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The Outlook we post to the site is based on the "Four Anchors" of Sentiment, Studies, Trend and Support/Resistance.  It ranges from 100% Bearish to 100% Bullish, depending on whether each of the anchors is bullish or bearish for the market.

 

It is not based on an actual trade that we place in personal or directed accounts, and it is not trading advice.  It is a general outlook that we use for the coming days (short-term) or weeks/months (intermediate-term).  We use the S&P 500 SPDR (SPY) so that subscribers have specific, accountable levels to track the Outlook (dividends are an issue, and we will note when they impact an Outlook).

 

We mainly focus on one thing - sentiment - and always assume that subscribers utilize other resources and their own methodologies for fundamental and technical analysis.  So even if we are 100% bearish due to sentiment, subscribers should incorporate that view into their own research, and not trade based solely off of that view.

 

Following is a list of recent changes in the Outlook.

 

SHORT-TERM
DATE POSITION

PRICE

12/20/10 Neutral 124.77
12/15/10 25% Bearish 123.90
12/10/10 Neutral 124.16
12/06/10 25% Bearish 122.63
11/19/10 Neutral 119.96
11/18/10 30% Bullish 119.59
11/17/10 50% Bullish 118.03
11/12/10 Neutral 120.10
11/05/10 20% Bearish 122.00
10/21/10 Neutral 118.75
10/18/10 25% Bearish 117.65
10/13/10 Neutral 118.50
10/11/10 25% Bearish 116.65
10/07/10 Neutral 115.45
10/06/10 10% Bullish 116.39
10/05/10 15% Bullish 114.24
09/28/10 Neutral 113.85
09/27/10 10% Bullish 114.35
09/23/10 15% Bullish 112.65

 

 

 

INTERMEDIATE-TERM
DATE POSITION

PRICE

10/14/10 Neutral 116.75
09/20/10 25% Bullish 114.22

 

 

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Prior to September 2010, we published a "signal strength" system that was bullish or bearish the market (S&P 500) on a sliding scale based on our confidence in the signal.

It ranged from 100% Bullish (we strongly expect the market to rally) to 100% Bearish (we strongly expect it to fall).  The signal can move in 25% increments either way.

The strength of the signal is based on four basic factors:

1. The market's underlying trend

2. The proximity of technical support / resistance

3. The degree of optimism or pessimism evident in our indicators and models

4. Other tendencies (seasonality, price patterns, etc.)

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 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.

Below is the archive of all signal changes, for the Short-term and Intermediate-term, since their inception on September 20, 2007.

The current signal is on the top row in the "TO" column.

The changes are based on the S&P 500 front-month e-mini futures contract for the short-term, and the S&P 500 cash index for the intermediate-term.

Key:  Bullish (%);  Neutral;  Bearish (%)

