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In order to help with the translation of putting our models, indicators and research into action, we have established a "signal strength" system that is bullish or bearish the market (S&P 500 cash index) on a sliding scale based on our confidence in the signal.

It can range from the most bullish of 100% Bullish (in which case we strongly expect the market to rally) all the way to 100% Bearish (in which case we strongly expect it to fall).  The signal can move in 25% increments either way.

We neither expect nor encourage any subscriber to take these as trading signals, so if you do please understand that you're on your own.  We do not know your risk tolerance, capital situation, time frame, etc., so we cannot suggest anyone make any trade based on these signals alone.  We mean for them to be wrapped into your current methodology and give you more or less confidence in your trade based on what our evidence is suggesting.

The signal strength is not necessarily indicative of positions held in managed accounts.

SIGNAL STRENGTH KEY

100% Bullish

  

100% Bearish
75% Bullish 75% Bearish
50% Bullish 50% Bearish
25% Bullish 25% Bearish
No Signal  

Below is the archive of all signal changes, for Traders and Investors, since their inception on September 20, 2007.

The current signal (updated after market close) is on the top row in the "TO" column.

NOTE:  Sometimes we move the position before or after regular trading hours, when SPX (the S&P cash index) is not trading.  At those times, usually only during major gaps, we use the percentage move in the futures markets to estimate where SPX would be.  It is not perfect, but these are not trading signals and used only for general purposes.  Because of that, sometimes you may see prices for SPX in the signals when the actual cash S&P index did not trade at those prices.

SIGNAL DATE S&P LEVEL
FROM TO
10/14/08 1045
10/06/08 1075
09/19/08 1270
09/17/08 1187
07/17/08 1251
07/15/08 1213
05/27/08 1386
05/22/08 1390
04/22/08 1375
04/18/08 1389
04/01/08 1346
03/28/08 1317
03/24/08 1355
03/24/08 1340
03/13/08 1292
03/07/08 1290
03/04/08 1327
03/04/08 1309
02/29/08 1340
01/25/08 1352
01/25/08 1364
01/22/08 1310
01/22/08 1259
01/10/08 1420
01/09/08 1386
01/04/08 1436
01/02/08 1443
01/02/08 1452
12/31/07 1472
12/21/07 1483
12/21/07 1473
12/18/07 1440
12/17/07 1457
12/13/07 1481
12/10/07 1513
12/07/07 1509
11/14/07 1490
11/08/07 1457
10/23/07 1511
10/23/07 1514
10/19/07 1501
10/19/07 1517
10/18/07 1538
10/17/07 1550
10/15/07 1545
09/26/07 1523
09/24/07 1519
N/A 09/20/07 1529

For Investors, we were following an alternate system prior to September 20, 2007.  That system was based on a simple set of mechanical rules, basically which we still use as a general guideline for how we approach the market.  Details on that follows the table.

Investors - Next 1 to 3 Months
SIGNAL DATE S&P LEVEL
FROM TO
10/06/08 1075
08/27/08 1282
07/18/08 1260
05/07/08 1393
04/24/08 1389
03/25/08 1350
03/12/08 1308
02/05/08 1336
12/26/07 1498
11/19/07 1433
10/23/07 1519
10/02/07 1547
07/12/07 1548
06/07/07 1491
03/20/07 1411
12/22/06 1411
12/05/06 1415
11/27/06 1382
05/03/05 1161
04/14/05 1162
03/04/05 1222
01/03/05 1203
10/01/04 1132
09/22/04 1114
08/18/04 1096
07/01/04 1129
05/25/04 1113
05/10/04 1087
03/29/04 1122
10/11/02 835
10/07/02 785
07/29/02 899
01/11/02 1146
10/02/01 1051
11/09/00 1400
04/12/00 1467
03/21/00 1494
01/03/00 1455
10/22/99 1302
07/21/99 1379
06/30/99 1373
05/14/99 1338
01/29/99 1280
01/14/99 1212
12/21/98 1203
12/11/98 1166
09/15/98 1038
07/22/98 1164
06/24/98 1133
04/24/98 1108
12/05/97 984
10/16/97 955
10/02/97 960
08/08/97 934
01/01/95 459

The alternate system we followed was a (nearly) 100% mechanical system that is either long, short or neutral the S&P 500 index based upon the following guidelines:

bullet If the 200-day simple moving average is rising, then the default Position is long.
bullet If the 200-day simple moving average is falling, then the default Position is short.
bullet If the default Position is long, then it will only change if the spread between the Smart Money and Dumb Money drops below -25%.  In that case, the Position will go to neutral once the S&P 500 closes below its 21-day exponential moving average.  The Position will go back to long if the S&P closes at a new high, or if the Smart Money / Dumb Money Spread reaches +25% and the S&P subsequently closes above its 21-day exponential moving average.
bullet If the default Position is short, then it will only change if the spread between the Smart Money and Dumb Money rises above +25%.  In that case, the Position will go to neutral once the S&P 500 closes above its 21-day exponential moving average.  The Position will go back to short if the S&P makes a new low, or if the Smart Money / Dumb Money Spread reaches -25% and the S&P subsequently closes below its 21-day exponential moving average.

We will take some slight discretion in these Position changes, which would involve one of the following:

bullet If the Smart Money / Dumb Money Spread reaches an historical extreme, then we may not wait for the confirmation of the 21-day moving average before making a Position change.  This is to take advantage of rare panics in equity markets.
bullet If the spread gets very wide but not quite to -25% or +25%, then we may make a Position change on a violation of the 21-day exponential moving average.  This is to take advantage of opportunities during strong trends.
bullet If the S&P moves to a new high or new low and we re-enter a position, then the S&P immediately moves against the position and violates the prior swing low or high (respectively), we will likely move back to neutral.  This is to prevent large losses during times of major trend changes.

For back-testing purposes, we did not optimize any settings, or use any discretion in terms of spread extremes.  An expert in systems design could likely come up with a superior mechanical model, however our goal is to present clear, simple and practical guidelines for using the Confidence indexes.

Following is the list of prior changes to the Position (using backtested results up to 10/18/06) based upon the criteria listed above:

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