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.

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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.