Tuesday, March 4, 2014

ABC Indicator Flashes S&P 500 ‘Sell’ Signal: March 4

The ABC Indicator of movements in the S&P 500 (INDEXSP:.INX) introduced in a J.J.’s Risky Business blog post in December is flashing a Sell signal this Tuesday morning. However, the signal’s strength carries with it no suggestion as to whether the equity market is about to be whipsawed in the midst of the geopolitical situation involving Russia and Ukraine.

I am happy to note the following data points related to the ABC Indicator’s record in forecasting the short-term direction of the U.S. large-capitalization index on a closing basis since July 6, 2009:
  • Its signals have been correct on 97 occasions, or 69.78 percent of the time, and incorrect on 42 occasions, or 30.22 percent of the time.
  • Its Buy signals have been right on 56 occasions, or 80.00 percent of the time, and wrong on 14 occasions, or 20.00 percent of the time.
  • Its Sell signals have been right on 41 occasions, or 59.42 percent of the time, and wrong on 28 occasions, or 40.58 percent of the time.

I am also pleased to point out the ABC Indicator has done even better during its current public test at J.J.’s Risky Business. To date, its signals over the course of the test have been successful on six occasions, or 85.71 percent of the time, and unsuccessful on one occasion, or 14.29 percent of the time. The test will encompass 10 signals, and history suggests they will be correct between six and eight times and incorrect between two and four times.

The first seven 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 S&P 500 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.
  • In the case of the Buy signal on Jan. 15, the S&P 500 on a closing basis rose to as high as 1,848.38 that day from 1,838.88 on Jan. 14. Successful.
  • In the case of the Sell signal on Jan. 24, the index on a closing basis fell to as low as 1,741.89 on Feb. 3 from 1,828.46 on Jan. 23. Successful.
  • In the case of the Buy signal on Feb. 11, the S&P 500 on a closing basis rose to as high as 1,859.45 on Feb. 28 from 1,799.84 on Feb. 10. Successful.
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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.