Friday, January 24, 2014

ABC Indicator Flashes S&P 500 ‘Sell’ Signal: Jan. 24

The ABC Indicator of movements in the S&P 500 (INDEXSP:.INX) introduced in a J.J.’s Risky Business blog post last month is flashing a Sell signal this Friday morning. In forecasting the short-term direction of the U.S. large-capitalization index on a closing basis since July 6, 2009, this indicator’s signals have been correct on 98 occasions, or 71.53 percent of the time, and incorrect on 39 occasions, or 28.47 percent of the time.

There have been important differences between the behaviors of the ABC Indicator’s Buy and Sell signals during the above-referenced period, as mentioned in a blog post this month. Its Buy signals have been right on 56 occasions, or 81.16 percent of the time, and wrong on 13 occasions, or 18.84 percent of the time, while its Sell signals have been right on 42 occasions, or 61.76 percent of the time, and wrong on 26 occasions, or 38.24 percent of the time.

I am happy to note the latest ABC Indicator signal succeeded in its task of forecasting the short-term direction of the S&P 500 on a closing basis during the current public test of the pointer at J.J.’s Risky Business: The Buy signal on Jan. 15 was followed by the index rising to as high as 1,848.38 that day from 1,838.88 on Jan. 14. This test will encompass 10 signals, and history suggests they will be correct between six and eight times and incorrect between two and four times. To this point in the test, they have been right four times and wrong one time, which means the indicator is performing within its historical parameters.

The first four ABC Indicator signals mentioned in the blog posts linked below produced as follows:
• In the case of the Buy signal on Dec. 20, the S&P 500 on a closing basis rose to as high as 1,848.36 on Dec. 31 from 1,809.60 on Dec. 19. Successful.
• In the case of the Sell signal on Jan. 3, the index on a closing basis fell to as low as 1,826.77 on Jan. 6 from 1,831.98 on Jan. 2. Successful.
• In the case of the Buy signal on Jan. 10, the index on a closing basis rose to as high as 1,842.37 on Jan. 10 from 1,838.13 on Jan. 9. Successful.
• In the case of the Sell signal on Jan. 14, the index on a closing basis rose to 1,838.88  that day from 1,819.20 on Jan. 13. Unsuccessful.

 photo
JJRB-140124_zpsb51eda33.png

Source: This chart is based on J.J.’s Risky Business proprietary data.

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Disclaimer: The opinions expressed herein by the author do not constitute an investment recommendation, and they are unsuitable for employment in the making of investment decisions. The opinions expressed herein address only certain aspects of potential investment in any securities and cannot substitute for comprehensive investment analysis. The opinions expressed herein are based on an incomplete set of information, illustrative in nature, and limited in scope. In addition, the opinions expressed herein reflect the author’s best judgment as of the date of publication, and they are subject to change without notice.

Wednesday, January 15, 2014

ABC Indicator Flashes S&P 500 ‘Buy’ Signal: Jan. 15

The ABC Indicator of movements in the S&P 500 (INDEXSP:.INX) introduced in a J.J.’s Risky Business blog post last month is flashing a Buy signal this Wednesday morning. In forecasting the short-term direction of the U.S. large-capitalization index on a closing basis since July 6, 2009, this indicator’s signals have been correct on 97 occasions, or 71.32 percent of the time, and incorrect on 39 occasions, or 28.68 percent of the time.

There have been important differences between the behaviors of the ABC Indicator’s Buy and Sell signals during the above-referenced period, as mentioned in a blog post this month. Its Buy signals have been right on 55 occasions, or 80.88 percent of the time, and wrong on 13 occasions, or 19.12 percent of the time, while its Sell signals have been right on 42 occasions, or 61.76 percent of the time, and wrong on 26 occasions, or 38.24 percent of the time.

Meanwhile, I am unhappy (although neither shocked nor surprised) to note the first public test of the ABC Indicator in forecasting the short-term direction of the S&P 500 on a closing basis is posting its initial unsuccessful result at J.J.’s Risky Business, as the latest Sell signal failed in its mission, with the index rising to 1,838.88 on Tuesday from 1,819.20 on Monday. This test will encompass 10 signals, and history suggests they will be correct between six and eight times and incorrect between two and four times. To this point in the test, they have been right three times and wrong one time, which means the indicator is performing within its historical parameters.

The first three ABC Indicator signals mentioned in the blog posts linked below were successful, as follows:
• In the case of the Buy signal on Dec. 20, the S&P 500 on a closing basis rose to as high as 1,848.36 on Dec. 31 from 1,809.60 on Dec. 19.
• In the case of the Sell signal on Jan. 3, the index on a closing basis fell to as low as 1,826.77 on Jan. 6 from 1,831.98 on Jan. 2.
• In the case of the Buy signal on Jan. 10, the index on a closing basis rose to as high as 1,842.37 on Jan. 10 from 1,838.13 on Jan. 9.

