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Current position for Active portion of portfolio: SELL – S.T.A.Y. Plus™ Last week the market lost about 1% off of the previous bear market rally. There have been several bear market rallies so far this year, each of which has retraced between 50% to 61% of the previous decline. Although these rallies in a Bear Market can be quite impressive, we are still in a definite downtrend if we continue to have lower lows and lower highs, which has persisted all year long. I would draw your attention to this week’s weekly chart that shows last week’s rally achieved reaching the 61% (4006) retracement of the Aug 16th to Oct 14th decline with a high last week of 4028.  The test this week was to see if this resistance area of 4006 holds or not. Last week this area was penetrated with an intra-week high of 4028 but was not able to hold and closed below the 4006 area at 3965, so thus far it has not been able to penetrate and hold above the 61% resistance area.
Current position for Active portion of portfolio: SELL – S.T.A.Y. Plus™ What difference do you see between the two graphs below? Both are 10 months of data and both have over a 20% decline from highest to lowest point of the graph. Both achieved a successful rally o f over 50% of the previous decline. Both are five weeks away from the most recent lower low. (Updated through last week 11/18/2022).  Quiz Answer: The chart on the right is our current YTD chart of the S&P500 updated through 11/18/2022. The chart on the left is the same ten-month time frame from October 2007 to August of 2008. Would you like to see the rest of the left side chart? See Below: That was the Bear Market of 2007 – 2008 with over a 55% loss. Both charts show results for six weeks following the previous low. In 2008 it went for three more weeks before the bottom fell out. Therefore, we will soon know if history will repeat itself or not.  Current position for Active portion of portfolio: SELL – S.T.A.Y. Plus™ I attended an interesting investment conference last week in Dallas, Texas, the National Association of Active Investment Managers. One of the speakers shared an interesting technical phenomenon that has only taken place twice in the last 40 years that is happening again now. The chart below shows a graph of this where the price of the S&P500 10-Month Exponential Moving Average (EMA), the red line, crosses below the 20-Month EMA, the blue line. Currently the S&P500 20-month EMA is at 4019, and as of last week the 10-month EMA is at 4013. Note: this technical indicator is also referred to as the Exponential Smoothed Average (ESA), which is the same as the Exponential Moving Average (EMA), these terms are interchangeable. You can see this in the monthly charts. So far, the market is only showing a very slight cross-over, but if it crosses over to the downside in a more significant material way, according to past events this could spell a bear market equivalent to 2001 and 2008 which dropped over 50% in value. Just another technical setup showing that the market is at a very precarious crossroad. Time will tell, we will keep you posted.  Current position for Active portion of portfolio: SELL – S.T.A.Y. Plus™
Having been out of equities (stocks) since 2/23/2022 and then removing bonds going to ALL-CASH since April 11th, August 16th, we engaged the first element of the S.T.A.Y. Plus™ strategy. Since then, the market has been down about 19%. This is exciting as markets have been moving down, the S.T.A.Y. Plus™ portfolios were moving UP! We are scaling in the first application of the second phase of the S.T.A.Y. Plus™ strategy starting this month. We will keep you posted on those results in future reports. |
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Disclaimer: past performance is not a guarantee of future performance. © Copyright - Advanced Financial Solutions, Inc.
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