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AlphaDow: When to buy back? Three Capitulation charts added. See 7a, 7b and 7c. Feedback
Sean Gallagher
Sean Gallagher Avatar Icon
Time tested systems for stocks, bonds and gold. Send feedback for complete rules and system descriptions. This is not investment advice. Thanks in advance for looking.
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  • Rank: 20
  • Followers: 50
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  • Years Member: 14
  • Last Update: 19 May 2022, 11:02
  • Categories:
    Canadian Stocks
    General Market Commentary
    ETFs
Password is AlphaDow (no caps)
In Chart #1 (AlphaDow), add up the numbers in the boxes. A BULLISH state first occurs when the count reaches 5 out of 5. A BEARISH state occurs when any 3 of the 5 turn negative.

We also offer paint by numbers systems for bitcoin, bonds and gold. An illustrative diversified portfolio of five ETFs is offered below our commentary. As always, consult your own advisor and due your own due diligence. Not investment advice.

The Call For The Week of May 16th:

Stocks stayed mostly on the back foot despite a late rally, as the S&P 500 and TSX each finished lower while bonds enjoyed a rally with the two-year yield sinking to its lowest since April 26. Gold remained under pressure, WTI crude oil rose and the CAD$ held near $0.77. Focus on capital preservation.

Long: SPY=0% TLT=20%, GLD=0% QQQ=0% Cash=80%
Auto-Size Charts
1. AlphaDow -- Five points possible. 5=BUY 2=SELL. Use SPY or the top SCTR sector (Alpha) ETFs.
chart

Bullish when 5 out of 5 are true (+1) for each condition:

1. $SPX is above 65wk MA
2. Advance/Decline Line is trending up (buying power)
3. $TRAN is trending up (Dow Theory confirmation)
4. Utility Average MA rises (interest rate sensitive Utilities lead)
5. Bonds are trending up (interest rates are low)

Average holding period 392.3 days. 0.58 round trip trades per year. Longest drawdown duration 50 months vs. 73 for buy & hold.
64% winning trades since 1980. Beats buy and hold with less volatility (0.53 MAR Ratio).

Past performance is no guarantee of future results. This is not investment advice, but is for educational purposes only. Consult your investment advisor for additional information regarding suitability, fees, expenses and short term trading costs.

2. AlphaDow North -- use HXT.TO, XIU.TO or Top SCRTR Sectors
chart

Bullish when 5 out of 5 are true (+1). Stay long HXT.to or XIU.to until 3 turn false (+0).

1. $TSX is trending up
2. Advance/Decline Line is trending up (buying power)
3. $TRAN is trending up (Dow Theory confirmation)
4. Utility Average MA rises (interest sensitive)
5. Bonds are trending up (interest rates are low)

67% winning trades since 1980 - beats buy and hold with lower volatility. Buy and Hold the strongest ETFs or stocks when in BULLISH state. Otherwise hold cash or bond proxy.

Past performance is no guarantee of future results. This is not investment advice, but is for educational purposes only. Consult your investment advisor for additional information regarding suitability, fees, expenses and short term trading costs.

3. AlphaBond - Intermarket System 3=BULL, 1=BEAR (TLT)
chart

Bullish on BOND, JNK or TLT when 3 systems are on BUY. FLAT (go to cash) when count drops to 1 :

1. If Fidelity Financial RS is positive add +1 to model count
2. If Utility RS is positive add +1 to model count
3. If Chemical RS is negative add +1 to model count
4. If Nickel ROC is negative add +1 to model count

Financial assets and utilities lead. Inflation is bad for bonds. Source: Formula Research Intermarket Bond Strategy. Send feedback for complete details.

4. AlphaGold - Intermarket System 3=BULL, 1=BEAR (GLD or GDX)
chart

Bullish on GLD or CGL.TO when all three systems are on a BUY. Score +1 for each of the following TRUE statements:

1. US Dollar Index < 7 wk EMA
2. Oil > 12 wk EMA
3. Swiss Franc > 5wk EMA

Buy Gold (GLD) if score is +3 (all three TRUE). Stay invested (long GLD or GDX) until 2 systems turn false (0).

14.8% CAGR with 13.8% max drawdown 1954-1995. *Source: Wall Street Journal - Divining Gold%27s Next Move 2006

Past performance is no guarantee of future results. This is not investment advice, but is for educational purposes only. Consult your investment advisor for additional information regarding suitability, fees, expenses and short term trading costs.

5. New Dow Theory
chart

Bullish when 3 out of 3 are true (+1) for each condition:

1. $SPX is above 39wk MA
2. $TRAN is above 39wk MA
3. Utility Average is above 39wk MA

Sell when 2 of 3 are FALSE (below 39wk MA).

Since 1980:
Average 0.84 trades per year. Longest drawdown duration 61.4 months vs. 73 for buy and hold.
84% winning trades
11.3% cagr 17.4% max dd

Past performance is no guarantee of future results. This is not investment advice, but is for educational purposes only. Consult your investment advisor for additional information regarding suitability, fees, expenses and short term trading costs.

6. ValueMentum -- 3 Point System developed by Nelson Freeburg
chart

Bullish on SPY when all 3 systems are TRUE. Sell and go to SHY or cash when all 3 are FALSE.

Logic: when the Nasdaq is outperforming the S&P500 and Growth is outperforming Value, the US Stock market outperforms.

11.7% drawdown and 9.1% CAGR since inception vs. 47% drawdown for S&P500.

Of 17 long entries, 14 were profitable, an 82% batting average. Source: Formula Research December 30, 2003.

7a. Capitulation on Dow? $INDU
chart

PPO is a short-term oscillator which measures the percent of divergence between the three major stock market indices (DJIA, S&P500, and the NYSE Composite), and their time-weighted moving averages.

7b. Capitulation on $NYSE
chart

When two of the three indices are simultaneously in double digits below those respective moving averages, we have Capitulation.

7c. Capitulation on $SPX
chart

There have been 17 dates that this has happened in the past. The signal came an average of 13 days off the market low and 5.2% away from the low in price. Six months later the average gain of the 17 signals is 16.9%.

The end of the last 10 bear markets were signaled, and 3 of the 7 before that. Some bear markets end, however, with a whimper, hence no Capitulation indication.

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