I would like to say the ABC Indicator has never, ever in its history whipsawed between Buy and Sell signals the way it has recently, with three signals being generated during a period of four trading days. Alas, I cannot say it because the same thing happened on three occasions in 2013, as noted here:
• Aug. 7, Sell; Aug. 8, Buy; and Aug. 12, Sell.
• Oct. 11, Buy; Oct. 15, Sell; and Oct. 16, Buy.
• Nov. 7, Sell; Nov. 8, Buy; and Nov. 12, Sell.

Importantly, the ABC Indicator also flashed an S&P 500 Buy signal on Nov. 14, which is extraordinarily helpful in interpreting the subsequent short-term movement of the index in each of the three cases of comparatively high equity-market volatility last year.

 photo SPX-130801-131231-580_zps18b99b96.jpg

Source: This chart is based on data at Yahoo! Finance.

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Disclaimer: The opinions expressed herein by the author do not constitute an investment recommendation, and they are unsuitable for employment in the making of investment decisions. The opinions expressed herein address only certain aspects of potential investment in any securities and cannot substitute for comprehensive investment analysis. The opinions expressed herein are based on an incomplete set of information, illustrative in nature, and limited in scope. In addition, the opinions expressed herein reflect the author’s best judgment as of the date of publication, and they are subject to change without notice.

Tuesday, January 14, 2014

ABC Indicator Flashes S&P 500 ‘Sell’ Signal: Jan. 14

The ABC Indicator of movements in the S&P 500 (INDEXSP:.INX) introduced in a J.J.’s Risky Business blog post last month is flashing a Sell signal this Tuesday morning. In forecasting the short-term direction of the U.S. large-capitalization index on a closing basis since July 6, 2009, this indicator’s signals have been correct on 97 occasions, or 71.85 percent of the time, and incorrect on 38 occasions, or 28.15 percent of the time.

There have been important differences between the behaviors of the ABC Indicator’s Buy and Sell signals during the above-referenced period, as mentioned in a blog post this month. Its Buy signals have been right on 55 occasions, or 80.88 percent of the time, and wrong on 13 occasions, or 19.12 percent of the time, while its Sell signals have been right on 42 occasions, or 62.69 percent of the time, and wrong on 25 occasions, or 37.31 percent of the time.

Meanwhile, I am happy to note the first public test of the ABC Indicator in forecasting the short-term direction of the S&P 500 on a closing basis has continued to go well at J.J.’s Risky Business. This test will encompass 10 signals, and history suggests they will be right between six and eight times and wrong between two and four times. The initial three signals mentioned in the blog posts linked below were successful, as follows:
• In the case of the Buy signal on Dec. 20, the index on a closing basis rose to as high as 1,848.36 on Dec. 31 from 1,809.60 on Dec. 19.
• In the case of the Sell signal on Jan. 3, the index on a closing basis fell to as low as 1,826.77 on Jan. 6 from 1,831.98 on Jan. 2.
• In the case of the Buy signal on Jan. 10, the index on a closing basis rose to as high as 1,842.37 on Jan. 10 from 1,838.13 on Jan. 9.

The brief duration of this last ABC Indicator signal leads to the obvious question: What is the length of the so-called short term in this context? Historically, the indicator’s Buy signals have ranged between one trading day (eight cases) and 43 trading days (one case), with a median of 7.00 trading days, a mean of 9.71, and a standard deviation of 9.24, while its Sell signals have ranged between one trading day (10 cases) and 24 trading days (one case), with a median of 5.00 trading days, a mean of 7.04, and a standard deviation of 5.94.

Duration in Trading Days of ABC Indicator ‘Buy’ and ‘Sell’ Signals:
Median, Mean, and Standard Deviation

 photo
ABCIndicator-DurationofSignals_zpsaf289e01.jpg

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Disclaimer: The opinions expressed herein by the author do not constitute an investment recommendation, and they are unsuitable for employment in the making of investment decisions. The opinions expressed herein address only certain aspects of potential investment in any securities and cannot substitute for comprehensive investment analysis. The opinions expressed herein are based on an incomplete set of information, illustrative in nature, and limited in scope. In addition, the opinions expressed herein reflect the author’s best judgment as of the date of publication, and they are subject to change without notice.

Friday, January 10, 2014

ABC Indicator Flashes S&P 500 ‘Buy’ Signal: Jan. 10

The ABC Indicator of movements in the S&P 500 (INDEXSP:.INX) introduced in a J.J.’s Risky Business blog post last month is flashing a Buy signal this Friday morning. In forecasting the short-term direction of the U.S. large-capitalization index on a closing basis since July 6, 2009, this indicator’s signals have been correct on 96 occasions, or 71.64 percent of the time, and incorrect on 38 occasions, or 28.36 percent of the time.

