if it breaks below the 32 line like it ALMOST IS, then the market is getting extremely oversold and we could have a major rally. It’s almost there now.
52 YEARS OF PERFORMANCE OF THE S&P 500:
The Stock Market and INFLATION
As you can above, the S&P 500 has performed well over the long term. It has averaged an INFLATION ADJUSTED RETURN OF 6.49% according to Officialdata.org for the last 52 years. It averaged 10.66% before inflation and 6.49% after inflation. So as you can see the stock market has been one of the best ways to offset inflation over the long term. Yes, the market goes down, but over the long term it’s still one of the best places to make money.
SUPPORT AND RESISTANCE LEVELS ON THE S&P 500
SUPPORT 3800 to 3850, then 3719, 3478, and 3380. These are areas not exact numbers RESISTANCE 4071, 4210, 4322, and 4434
Bottom Line
The market has had one of the worst 4.5 months n a few years dropping 11-50% The cause?? Overvaluation, Higher Interest rates, INFLATION, Covid and the Russian War.. If interest rates are rising and could rise 3 to 5 times like the Federal Reserve says that is why we should consider reducing regular bonds for at least another few months. At that time if interest rates peak because inflation is peaking then regular bonds may be a good investment but the only bonds I might consider are FLOATING RATE BONDS now. In addition, if interest rates rise financials potentially tend to perform better than most. In addition, stocks with pricing power and with good consistent earnings can do better than aggressive companies that have potential but no earnings. Commodities tend to do well in an inflationary environment. Look for companies with revenue growth that has the potential of beating inflation. I am still long term bullish on equities, but the short term could get very volatile where we could go a little higher on the markets but maybe back to 4500, but the downside could be the 3650 level and if we go into a soft recession then the 3300 3500 level is possible and lower if the recession is steeper. This is predicated on the actions of the Federal Reserve. I will continue to do my analysis and inform you when a bottom looks imminent.
The Best to all of you,
Joe Bartosiewicz, CFP® Investment Advisor Representative Contact information:
Disclaimer: The views expressed are not necessarily the view of LPL Financial or American Strategic Advisors, Inc. and should not be interpreted directly or indirectly as an offer to buy or sell any securities mentioned herein. 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 of time 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 in directly, are unmanaged and do not incur management fees, costs, and expenses.
Dow Jones Industrial Average: A price weighted 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.
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 rules 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.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and there is no guarantee of future results. All indices are unmananaged an may not be invested into directly. Stock investments include risks, including fluctuations in market price and loss of principal. No strategy assures success or protects against loss. Because of their narrow focus, sector investing includes risk subject to greater volatility than investing more broadly across multiple sectors
Rarely do we come across a newsletter and alerting service that offers the kind of insight and alerts that Trading Floor Research is offering. TFR was founded by David Wozniak, a high net worth portfolio manager for over 32 years.
The system David employs in his newsletter and alert service has a high probability trading model that was developed, backtested, and used to successfully manage portfolios by selling losses quickly and letting profits run.
The TFR service uses a combination of Group/Sector rotation (based on David’s own custom groups), Donchian’s four-week rule, volume, trend analysis of averages and Fibonacci expansions for entry and exit targets.
High Probability Trading Setups
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That’s why you’ll know your sell target before you enter the trade.
The system has a high probability trading model that was developed, backtested, and used to manage high net worth portfolios for over 32 years. Successfully managing portfolios has taught me that the secret to success includes selling losses quickly and letting profits run.
TFR informs you through a text alert of your next trading opportunity, and when a sell target is achieved. This allows you to react as quickly as possible to new trading ideas and maximize your ability to make greater trading profits.
Trading Floor Research provides commentary on individual stocks, their industry group, and the market. This gives you greater insight into every trade. Trade setups will come with a possible 1 to 5-star rating based on an individual stock’s probability of success. Make better risk management decisions by knowing what to allocate to every trade.
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I am now a Partner at American Strategic Advisors in Stamford Connecticut.
Now
to the the important news that will continue to affect all of us.
1. Putin and the Russians continue to penetrate
and choke off the cities of Ukraine although there are talks of a cease fire..
