The SPX advanced 19.81 points yesterday to close at 2385.26. TOT daily traders were on the sidelines for the session.
IMHO, the gain was mostly a function of (1) program trading, (2) short covering, and (3) investors putting the cart before the horse.
(1) Program trading can be identified when net ticks (upticks minus downticks) reach very high levels. While closing net ticks were flat, along with a market that sold off a bit as we approached the close, there were several times during the day when net ticks were in the 800-1000 range. Money managers’ goal is usually to outperform their competition, more importantly than outperform the market, and so there is a definite herd instinct.
(2) Short covering was apparent, especially in the bond market, where there were huge bets made on higher interest rates (and lower prices). When the very-expected news came of a raise in the Discount Rate was announced, short sellers ran to cover (“buy on the rumor; sell on the news, or the inverse for short positions, “cover on the news”).
(3) If the stock market is a barometer of future economic developments, then it is illogical to buy the market because of an expectation that raising rates will be of benefit to the economy. Even if the rally was a function of believing that rates are rising because of an expectation of a better economy, it is still a case of putting the cart before the horse.
Since initiation of the Turov on Timing service on September 30, 1993, our daily trader recommendations have gained 17076.52 cumulative SPX points, compared to a gain of 1926.33 points in the index itself over the same period. That’s a ratio of 8.86 to one. (Please note that any day in which the daily model fails to outperform the SPX by at least a ratio of +8.86 to one, since that’s the ratio of outperformance already achieved, that ratio will decline.)
(The commentary in this paragraph last updated November 10, 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. For a long time, I’ve been saying, “I also expect that our new 2016-elected President will have some very serious problems during his/her single term in office.” That belief stands.
(The commentary in this paragraph last updated February 3, 2017.) The Intermediate Term Model is bearish. This signal was wrong for a surprising amount of time, but at the present time, it seems more likely than the more commonly held bullish perspective.
After an expected bump upwards this morning, I expect the market to flatten out by the close. I’d rather be short from shortly after the opening than long, but I don’t see any major move. Continue to stand aside, as boring as that may seem.
Thanks for the opportunity to be of service, and I’ll email you again in 24 hours – or sooner if circumstances warrant.
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