With the market in shambles it may seem crazy to recommend a trade that expects the market to rise. But that is the nature of the markets and the model I use for these trades. Most times I focus on buying low points in an uptrend. But ridiculously strong upthrust can form after the bottom of a down-trend, especially the expanding type that has been forming.
The short-term model for the S&P 500 is now both over sold and it is divergent with the prior oversold signal. Divergence is a term used in technical analysis that describes a situation where the indicator you are using is not following the same trend as price is. Divergence often happens before trend shifts.
Without further ado here is the recommendation:
Buy SSO with a market order today Oct 8th. or at the open tomorrow.
The current price is 35.25 which I will use to track the trade.
Pete
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I'm curious about this. I believe the analysis you use assumes a particular timescale to determine whether or not a market is oversold. I think you might get different results depending on what timescale you use. The Dow dropped lower than it is right now around 2002-2003 I think, and bounced back quickly when it dropped to about 8000. However, there are some strong indicators that the current downturn is significant on a larger timescale. I'm concerned that the current drop could correct for growth observed in the 90s, which would require using a several decade-long timescale to determine where the bottom should be. This concern may or may not be warranted. Unfortunately, its not easy to do this because most tools seem to limit you to the last 5 years or so to do analysis. I had to go on the dow jones website just to find historical data. Any thoughts as to whether or not this makes a difference?
ReplyDeleteThese trades are short-term and are calculated off of intra-day data. So the time frame is very short...oversold is relative to the recent market action in a statistical sense. An overbought signal could be generated within 1-2 days from now if the market rises quickly.
ReplyDeleteIf you have been following the posts, I basically agree that this overall decline will go much further than it has now. But market don't go in straight lines.
I don't know what data you are looking for beyond price data, but price data is easy to get from the charting package of any broker you use for free. You should be able to get price data back to early 1900's or earlier on the Dow.
The 2002 low on the Dow was around 7200. I think it is likely that the Dow will approach that level before the next bull market. Realize that it may be several months or more than a year before price actually gets down there though.
This blog is really intended to profit from high probability short-term moves numerous times a year.....maybe 2-4 signals a month on average. I factor in all the other long-term trends and market sentiment and price patterns into what signals I choose to act or recommend on. I do not treat any signal as a "pure" buy or sell. It must make sense in context of larger market trends also.