This will most likely continue until the Ukranians give up, Putin gives up or
there is an escalations that can be a disaster.
2. As reported on CNBC, Inflationary pressures
are 6-7% plus should continue to weigh heavily on the economy and overall costs
in the USA.
3. Interest rates
will continue to rise at least 3 to 5 more time unless the data changes
4. Earnings
will slow if the war continues and inflation does not subside. This could cause
a Global Recession
5. Overall the
citizens of the USA want to travel and to spend money but they are being suppressed
by the uncertainty of war, higher interest rates, higher inflation and spiking energy
costs.
Earnings are expected to continue to grow this year about 3 to 7%, but after the bounce in the stock market over the last 2 weeks the market is getting overbought again somewhat and getting near resistance. The market can continue to rally from here, BUT now I would consider reducing equity positions as there are too many head winds in the market that could become a problem in the next few weeks and months. The stocks that tend to do well in an inflationary environment are stocks that have pricing power. These companies can raise prices somewhat and people will continue to use their products. As prices go higher people tend to buy other substitute products. If you are nearing or in retirement, I would consider reducing equities by 5 to 10% to fixed accounts if you are over allocated to equities. I still like energy, and dividend stocks and over the longer term higher quality technology stocks.
Some of the INDEXES of the markets both equities and interest rates are below. The source is Morningstar.com up until April 1, 2022 These are passive indexes.
Excerpts from Dr. Robert Genetski
Market
Outlook
Nervous
investors continue to produce highly erratic moves in stock prices. This week started
with substantial gains, then ended by giving back the gains. By yesterday, most stocks ended the week unchanged.
Daily moves in stock prices are usually in response to major news events. The gains earlier in the week appear consistent with a promise that peace talks could end the war. The declines later in the week were consistent with a lack of progress in the talks and with Russian troops being exposed to radiation
at Chernobyl.
Most technical stock market indicators remain negative. The S&P500 is in the best shape since it is the only major index above its 200-day average. All others have failed to move above key resistance
levels.
Economic indicators for March point to moderate growth of 2% to 3%. Rapid inflation continues to eat away at increases in spending and incomes. After a sharp increase, longer-term interest rates have leveled off. The spread between the 2-year Treasury and the 10-year Treasury is currently a mere 0.01 percentage point. The narrowing of this spread suggests the Fed will be able quickly to contain
inflation by rapidly raising short-term rates. This is highly unlikely.
Although the flood of money entering the economy slowed a bit in March. It will take much more than slowing to offset the surge this past year. With little change the S&P500, the index remains 29% above its underlying value. Investors should remain cautious in a highly erratic news driven market.
A Look Back
Today’s March employment report shows a strong rise of 426,000 private payroll jobs, a 4% annualized increase. Average weekly earnings increased at a 5% annual rate and the unemployment rate declined to 3.6%. As expected,
the economy continues to perform well.
Forces Impacting the near term outlook for stock prices
Economic Fundamentals Mixed
Stock Valuation Over-Valued 29%
Monetary Policy: Highly Expansive
Recommended Stock Exposure: 60%
This is
a reduction of his stock allocation.
Dr Robert Genetski, American Strategic Advisors and LPL Financial are not affiliated. The opionions expressed in this material do necessarily reflect the views of LPL Financial.
S&P 500 Charts Source: AIQSystems.com
The S&P 500 is above. As you can see it has rebounded over the last month where the AIQ Systems gave BUY signals on March 10th but it is again flashing topping action again. The S&P is masking what is happening to the very aggressive stocks that have fast revenue growth but no real earnings as of yet and have dropped 30% or more. Over the longer term I am still Bullish, but over the next few months I do not see any new highs in the S&P 500. I see the S&P not going above the old high and actually trying to test the 4200 level again on the S&P 500. So, any rally in the markets may be to REDUCE equities. In addition, we will probably not have a recession this year, but in 2023 the chances go up for a recession. Stick with companies with solid earnings.
