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The model has switched back to a BUY
signal, effective at the close on Monday, July 26. Accordingly,
the model’s standard portfolio switches 100% into the S&P 500 and the
aggressive portfolio invests 150% in the same index.
The three-week sell signal
was a big disappointment, to say the least, giving up gains of about 7%,
although finalized percents will be based on Monday’s close. Switchbacks are uncommon, but more
likely in fast-moving volatile markets.
Out of 59 past signals for this model’s forty-year history, 8
included switchbacks of three weeks or less, or about 14% of the
signals. There have been 4
one-week (with net loss or foregone gain averaging 2%), 1
two-week (13% loss in January, 2009), and 3 three-week (average 5%
negative) turnarounds. The only
three-week sell-buy switchback prior to the current one occurred in 1980,
sacrificing the same 7% gain as the current.
At that time, the subsequent buy signal became a one-week
switchback and the succeeding sell signal lasted 84 weeks, avoiding a
market loss of 13%.
The model continues its struggle with borderline
inflection points that signal the intermediate direction of the market, a
learning experience that will be assimilated in next year’s version. The sell signal three weeks ago barely
crossed the sell threshold and the score the following week came within a
hair of a buy signal. The buy
signal this week is well above the 77 threshold, although given current uncertainties regarding economic
recoveries here and abroad, legislations that impact business, and the
upcoming US elections, this bipolar and volatile market is likely to
continue, probably within the context of a flat to down secular trend. For now, though, the cyclical bull market that began in
March, 2009 remains intact, until proven otherwise by a greater than 20%
decline from the 1217 April high.
At 1103 the index sits 9% below this high.
See the FAQ
for details on bull and bear markets.
Disclaimer
Specific and personalized investment advice is not intended by this
communication. Its contents are for the public record as a free public
service. Information is based on the analysis of past data and
assessments by the models. Future performance may not reflect past
performance. Profitable trades are not guaranteed. No system or
methodology ensures stock market profits. No guarantee is made regarding
the reliability or accuracy of data. In other words, use this stuff at
your own risk!
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