Still trying to model this mess of a market. To that end, I’ve crafted a study that accounts for the recent 200 day low, the range trading, and 3 up days in a row.
Less than 30 days ago, the market made a new 200 day low, which portends a bearish future. Since then, the market has traded in a volatile range, and until recently was working through a bear flag pattern. After breaking the bear flag to the downside, the market has closed up, 3 days in a row.
So let’s model that mess.
The Rules:
- Buy SPY at the close IF
- SPY made a new 200 day low < 30 days ago AND
- SPY closed lower than its 30 day closing high AND
- SPY has logged three consecutive higher closes
No commission or slippage is included. All SPY history was used.
The Results:
So the recipe for bear stew has yielded the flavor above. Tastes bitter to me, with a hint of acrid and a touch of burnt naivete.
Clearly, nothing has changed. Volatility, range-trading, blah blah blah. This is pretty much what I’ve been saying over the past month or two.
You’ve noticed the spike at the end of the time period. I’ve posted a graph of each trade to show when the spike arrived. The results assume each trade was held for the full 100 days.
Note that there were only 10 samples, IF each trade was held for the full 100 days. There were actually 37 occurrences of this setup. The number of samples decreases as the amount of time each trade is held increases. Confusing, I know. Drop me a comment if you need a more thorough explanation.
Anyway, the bottom line is that each bear market ends with a big rally, and 2 of these trades caught a very big rally after 9o days of bear market mania. Not too inspiring for the near term. Personally speaking, 90 days is a long time to wait, especially when after 90 days, fully 6 trades were still in negative territory.
Bottom Line: We are in a bear market. Expect large, volatile swings. There is no evidence that this will be over any time soon.
Who woulda thunk it!?
Right up there with
Tranny Coulter’s reaction to Fukushima: “Radiation is good for ya!”
8)
Juice, answer this question.
Do clouds,
a. cause temperatures to rise
b. cause temperatures to fall
c. cause temperatures to both rise and fall
Thanks.
What causes clouds, young Woodshedder? Do particulates in the atmosphere, aka pollution, help clouds to form?
Clouds are the source of rain.
Clouds naturally have effects on temperature. They keep radiant heat below them and reflect sunlight above. You know that cloudless nights are cooler, cloudless days are less humid, etc ….
what u getting at, sir woodshedder?
Juice,
Since you agree that clouds force temperature and temperature forces clouds, then you will obviously find the IPCC climate models limited (at best) and at worse, hopelessly flawed.
Why, you ask? Because these models have no idea how to model the effect of clouds on temperature OR temperature on clouds.
That is why the latest research from CERN and from Dr. Spencer is so important. It has shown that the IPCC models are woefully inadequate.
You may remember Trenberth’s famous comment from Climate Gate that half the heat that the models predict should be there, isn’t there?
Key word being “half.” In fact, Dr. Spencer’s latest cloud research estimates the IPCC models are over-estimating heat by approximately 50%.
Clouds, juice. Clouds. They haven’t figured out exactly how the clouds forcing temperature forcing clouds works, and they SURELY haven’t been able to include a valid representation of this phenomena in their models.
Buy, hey, glad we agree, no?
We agree in part .. however:
Clouds are not an ultimate self-determining factor, independent of all other contributing factors ; they are one in a myriad.
To say that clouds alone, determine temperature, is an absurd oversimplification.
Hmm….I don’t know about that yet. I mean technically, we are below the 200-SMA/EMA so that must be honored. But are we correcting or are we rolling over further?
I’d like to see some lows get taken out here (SPY, QQQ, etc.) before I’m fully in the bear market camp. I’m not saying you’re wrong for writing that, I’m just not so sure we’re in a full blown bear market yet.
But maybe we are and I’m in denial. I don’t have long position in…and actually, I just started to scale a swing short in on the QQQ.
I don’t know…every time the bears get rolling, they get blown out by bottom picking “value” players. My Twitter stream was seriously negative going into this week and now…crickets.
Bears need to prove it to me. They fail often. Too often.
Keith, I understand where you are, but by all definitions, with the exception of being -20% from the high, we are in a bear market (and we were close to being -20%).
Doesn’t mean it will last long.
Certainly the global central bank news from today may help things along.
Yeah, I was think about the global banking news as well. Too much Macro in this market for my liking.
Anyways, I always enjoy your blog. Thanks for taking the time to put up trade ideas and test results. Good stuff.
Juice, I did not mean to sound like I was saying that clouds alone determine temperature. Of course not. It is a large, complex myriad of factors. My point is simply that the models are limited, at best, as the modelers have yet to figure out the clouds-forcing-temperature-forcing-clouds part of the equation.
With that in mind, to call the science “settled” or “incontrovertible” is almost fraudulent on the part of the IPCC. To fear-monger the public and commandeer billions in economic resources to respond to models that are very possibly flawed is tantamount to criminal behavior.