Looking Forward....10.08.15

Here's a piece by Mauldin (actually Blodget) that forecasts dismal market conditions for the next 10 years. He presents a series of historical arguments to support his case that make a lot of sense...not that market activity makes any sense at all in this highly manipulated environment.
Anyhow, whenever I encounter a problem my immediate response is to try and find a practical and actionable solution. That's just me.
I know a lot of traders don't like to re-balance positions on a daily basis so here's 2 new versions of the old Lazy Man model using just SPY and AGG (Ponzo chart posted yesterday) that trades on a weekly basis (positions rotate at Tuesday's open + 20 minutes).
The first version looks at returns based on positions established after a one week pullback
The second version looks at returns based on positions established after a two week pullback.
Both models use a 1.5% limit stop per week.
If stopped out we just wait till the next week for new signals.
These look like no brainer models but there's actually some sneaky stuff going on in the background and I'll peek at a few of these nuances in future posts, including what happens when you trade the top 2 positions instead of the top 1. .How about that drawdown versus the SPY benchmark buy and hold?

The Best Ponzo Chart....10.07.15

As a follow up to yesterday's Ponzo Updates I've been doing extensive research for the launch of the new SIGMA model and in the process I run a lot of Ponzo studies to develop risk profiles for potential portfolio inputs other than the usual suspects that Mosaic has focused on for the past 2 years.
Here is the risk forecast chart for AGG, the IShares Aggregate US bond ETF, and it is hands down the most bullish profile I have yet seen.  The risk correlation for the blue and green lines is fairly amazing at +70%.   Just something to keep in mind and pujt on your watchlist.
I'll probably be rolling out the new SIGMA model this weekend,

Weekly Ponzo Updates...SPY Versus IEF....10.06.15

After a week of bullish activity in the SPY we're seeing the expected pullback today.  This is still a news driven market with a variety of escalating risk factors that could swing the markets dramatically either way. On a strictly historical basis Ponzo is presenting a bullish odds skew for the next 2 weeks but after that the prognosis is murkier.  The longer term trend into the year's end remains downslope.
This week we look at the SPY forecast versus IEF (IShares 7-10 year Treasuries)....quite a difference!

Overbought...10.05.15

With the DOW up 300 points today, The RSI2 at 98 and the VIX below 20 for the first time since Aug 20th the markets are in overbought territory.  After 5 up days its time for a pause. The technicals did turn negative in the last hour although price held up into the close.  What was surprising was that the VIX was only down 7 percent....we expected a much larger contraction given the sustained bullish action today.  If you looked at the Sunday night post (below) you'll note the upcoming economic news reports...some of which may derail the current upbeat mood.
As of 4:30 PM PST (aftermarket 4.5 hours) SPY is down .$.62 in active trading.

An Objective Risk Analysis of NOW...10.04.15

I pass along this probing and objective perspective on current market risk factors and technical signals.

Surprising Strength and VDX Updates...10.03.15

We had another V bottom day Friday with a heavy hit to the financials in particular.  The markets however were not long deterred by a lousy jobs report, perhaps in anticipation that poor economic profiles lower the odds for a FED rate raise.  Virtually no one now believes the FED will raise in 2015 and as previously mentioned there's now a local minority saying the odds for 2016 aren't much higher.  The past few days have had some tremendous whipsaws and have dramatically illustrated the value of trailing stops for daytraders.
I read a few reports this week by analysts who have a good track record and the emerging view is that China 's woes are bottoming and this may be a good time to at least get a small position going although we should expect some volatility along the way. FXI's hot action on Friday suggests more than a few folks are buying into the buy China argument and the VDX update below indicates that FXI is now almost overbought.  What a difference a weeek makes.
Longer term (4 weeks) the US markets are kicking off earnings season next week and after last quarter's sub-par reports the anticipation and fear factor are sure to keep volatility trending up for the next month or more.

Looks Like Yesterday...10.01.15

Almost a mirror image of yesterday's action...a big V dip with the markets ultimately closing near the open.  We're still seeing considerable indecision ...maybe some skepticism that the recent retest of the August low was genuine...or maybe there's a another leg down in the making.  The last 15 minutes saw a positive reversal of the downtrend begun 40 minutes preclose.  It was a fast market, high volume close and the positive momentum continued after hours with SPY up another .40.  This is the reverse of yesterday's aftermarket so it may bode well for tomorrow, which has a bearish bias.
With Ruskie and US warplanes now bombing the dickens out of opposing targets in Syria the odds for a really nasty incident are high....if  that happens the markets won't like it.