Previously, I analyzed the 2000 and 2007-2008 market tops. During both time periods, my trading system gave correct trading signals. This week, we will see what my trading system is telling us in real-time action.
I designed today’s chart exactly as the previous weeks, using the $SPX (S&P 500) from 2012 to the current (monthly) timeframe, with the SPX value in the top box and important momentum indicator in the lower box. I have my blue signal line front and center.
Let’s review. When the SPX crossed down and closed under a multi-month (green slotted) trend line plus crossed down through the blue signal line and traded under that value the next month, a sell signal was triggered. Let’s see if my system has merit like it did in 2000 and 2007.
One can see the S&P 500 has not crossed under the multi-month (green slotted) trendline and is nowhere close to trading under the blue signal line, so you make the call!
This is a prime example of what I teach: “Trade what you see instead of what you hear, feel or think!” In the last few months, I have read many reports that the sky is falling and one should be out of the market. If deciding to lock in some hard earned gains, consider selling incrementally instead of all at once. This can keep money working for you in case the markets continue to rally. Be sure and review my previous columns for questions to ask before selling. Keep this chart front and center when making your financial decisions.
In addition, learn to chart your holdings to see how they are performing. Just because the market continues to rally does not guarantee all securities will continue to rally also. Many have experienced pullbacks/profit taking during this bull run. Make sure to review all investment holdings at least weekly, and do not panic with the day-to-day action.
Keep in mind when studying the charts: in no way can they dictate 100 percent that will happen in the future. It only works as a guide for previous action. An exogenous event can come out of the blue to cause tremendous panic selling-something I hope does not happen.
While many still scoff at my systems, they worked in 2000 and in 2007 and should be considered with the current market action. Next week, I answer your questions on a tighter signal line-closer to the current price action.
Plan your work, work your plan and learn to share your harvest!
David O. England
davidoengland.com
