Sidebar

[highnote]

Yes. The model based on SP and Value Line is a momentum model, but in addition, I look two more momentum factors -- 1.) the daily ratio of Advancing Stocks to Declining Stocks and 2.) the daily ratio of Advancing Volume Stocks to Declining Volume Stocks.

If the 10 day average of (1.) is 2 to 1 or greater that is a huge buy signal. That happened last January and the market increased 20% by April 8. It leveled off for a month before falling in May. This is a rare signal, but it is important.

If (2.) is 9 to 1 or better that is a big buy signal. If the reverse of (2.) is 9 to 1 that is a sell signal. The advancing volume stocks to declining volume stocks had a ratio of 24-1 on December 26, 2018. That was a big buy signal. It followed up with the 2-1 ratio on January 8. The Value Line was 4% above its recent low on January 2. Everything was pointing to a higher market.

I use these 3 momentum factors along with some interest rate and other factors to determine when to get in and out of the market. When I do what the model says to do it usually works. When I think I am right and the model is wrong I am usually wrong.

Don't fight the Fed. Don't fight the tape. Sell in May and go away. There is a lot of wisdom in those old Wall Street sayings.

The only reason the market fell recently was because of tariffs. Get rid of the tariffs and the market would be booming. Maybe it was booming too much? Or maybe Trump makes some tweets to cause the market to fall and insiders buy on the dip? There are probably many other reasons. I don't waste time trying to figure out what it all means because the price and volume gives plenty of clues about where the market is going.