There have been important differences between the behaviors of the ABC Indicator’s Buy and Sell signals during the above-referenced period, as mentioned in a blog post this month. Its Buy signals have been right on 54 occasions, or 80.60 percent of the time, and wrong on 13 occasions, or 19.40 percent of the time, while its Sell signals have been right on 42 occasions, or 62.69 percent of the time, and wrong on 25 occasions, or 37.31 percent of the time.

Meanwhile, I am happy to note the first public test of the ABC Indicator has continued to go well at J.J.’s Risky Business. The initial two signals mentioned in the blog posts linked below were successful. In the case of the Buy signal on Dec. 20, the S&P 500 on a closing basis rose to as high as 1,848.36 on Dec. 31 from 1,809.60 on Dec. 19. In the case of the Sell signal on Jan. 3, the index on a closing basis fell to as low as 1,826.77 on Jan. 6 from 1,831.98 on Jan. 2.

The ABC Indicator test will encompass 10 signals, and history suggests they will be right between six and eight times and wrong between two and four times.

 photo JJRB-Jan102014-580_zpsd495de73.jpg

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Disclaimer: The opinions expressed herein by the author do not constitute an investment recommendation, and they are unsuitable for employment in the making of investment decisions. The opinions expressed herein address only certain aspects of potential investment in any securities and cannot substitute for comprehensive investment analysis. The opinions expressed herein are based on an incomplete set of information, illustrative in nature, and limited in scope. In addition, the opinions expressed herein reflect the author’s best judgment as of the date of publication, and they are subject to change without notice.

Friday, January 3, 2014

ABC Indicator Flashes S&P 500 ‘Sell’ Signal: Jan. 3

The ABC Indicator of movements in the S&P 500 (INDEXSP:.INX) introduced in a J.J.’s Risky Business blog post Dec. 20 is flashing a Sell signal this Friday morning. In forecasting the short-term direction of the U.S. large-capitalization index on a closing basis since July 6, 2009, this indicator’s signals have been correct on 95 occasions, or 71.43 percent of the time, and incorrect on 38 occasions, or 28.57 percent of the time (as indicated by Figure 1).

Figure 1: Percentages of Successful and Unsuccessful
ABC Indicator Signals Before Jan. 3, 2014

 photo
ABCIndicatorArt-AllSignalsBeforeJan32014_zpsfcd73bba.png

Source: This chart is based on J.J.’s Risky Business proprietary data.

However, there have been important differences between the behaviors of the ABC Indicator’s Buy and Sell signals during the above-referenced period, when the S&P 500 more than doubled on a closing basis to 1,848.36 on Dec. 31, 2013, from 896.42 on July 2, 2009, the last trading day before the inception of this incarnation of the indicator. Taking these differences into account has helped in my trading of derivatives of the index, including options on the SPDR S&P 500 ETF Trust (SPY), ProShares Ultra S&P500 ETF (SSO), and ProShares UltraShort S&P500 ETF (SDS).

Most significant, the ABC Indicator’s Buy signals have been right on 54 occasions, or 80.60 percent of the time, and wrong on 13 occasions, or 19.40 percent of the time (as indicated by Figure 2), while its Sell signals have been right on 41 occasions, or 62.12 percent of the time, and wrong on 25 occasions, or 37.88 percent of the time (as indicated by Figure 3).

Figure 2: Percentages of Successful and Unsuccessful
ABC Indicator ‘Buy’ Signals Before Jan. 3, 2014

 photo
ABCIndicatorArt-BuySignalsBeforeJan32014_zps69de40e6.png

Source: This chart is based on J.J.’s Risky Business proprietary data.

Figure 3: Percentages of Successful and Unsuccessful
ABC Indicator ‘Sell’ Signals Before Jan. 3, 2014

 photo
ABCIndicatorArt-SellSignalsBeforeJan32014_zps7e0ae36a.png

Source: This chart is based on J.J.’s Risky Business proprietary data.

Meanwhile, I am happy to note the first public test of the ABC Indicator has had a nice beginning at J.J.’s Risky Business: The Buy signal flashing the morning of Dec. 20 was successful as the S&P 500 on a closing basis rose to as high as 1,848.36 on Dec. 31 from 1,809.60 on Dec. 19. The test will encompass 10 signals, and history suggests the indicator will be right between six and eight times and wrong between two and four times.

Related Reading


Disclaimer: The opinions expressed herein by the author do not constitute an investment recommendation, and they are unsuitable for employment in the making of investment decisions. The opinions expressed herein address only certain aspects of potential investment in any securities and cannot substitute for comprehensive investment analysis. The opinions expressed herein are based on an incomplete set of information, illustrative in nature, and limited in scope. In addition, the opinions expressed herein reflect the author’s best judgment as of the date of publication, and they are subject to change without notice.