Market Timing Blog Archive
for 09-09-2010 to 09-16-2010

Current Market Timing Blog


The VIX Will Rise and the S&P 500 Will Fall"

Market timing analysis says the VIX is going to rise today. The recent up trend in the stock markets is going to take a pause for the next 1-3 days AT LEAST. If you missed my earlier post, please click on my feed page and read that article. It gives you the math.

And it's not too late to act on a market timing basis. If we move down at least 3%, that is nearly 6 times the loss we have so far this am as I write this of 0.51% on the S&P 500 futures.

What are the market timing numbers? The VIX has risen above BOTH our key numbers of 21.24 and 21.36. It FAILED to break to the down side and is on the rise. Those are the numbers to watch for a reversal of course.

The ETF timing signals say the market should move down another 2.49% from where it is now in the S&P 500 futures. I'll have more for FREE "Tips" subscribers later today on the SPY / S&P 500 ETF. You can sign up below.


What the VIX is Saying Today"

The VIX actually made a marginal new low yesterday, but it was only 0.03 below the target of 21.24 with a close at 21.21. Not good enough. Whenever a close is that close to a key number, BE CAUTIOUS. This is useful general trading advice by the way. Markets often test slightly ABOVE and slightly BELOW key numbers to trap early longs on false breakouts and early shorts on false breakdowns.

And to prove my point, the VIX is back clearly above the prior two lows of 21.24 (Sept. 3rd) and 21.36 (Aug. 9th) The banking sector is down hard and is moving below what could now turn out to be a false breakout above the down trend line coming down from the May and August highs. In other words, the banking sector MAY be reversing course. The close today will confirm or rule against this impression.

The S&P 500 (SPX) is down modestly at the moment, but remains vulnerable to correction as it is nearing the top of it's trading range over the past few months of 1131.23 Read the article from yesterday on the second way to go "Passively Short™" if you are not familiar with the possible strategies you could use to protect your capital from a downturn from these levels. And feel free to contact me via our contact system if you have any questions about this market timing blog.

The article is here:

Passively Shorting™ the Second Way

09-13-2010: 1:14 am ET

The VIX Is Signaling "No Go" at the Moment"

This morning, the VIX, which can act as a market timing signal, attempted to break out to the downside and breach the prior lows of 21.36 on Aug. 9th and the 21.24 low on 9-3-10. IT FAILED to hold the new lows. This is a big point AGAINST the Bulls since it means that traders were protecting their positions as we hit the highs this morning.

This does not mean the rally is done for sure, but it does mean that the enthusiasm this morning was met by "concern" as revealed by the failure of the VIX to breakout to the downside to new recent lows.

09-13-2010: 1:14 am ET

GLD ETF Shows Two More Negative Signs But One Positive Sign May Emerge for Gold

There are other negative findings for the GLD that are cropping up in my market timing observations. The past few days are the first time since the $113 low that GLD has closed down 3 days in a row. There was only ONE other time since that $113 low that there were 2 down days in a row, but when it happened, the second down day was down only 0.02% from the previous day. So gold is showing what I call a “change of character.” The fact that this pullback is occurring close to a new high for gold could be foreshadowing the next pivot point.

The second thing that is not favorable is that the dollar index is now holding up fairly well and the Euro looks weak again. How is this playing out with gold? Dollar index weakness has helped gold back to the recent high. If the dollar index now strengthens, gold will have difficulty rallying. On top of that gold selling is picking up. Gold selling as reported by is greater than the effect of dollar weakness. So gold is down a bit in the overnight trade despite dollar weakness.

What COULD the gold Bulls have in their favor? The dollar index has pulled back in this morning's overseas trade within the recent consolidation and if it breaks the base of the consolidation, gold will benefit. I've written a complete article on the relationship of the gold price to currency movements and it's located on my Feed page (see navigation bar to left - at the top). But the dollar index has not broken down yet, since it began moving essentially sideways in mid-August. IF it does, that may be the market timing signal gold needs to make brand new highs.

As mentioned on Friday's Market Timing Blog (please read the Friday blog entries), if gold were to break out, I would buy based on that market timing breakout signal. My goal is not to be right about either a breakout or a breakdown. It is to recognize there is risk at the current top if gold does not move thorough the overhead resistance soon. That risk is there for the GDX (gold stocks) as well.

