Weekly Market Commentary

publication date: Aug 24, 2019

NOTE;  All posts are opinions only.  No investment advice is given.  Consult with a financial adviser and do your own due diligence before trading.
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Market Summary for Week Ending October 25, 2020


It's been a volatile year in the stock market, and it's not over yet!  The Bradley Siderograph, which often shows turning points in the market, signalled increased volatility on August 19th and suggests exaggerated price movements may continue through approximately December 2nd.  (Remember though, volatility means increased price movement in either direction, not necessarily down.)


There are definitely some warning signs.  Many of the individual large-cap stocks are showing tentative Head & Shoulders patterns, which may signal a 2-3 month pullback is coming.  Although the ETF charts aren't currently picking up on this pattern very well, take a look at Microsoft ($MSFT), Amazon ($AMZN) and Google/Alphabet ($GOOGL):

commentary          commentary          commentary

Unfortunately, the broader market charts aren't very helpful right now.  There is so much uncertainty with the upcoming election and stimulus negotiations, many of the market indicators are stuck in neutral.  The McClellan Oscillator and CBOE Put-to-Call Ratio are neutral, and the $VIX remains non-committal (though elevated):


Since the market can clearly break in either direction from here - or perhaps more likely, swing violently back & forth for the next several weeks without any clear direction - I'm not going to make a prediction as to where the market will be 3 months from now.  Instead, I'll continue to focus on charts that give me short-term signals I can use for daytrading and 1-2 day swing trades.  Charts are likely to change quickly and unexpectedly through December 2nd, so be sure to watch the market closely in case market momentum changes and you need to switch from long to short or vice versa.


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Chart signals continue to outperform the traditional "buy and hold" approach.  Assuming one had traded 1x leveraged $SPY shares at each of the entry/exit points, these would be the compounded year-to-date results:


January 1, 2020 - October 23, 2020*

Proprietary Trading System ("Shadow Index"):  +100.7%
Standard Buy & Hold S&P 500 Strategy:                   +  7.3%

* Prices assume that you traded 100% of your portfolio in $SPY shares (with no options leverage) at each of the entry/exit points.  Past performance doesn't guarantee future success.

Source:  https://www.tradingideas.info/articles/recenttrades


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