The SPX advanced 5.6 points Monday to close at 2429.01. On Monday’s email, I had written the “most likely scenario will be some strength in the early going, followed by weakness later in the session.” And indeed, the SPX ETF (SPY) opened at 242.88, reached its high for the day (243.38) at 10:20 a.m., and reached its low for the day (242.21) on the close. TOT daily traders, in recognition of the conflicting expectation of a decline after the opening, plus the tendency of the first day of July to advance, stayed on the sidelines. All five of the biggest Nasdaq 100 stocks declined with all of them but Apple down by more than a full percentage point.
Since initiation of the Turov on Timing service on September 30, 1993, our daily trader recommendations have gained 17352.32 cumulative SPX points, compared to a gain of 1970.08 points in the index itself over the same period. That’s a ratio of 8.81 to one. (Please note that any day in which the daily model fails to outperform the SPX by at least a ratio of +8.81 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 May 10, 2017.) The Intermediate Term Model remains bearish. But while it is bearish, in the absence of a bearish news catalyst, I don’t expect the decline to be any more robust than the advance that preceded it.
Only once this century has July 5 fallen on a Wednesday. That was in 2006. On that day, the SPX fell 9.28 points. At the time, that was a decline of .72%. A decline of that percentage magnitude today would be about 17.5 points. However that was only one case, and therefore not statistically significant. Broadening the picture, from 2004 through the present, on the day after Independence Day, the SPX has fallen an average of 2.5 points. Eliminating the only Friday in the equation, from 2013, the SPX has fallen an average of 4.1 points. But it still is a small universe.
The biggest problem the SPX faces is the continuing weakness in the Nasdaq 100 and especially the Big 5 – AAPL, AMZN, GOOGL, MSFT, AND FB – and the related $64,000 Question: When will the selling in those stocks end? In overnight futures, the SPX is down about 1 point below fair value, while the NDX is down 24 points below fair value. “Logic” and my data say the market will likely be down today, BUT if the Big 5 reverse, the short covering could be immense. The format of TOT does not lend itself well today’s potential market – the probability of a modest decline weighted against substantial upside risk. The odds of the market declining today is about 3:2 in favor of that decline, but finding a place for a protective buy stop is the problem. UNOFFICIALLY, for very adroit traders, I would go short, but I would get out at the first solid sign of strength in the NDX. In other words, short the SPX, but base your stop on the NDX. OFFICIALLY, we will stand aside and await a less risky trading situation and one that better suits the format of TOT.
One other factor: The North Korean ICBM launch yesterday is a bit nerve-wracking for west coasters; how much that will affect traders in New York is unknown. Gold is up about $8 in overnight trading.
Thanks for the opportunity to be of service, and I’ll email you again in about 24 hours.
Turov on Timing is Copyright © 2017 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 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.