Friday, January 25, 2013

A Mature S&P500 buy signal

The NYSE tape has improved since year end with the NYSE advance / decline line and the S&P500 breaking to new highs. The only major technical impediment remaining was the failure of the Dow Industrials to the confirm last week’s 52-week high posted by the Dow Transports. The Dow confirmed on January 23 when IBM alone contributed 66.35 points to the total gain of 67.12 points

Last January 18 (see last post) our own TSX60 Index which has been in a “sell” mode since June 2011 issued a new “buy” signal. The model is a simple strategy with no math required. Set your “sell” at the lowest low of the past twenty six weeks. This is a moving 26-week window, so each week add the new week and drop the oldest week. The model “Sells” if the weekly price closes below the prior lowest 26-week low. The reverse is applied to the “buy” signal if the price closes above the highest 26-week high. The sector correlation on the S&P is higher than the sector correlation of the TSX60 and so a 30-week price channel is required.

Below is the summary of S&P500 trades from 1990 to date. 

There were only 6 trades issued from February 1990 to date and the model beat buy and hold by 608 points over the period. Below is a zoom over the last 5-years. Note at the close last week the upper channel printed 1486 and the lower channel printed 1309.


1 comment: said...

Hello to all

To Mamta Soni and Stock Tips thanks for the comments

Now I admit I do not understand dh12 because here on January 12, 2013 with Apple trading at $520.00 dh12 said “My call now would be a short term bounce possibly earnings related up to around 650 or so on apple, it will fail to take out the top ($709) and then will fall hard to 300 to 400 or possibly lower. At that point I may be looking to buy apple but not here

Then here on January 24, 2013 with Apple trading at $450.00 dh12 said “Not even a semi log chart can stop apple falling now. Never buy a stock that is so far removed from long term monthly averages. Doesn't matter how euphoric the investment sheep are on the stock.”

So just to clarify, does that mean when Apple was at $520 dh12 liked it to run $650 but when Apple failed to rally and fell to $450 dh12 decides now to hate it?