Current SPX Position: Short from 1586.16
Next Action: Stop at 1600
System Score: 4=Bearish=Trend Score + Turn Score=10-6
Proposed New Score: 48%=Neutral=Trend Score + Turn Score=48+0
The System reached a new high watermark for profits on Friday...174pts in a little less than 8 months which is 12% unleveraged and uncompounded. That's very good steady performance and would be in line with my backtesting (20-30% annual profits) if the +2% 2/28 trade were included. To be fair, I should mention that the SPX gain from official System inception (8/21/2012) exceeds the System's gains, so one could argue the System has not outperformed a buy-n-hold strategy nor does it enjoy the tax advantage. But, the System was actually up 100pts when SPX was down 50pts at one time, and SPX has not entered a cyclical bear market yet. Over years, I believe the System will outperform the broader market straight-up, but when you throw in greater leverage on shorter time frames, compounding gains and time out of market along with better risk protection, I believe the System will be multiples better than the broader market.
The System took its first short position in a while on Friday. We could be whipsawed out at 1600, but the technicals are setting up for more short trades in the near future. The tipping point for bears is just below 1570 right now which is more than 1% below, so I expect dips to continue to be bought. However, one day soon, a downtrend will not be bought and will break a key level and take out months of gains in a week as the excesses get wrung out. Discretionary consumer spending predicts market tops and bottoms 4-6 months out, and it suggests the uptrend could continue 5-13 more weeks with 5-7 weeks into late May or early June seeming most likely. I personally like the scenario where SPX backtests the 1525-1530 breakout area in the short-term followed by one final high (probably a higher high but not necessarily). However, the last 3 large downtrends since October 2011 have averaged about 10% (see below), while the medium-size downtrends during that same time frame have been 65,50,50 and 46pts, so it is possible that SPX only falls to 1540-1550 before retesting the high and then falling 10% (and much more if the cyclical bear market has finally started). Regardless, the System takes it day by day and it is narrowly bearish and likely to flip between bearish and bullish over the next week or two given the technical setup. Good luck.
1293-->1159=134pts
1422-->1267=155pts
1475-->1343=132pts
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