The SK-SD Stochastics chart is
again getting very overbought as the fast line is now over 88 and getting
overbought. MEANING?, the market is getting short term overbought again. See
the ABOVE pointing Arrows? Everytime the SK-SD Stochatisc was above the 88 line
the market topped out short term! Meaning I’m CAUTIOUS here, consider selling a
little above the 88 line, where it is now.
MACD or Momentum line. Momentum
is still going higher. The BUY signal was when the pink line crossed the Aqua
line in early March, but now it has gone up a good deal. My AIQ models are NOT
confirming Sell signals, I am saying they are flashing topping action.
The last chart is On Balance Volume. This chart shows as markets go up all volume is added and when markets fall then all volume is subtracted. Notice volume is not that great when markets are rising. It should at least follow the market above and it is not.
Bottom Line
The
market has had one of the worst quarters in a few years. The cause? Overvaluation,
Higher Interest rates, INFLATION, Covid and the Russian situation. If interest
rates rise 5 to 7 times like the Federal
reserve says then regular bonds may be a SELL, and the only bonds I might
consider FLOATING RATE BONDS. In addition if interest rates rise then financials
tend to perform better then most. In addition, stocks with pricing power and
with good consistent earnings do better than aggressive companies that have
potential but no earnings. Commodities tend
to do well in an inflationary environment. Look for companies with revenue growth
that has the potential of beating inflation. I am still long term bullish but the short
term could get very volatile where we could go a little higher on the markets
but there is a good potential of testing the 4200 level on the S&P 500
again later in the year.. I am Cautious on the market over the next few months.
If the market sells off and interest rates have gone up substantially then at
the peak of pessimism begets bottoms in the market. I will continue to do my
analysis and inform you when a bottom
looks iminant.
P
Support
levels on the S&P 500 area are 4250, 4200, and 3800- 3850 areas and 3500. These
might be BUY areas.
Please call me for a Review if
you have not seen me in 6 months, it is important.
The Best to all of
you,
Joe
Joe Bartosiewicz, CFP® Investment Advisor Representative
SECURITIES AND ADVISORY SERVICES
OFFERED THROUGH LPL Financial, a registered investment advisor, MEMBER
FINRA/SIPC.
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.
The economic forecasts set forth in this material may not develop as predicted
and there can be no guarantee that strategies promoted will be successful. Each
clients investment experience is unique to their circumstance and must be
carefully planned with their advisor.
Disclaimer: The views
expressed are not necessarily the view of LPL Financial or American Strategic
Advisors, Inc. and should not be interpreted directly or indirectly as an offer
to buy or sell any securities mentioned herein.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
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As we reach the end of March 2022, the volatility in the markets continues with large range days and varying volume levels.
When the market is in a trend, we might see 2 or 3 high Expert Ratings warning us of a potential change in direction. At the tail end of 2021 and the first 10 days of 2022, we had 3 down signals, the last of the 3 at 1-99 was on 1/10/22. The market moved down solidly to the 33280 level before rallying 2/3rds of the down move.
There was no up rating at the bottom as prices moved back up and one up rating early February that didn’t pan out. However, between 2/24 and 3/16 there was six signals, 5 of them up. That’s in only 14 trading days.
Between the 2/24 up signal and the 3/14 up signal there were 9 distinct bullish ER rules showing. There was also several that were duplicated bullish ER rules. Add to this 4 new distinct ER rules on the up signal 3/16, that adds up to the busiest ER cluster for a very long time.
Here are the first 9 distinct rules contributing the cluster of ratings
The Money Flow Indicator has reversed and is now advancing. In this sideways market, this is read as a bullish indication that the market could move up from this point because of the inflow of funds.
The 21 day stochastic has advanced and crossed the 20% line and the price phase indicator is also in- creasing. In this strongly downtrending market this is taken as a strong bullish signal suggesting an increase in prices.
The price phase indicator is negative but volume accumulation has started to advance. This is a non-conformation that, regardless of the type of market, is a bullish signal which usually results in an upward movement of the market.
The Money Flow Indicator has reversed and is now advancing. In this downtrending market, this is taken as a weak bullish signal that could indicate an upward movement in the market averages.
The advance/decline oscillator has turned positive with volume accumulation already positive. In this strong downward trend this is read as a strong non- confirmation of the current trend which could be followed by a reverse in price direction to the upside.
