Yesterday got a new sell from the short term contrarian indicators (yellow circle near top of first chart,) to confirm last week's twin VIX extreme sells (orangle circles,) which has me removing TNA from the hedging side of the portfolio.
Entering trades when two of these indicators trigger in the same direction, and exiting when one signals the other way, returned 33.6% last year trading the S&P500 without leverage, as well as scoring extremely well over the long term in testing.
(click to enlarge)Click to enlarge NEW excessive optimism of active money managers. Entering on the circles on dips/rips against the trend, and exiting on the arrow extremes in-line with the trend returned 30.7% last year trading the S&P500 without leverage, as well as scoring extremely well over the long term in testing.
The second chart shows a new red arrow sell due to
Both these new signals essentially to say to reduce exposure on the long side, though the trend remains up for now. Note two signals from the short term indicators against the trend is ALWAYS followed by a turn the other for the hedging indicator, which tracks movement of the average stock. Thus whatever happens the broader market, the history of this set-up says the average stock in for a wall of pain here, at least in the short term.
Also, red arrows on the second chart also usually leads to a drop for the S&P to the yellow faster moving trend average, and if that fails we get a move to the slower moving purple one, and if that is breached a new bear market is likely to have started. Following this indicator, whatever long sold here should remain in cash till the next green circle lands, which will help avoid any crash scenario for that portion of the portfolio.
If you would like to track updates on the chart shown below sign up at alphaking.com, click on the verification email, and get THREE months free access to my on-line newsletter.
Disclosure: I am long QID.