The SPX advanced 27.87 points yesterday to close at 2113.32. On last night’s Turov on Timing, I said, “The British vote today is what Donald Rumsfeld would have called a ‘known unknown.’ We know there will be significant news, but exactly what that news will be is unknown. Furthermore, the significance of that news will outweigh anyone’s models — mine or anyone else’s. We are going to stand aside, simply because what my models say with significant news pending is irrelevant.” Accordingly, TOT daily traders were on the sidelines yesterday and missed the big rally (but with no regrets). [See below.]
Since initiation of the Turov on Timing service on September 30, 1993, our daily trader recommendations have gained 16684.83 cumulative SPX points, compared to a gain of 1654.39 points in the index itself over the same period. That’s a ratio of 10.09 to one. (Please note that any day in which the daily model fails to outperform the SPX by at least a ratio of +10.09 to one, since that’s the ratio of outperformance already achieved, that ratio will decline.)
(The commentary in this paragraph last updated April 15, 2016) The super long term perspective (a prediction, not a forecast!) for the stock market remains bearish (as it has been since January 2000 after having been bullish for over 25 years, from December 1974 until then). I believe that, adjusted for REAL inflation (not the funny numbers the Social Security Administration uses) the stock market will be lower in real dollars in 2020 than it was in 2000. I also expect that our new 2016-elected President will have some very serious problems during his/her single term in office.
(The commentary in this paragraph last updated June 23, 2016.) The Intermediate Term Model remains bearish. The anticipated decline today should make that forecast solidly profitable.
It is after midnight as I write this, and I have been watching the British election results on the BBC. A few moments ago, they forecast, “UK votes to leave,” and the vote totals and the high percentage of British districts (or whatever they’re called) reported leaves little doubt that the BBC’s forecast will prove correct. On Thursday afternoon’s Turov on Overnight Possibilities, I concluded as follows: “…I see the upside potential to the market being limited to 20 SPX points if everything is perfect for the ‘stays’, but the downside potential is perhaps 200 points if the “leaves” win. (Since) I consider the downside risk to be excessive, I choose to be conservative and safe. In other words… the potential MAGNITUDE of a decline outweighs the potential magnitude of an advance. And although my primary research is on the very short term, my orientation is always towards long term results — and from that perspective, preserving capital when faced with great risk is more important than making new capital. We will (reluctantly, to be sure), stand aside.”
As I write this, the British pound has dropped 10% to over 30 year lows, the FTSE and the Nikkei are both down 8%, US Dow futures are down over 600 points, and S&P futures are down over 100 points. Fortunately (and this is why I wrote “no regrets” in the first paragraph) TOT daily traders are on the sidelines, while TOT Intermediate Term Model adherents are comfortably positioned on the short side.
While the 100 point decline in S&P futures is not quite the 200 point decline I wrote about, I was not clear about that “200 points.” I did not, and do not, expect it to happen all at once (although we’re already half way there).
Obviously, the market will be volatile with heavy volume during the day session today, and I don’t know whether and when the SPX will bounce. Down 100 points, it could easily cut that loss in half, or it could easily fall another 50 points. So we will continue to be cautious and stand aside, rather than jump into a fray that is destined to be as mercurial as a thermometer placed in the hot sun, then in a refrigerator, and then moved from one place to the other randomly.
In the longer term, the withdrawal of the UK from the EU could have a devastating impact on the EU, although probably not immediately. It will probably increase Scandinavian opposition toward helping southern Europe, and depending on events as yet unfolded, Germany’s position as linchpin is the only country keeping European unity from collapsing – with very bearish consequences not only for Europe but for the rest of the world, including, of course, the United States.
Have a great weekend, be grateful you are not long today, thanks for the opportunity to be of service and I’ll email you again prior the start of Monday’s trading session.
Turov on Timing is Copyright © 2016 by Turov Investment Group Inc. All rights reserved. Turov on Timing is for personal use only. All caveats and advisories that appear in the monthly Turov on Timing apply equally to this email including the fact that past performance is not a guarantee of future performance. Re-publication and distribution is strictly prohibited. No part may be reproduced without the permission of the Turov Investment Group Inc. All recommendations are based on the Standard & Poor’s cash index (SPX) which cannot be directly traded and Turov Investment Group Inc. makes no recommendation or suggestion to readers as to how SPX-based recommendations should be traded but rather leaves that to the discretion of each individual reader. The “official” price of the opening and closing SPX is as reported at www.bigcharts.com and may not be consistent with futures or ETF prices. All stop recommendations are based on that “official” price. Any recommendation that is to take place at a specific time is basis the “opening” on a one minute bar chart beginning at that time and ending one minute later. All times mentioned are Eastern. Questions related to this service should be directed to InvestmentAdvice@aol.com.