The new high/new low indicator has reversed to the upside. This is a reliable bullish signal that is often followed by an upward movement in prices. In this strong downtrending market a reverse in trend could start shortly.
Volume accumulation percentage is increasing and the 21 day stochastic has moved above the 20% line. In this downtrending market, this is taken as a strong bullish signal that could be followed by an upward price movement.
The new high/new low indicator has reversed to the upside. This is a reliable bullish signal that is often followed by an upward movement in prices. In this weak downtrending market an uptrend could start shortly.
Intraday low prices of the market have declined to a 21 day low. But the volume accumulation percentage is positive. In this market, this is taken as a weak bullish signal that could be followed by an upward price movement.
So when was the last time we saw this many ratings so close together?
It happens in clusters particularly in advance of a move against the current trend of the market. The ER system is inherently counter trend. This chart shows some cluster from 2009 – 2011.
One example was way back at the tail end of 2007, when another cluster of buy signals occurred in a similar fashion. Following a 100 down on 11/01/07 the market gave ground until 11/08/07, the first of 6 buy signals in 13 trading days through to 11/28/07
The market ERs are not perfect but they provide us with key insights into the way the internals are performing.
Where does the market go from here?
This chart above was back at the start of the 2007/8 bear market. So how do the chart patterns compare between 2022 and 2007/8? The chart below, on the left shows the 2007/8 market through early December 2007 following a strong move up after the cluster of up signals. The right charts shows current market with a strong up move following the cluster of up signals
There are some similarities between current price action and the topping pattern back in 2007, one being the measured way this pattern is emerging over several months. The chart below is the same time periods compared but with the ERs showing.
The bear market that followed in 2008 is in the Chart below.
The market moved down in a series of measured moves until we reached late September 2008 and the sharp downturn occurred. No guarantees we’re in the same market, but keep an eye out for those counter trend cluster ERs if we are, they may provide warning of rallies.
AIQ TradingExpert Pro is programmed with the knowledge and insight of respected technical analysts, experts who have developed technical analysis indicators and systems for the last 50 years. The up/down timing signals issued by TradingExpert Pro are based on this knowledge. Since TradingExpert Pro’s timing signals are generated on a scientific basis, free of bias or emotion, you get a disciplined, objective approach to stock market timing.
The timing signals produced by the AIQ expert system are in the form of Expert Ratings. Behind each Expert Rating is a set of rules that combine the sound principles of technical analysis with the experience of market professionals. Since no single technical indicator works all the time, using indicators in combination increases their reliability. For example, a rule is developed that combines the readings of two or more indicators.
This rule is then more reliable than the reading of a single indicator. Within TradingExpert Pro are two knowledge bases, one specifically designed to issue market timing signals and the other designed to issue stock timing signals. Each TradingExpert Pro knowledge base 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.
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Getting up to speed with AIQ TradingExpert Pro + Market Timing – how the AI Expert System works
Join Steve Hill, CEO of AIQ Systems for this hour long session. Includes an AMA (Ask Me Anything) at the end of the session.
Part 1. Getting up to speed with AIQ TradingExpert Pro
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AIQ TradingExpert Pro – ETF Rotation Strategy using Relative Strength
In this hour-long session, Steve Hill, CEO of AIQ Systems covers some hidden features in AIQ TradingExpert Pro, and in the second half, explores an expanded ETF list of tickers using a tried and tested ETF rotation strategy.
If you missed out on the Zoom meet the other day, checkout this hour long recording presented by Steve Hill, CEO of AIQ Systems.
The first segment is an overview of TradingExpert Pro; something for new clients and a recap for existing clients.
In the second section Steve discusses the recent Expert Ratings on the market with analysis of the breadth data and some insights into the mechanics of the Market AI system.
Mar 16, 2022 04:30 PM Eastern Time (US and Canada) In this hour-long session, Steve Hill, CEO of AIQ Systems will cover some hidden features in AIQ TradingExpert Pro, and in the second half, explore an expanded ETF list of tickers using a tried and tested ETF rotation strategy.
