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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.
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.
 |
|
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:
 |
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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