Short-term

Looking at the next 1 - 5 Days

SIGNAL DATE S&P LEVEL
FROM TO
25% 07/20/10 1056
25% 07/15/10 1083
25% 06/24/10 1067
25% 06/23/10 1085
25% 05/25/10 1049
25% 05/21/10 1056
25% 05/19/10 1112
50% 25% 05/14/10 1150
50% 05/13/10 1173
25% 04/23/10 1215
25% 04/13/10 1194
25% 02/26/10 1107
25% 02/25/10 1091
25% 02/19/10 1112
25% 02/17/10 1097
25% 01/27/10 1090
50% 25% 01/22/10 1101
25% 50% 01/21/10 1128
25% 01/12/10 1134
25% 12/17/09 1098
25% 12/14/09 1114
25% 12/04/09 1115
25% 12/03/09 1102
25% 10/05/09 1029
25% 10/02/09 1015
25% 07/23/09 955
25% 07/15/09 916
25% 06/30/09 919
25% 06/25/09 918
25% 06/03/09 924
25% 06/02/09 938
25% 04/20/09 837
25% 04/14/09 865
25% 04/14/09 846
25% 04/13/09 862
25% 03/23/09 783
25% 03/13/09 753
25% 03/11/09 726
25% 02/24/09 746
25% 01/16/09 853
25% 01/13/09 865
25% 01/08/09 897
25% 01/05/09 920
25% 12/29/08 870
50% 25% 12/26/08 873
50% 12/24/08 865
25% 10/14/08 1045
25% 10/06/08 1075
25% 09/19/08 1270
25% 09/17/08 1187
25% 07/17/08 1251
25% 07/15/08 1213
25% 05/27/08 1386
25% 05/22/08 1390
25% 04/22/08 1375
25% 04/18/08 1389
25% 04/01/08 1346
25% 03/28/08 1317
25% 03/24/08 1355
50% 25% 03/24/08 1340
50% 03/13/08 1292
25% 03/07/08 1290
25% 03/04/08 1327
25% 03/04/08 1309
25% 02/29/08 1340
25% 01/25/08 1352
25% 01/25/08 1364
50% 01/22/08 1310
50% 01/22/08 1259
25% 01/10/08 1420
25% 01/09/08 1386
50% 01/04/08 1436
25% 50% 01/02/08 1443
50% 25% 01/02/08 1452
50% 12/31/07 1472
25% 12/21/07 1483
50% 25% 12/21/07 1473
50% 12/18/07 1440
50% 12/17/07 1457
50% 12/13/07 1481
25% 12/10/07 1513
25% 12/07/07 1509
25% 11/14/07 1490
25% 11/08/07 1457
25% 10/23/07 1511
50% 25% 10/23/07 1514
25% 50% 10/19/07 1501
25% 10/19/07 1517
25% 10/18/07 1538
50% 25% 10/17/07 1550
50% 10/15/07 1545
25% 09/26/07 1523
25% 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.

Intermediate-term

Looking at the next 1 - 3 Months

SIGNAL DATE S&P LEVEL
FROM TO
25% 06/22/10 1103
25% 06/10/10 1080
50% 06/04/10 1065
50% 05/27/10 1093
25% 05/25/10 1044
25% 05/21/10 1072
25% 02/02/10 1104
25% 01/21/10 1116
25% 04/09/09 843
50% 25% 03/27/09 824
25% 50% 03/05/09 696
50% 25% 01/14/09 843
25% 50% 12/12/08 845
25% 10/06/08 1075
25% 08/27/08 1282
25% 07/18/08 1260
25% 05/07/08 1393
50% 25% 04/24/08 1389
75% 50% 03/25/08 1350
50% 75% 03/12/08 1308
25% 50% 02/05/08 1336
50% 25% 12/26/07 1498
25% 50% 11/19/07 1433
75% 25% 10/23/07 1519
100% 75% 10/02/07 1547
100% 07/12/07 1548
100% 06/07/07 1491
100% 03/20/07 1411
100% 12/22/06 1411
100% 12/05/06 1415
100% v 11/27/06 1382
100% 05/03/05 1161
100% 04/14/05 1162
100% 03/04/05 1222
100% 01/03/05 1203
100% 10/01/04 1132
100% 09/22/04 1114
100% 08/18/04 1096
100% 07/01/04 1129
100% 05/25/04 1113
100% 05/10/04 1087
100% 03/29/04 1122
100% 10/11/02 835
100% 10/07/02 785
100% 07/29/02 899
100% 01/11/02 1146
100% 10/02/01 1051
100% 11/09/00 1400
100% 04/12/00 1467
100% 03/21/00 1494
100% 01/03/00 1455
100% 10/22/99 1302
100% 07/21/99 1379
100% 06/30/99 1373
100% 05/14/99 1338
100% 01/29/99 1280
100% 01/14/99 1212
100% 12/21/98 1203
100% 12/11/98 1166
100% 09/15/98 1038
100% 07/22/98 1164
100% 06/24/98 1133
100% 04/24/98 1108
100% 12/05/97 984
100% 10/16/97 955
100% 10/02/97 960
100% 08/08/97 934
100% 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:

If the 200-day simple moving average is rising, then the default Position is long.

If the 200-day simple moving average is falling, then the default Position is short.

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.

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:

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.

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.

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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