I'll likely be commenting further in the Market Timing Blog on the GLD ETF / gold on my FREE "Tips" page tomorrow. You can obtain a FREE password here by subscribing to the FREE "Tips" newsletter right here:

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09-10-2010: 10:02 am ET

Sitting at Resistance with No News

$SPX $SPY It's a bit of a problem when you have NO POSITIVE NEWS when you are SITTING AT RESISTANCE. No, it's not a good day to be a Bull, because this market needs some Redbull news to push it through the prior tops. The often watched 50 and 200 day moving averages are like a market timing wall the S&P 500 faces here.

So what do you do? Please read the post from yesterday entitled "Is it Time to Take Market Timing Profits or Not?" It was posted on 09-09-2010 AT 1:55 pm ET.

09-10-2010: 9:04 am ET

What Do Market Timing Signals Say About Where GLD / Gold is Headed? PART 3

So where is GLD this morning? It is flirting with the 3RD SELL SIGNAL, which may or may not kick in today. After the close yesterday, I warned that a second market tming SELL signal had been triggered. This morning we are waiting to see if a confirmatory THIRD SELL signal in GLD and of course gold will appear or not. If you look at the numbers I posted in "PART 1" below, you can see that this morning we traded BELOW that signal point in the pre-market session. GLD WAS trading at 121.08 JUST below the 121.15 number that was the next market timing signal. We've recovered above there FOR NOW.

In summary, we now have TWO OF THREE SELL SIGNALS:

1. The failure to break out above the prior all time highs.

2. The high volatility pullback yesterday that was a distinct change in character.


3. The trade below 121.15, that MUST stick for this to unfold. It has not and that is the one point the Bulls have in their favor today.

It is true that the Bulls could take the market back UP through all these SELL signal points and NEGATE them, but #2 above makes this less likely in my opinion.

You could:

1. Average out here.

2. Sell your entire position here (trading position; you may as I do maintain a long term non-trading position that you do not touch). My trading position is currently zero.

3. Wait for even more weakness SUCH AS SIGNAL # 3 above. That is fine too if you have large gold profits, but just be aware that you get father behind and getting back in may be a challenge if you sell "late." (see my prior market timing blog posts on "selling late") Remember you can always REBUY higher if the signals above reverse.

In the end, you have to do what you feel is right according to your own investment plan. I am not "telling" you to sell. I'm asking you to be "aware." What I do here every day is attempt to allow investors to be a bit more conscious about their investment decisions when a lot of people have fallen asleep on their money.

For more FREE but private commentary THAT WILL HELP TO KEEP YOU ALERT OF MAJOR MARKET SHIFTS, be sure you subscribe to get FREE PASSWORD ACCESS HERE:

09-09-2010: 4:27 pm ET

What Do Market Timing Signals Say About Where GLD / Gold is Headed? PART 1

If the GLD closes below or most likely even moves below 121.15 on an intraday basis, it will likely trade to around 118.71. Next major market timing support is 115.36.

If you look at the chart, the GLD has been rounding out at the top and peaked near the prior high. The spike to 122.95 failed to bring the GLD ETF to a new high on 8-26-2010 and on 9-8-2010, the GLD ETF again failed to make a new high. The GLD is already broken on the 1 min, 15 min, and 60 min charts.

It's true that it must now break down on the daily chart, but taking some profits closer to the top may make sense here. You can always buy back in, if the GLD ETF rallies and makes a new high. This is my concept of "Passive Shorting ™."

09-09-2010: 1:55 pm ET

Is it Time to Take Market Timing Profits or Not?

This may be a time to take market timing profits or even eliminate some positions to lower your equity exposure. A number of indices that have had good short term upswings are now met with resistance. Remember that scaling out may be better than selling all at once, but you have to consider what your strategy is to decide how you will scale out. Some indices like the REITs have tested a major top and pulled back, which is negative for the overall market in my opinion as they were leading.

If the stock indices do finally break out above their resistance points, you can always re-enter the markets you exit now (or at least average out of by taking 50% of a position for example off the table). Yes, this does entail opportunity risk in that if you sell and rebuy, you are missing out on the difference between those two price points.

But with the market trading back at resistance after showing so much reluctance previously to making new highs in June and then in August, this may be a time to be cautious. Remember the backdrop is September-October, which are not always kind to the markets, which increases risk that the gains accrued over the next couple of weeks may be lost in the subsequent few weeks - and that would only be if we were to rally from here and breakout to new highs.

So consider paring back your equity exposure in indices that are meeting resistance points like major tops (REITs) or even possible head and shoulders formations ($RUT). Current Blog

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