The perfect storm I predicted in my Friday, October 5th article entitled, “Perfect Storm Brewing for Possible Market Crash Next Week” which caused a decline of 4.1% for the S&P 500 last week is going to rage on until the end of October. The Bull & Bear Tracker’s October 4th Crash (RED) signal produced a return of 14.4% as of the close of the market on October 12, 2018.
The S&P 500 faces the same challenge during October that it faced in February which had been the most volatile month for 2018. According to SEC rules corporations can’t conduct their share buy backs during the five-week period prior to their releasing quarterly or fiscal year earnings. Corporations must also wait for two days after reporting earnings. Thus, the market has little buyback support for the months of February, April, July and October. This is pointedly applicable to 2018. Corporations are projected to spend a record one trillion dollars for the year on share buy backs. This dollar amount which is equivalent to four percent of the S&P 500’s market cap has been buoying the market. Without these buy backs; the stock market would have already declined given that retail investors, mutual funds and pension funds have been net sellers of stocks throughout 2018. With the corporations unable to support their share prices, expect more volatility and lower lows until the end of October.
A great way to capitalize on the market’s volatility is to utilize the Bull & Bear Tracker’s GREEN and RED signals. In my October 5th article, I detailed an investing strategy to utilize the Bull & Bear Tracker’s RED signal to purchase the SPXS during the last half hour of trading. As of the market’s October 12th close, those who deployed my October 5th strategy were up 12.6%. Over the same seven-day period, the SPDR S&P 500 ETF (SPY) declined by 4.1%. The Bull & Bear Tracker’s signals are utilized to trade the following:
- Direxion Daily S&P 500 Bull 3X Shares: SPXL
- Direxion Daily S&P 500 Bear 3X Shares: SPXS
To maximize profits, a trader of the signals remains 100% invested in the SPXL when the signal is GREEN or in the SPXS when the signal is RED. When the signal changes, the trader sells the SPXS and buys the SPXL; or vice versa. The return from April 9 (when the first signal [GREEN] was published) through October 12, 2018 was 40.8% versus 6.7% for the SPY. The Bull & Bear Tracker’s signals are as follows:
- GREEN utilizes the SPXL to generate significantly higher profits than the SPY when the S&P 500’s volatility is low. From April 9th through October 4th, when the S&P 500 was in an uptrend, the SPY increased by 11.9%. The return for the GREEN signals to trade the SPXL for same period was 30.6%.
- RED utilizes the SPXS to generate profits when the volatility of the S&P 500 is high. From October 4th through October 12th, 2018 (when the signal went from GREEN to RED), the SPXS increased by 14.4%. This compared to a decline of 4.7% for the SPY during the same period.
The table below includes all of the Bull & Bear Tracker’s media verifiable signals from its April 9th launch date through October 4, 2018.
A trader must be prepared to incur losses for when the volatility of the S&P 500 becomes excessive. According to my back testing, this occurred twice during the first quarter of 2018. Losses of 6.8% for a RED signal and 7.5% for a GREEN signal were incurred. However, even with the two losses; the other signal changes in January, February and March of 2018 more than made up for the losses. The combined net gain for the Bull & Bear Tracker’s back tested signals from January 2 to April 9, 2018 was 13.3% versus a decline of 1.8% for the SPY. Because of the potential for volatility to become excessive, the Bull & Bear Tracker’s signals should be utilized only by traders who are willing to commit to utilizing them for a minimum of 12 months.
A further benefit of the signals is that they can be used in conjunction with technical analysis to maximize performance when trading S&P 500 ETFs; specifically including the SPXL, SPXS and SPY. The Bull & Bear Tracker is among the world’s best trend-trading-algorithms for three reasons:
- Dollar/Yen exchange rate, which is the source of the signal changes, is not susceptible to manipulation. The reason for this is the Dollar/Yen currency pair is the second most liquid trading instrument in the world.
- The S&P 500 and the ETFs which trade it (including the SPY, SPXL and SPXS) is the world’s most liquid investment vehicle.
- Since the signals trade triple leveraged ETFs, they can potentially produce annualized double digit returns in bull and bear markets.
From April through October of 2018, the Bull & Bear Tracker underwent testing and tweaking to reduce risk and maximize performance. The Bull & Bear Tracker’s signals are now exclusively available to subscribers. Click here to subscribe to the Bull & Bear Tracker’s signals.
For more on the Bull & Bear Tracker see my April 9, 2018 article, “NIRP Crash Indicator Renamed ‘Bull & Bear Tracker’; Signal Now GREEN”. Educational information explaining the role of the Dollar/Yen exchange rate as leading indicator for the S&P 500 is available on BullsNBears.com’s USD/JPY Indicator research page.
To better understand my math as well as to learn about the secular bear market and the recession-investing strategies that I am recommending from now through 2030, watch my recently taped two-part interview. A private pre-screening of my two-part interview, which will be broadcast on the Fox Business channel at the end of October is available NOW exclusively to BullsNBears.com’s alert subscribers. Click here to subscribe to BullsNBears.com free alerts.
Below are my most recent must-read articles pertaining to the market heading substantially lower in the coming weeks and months:
- Day of Reckoning Approaching for Market, October 9, 2018
- Perfect Storm Brewing for Possible Market Crash Next Week, October 5, 2018
- Market Vulnerable due to Buyback Blackout; Bull & Bear Tracker signal now Red, October 4, 2018
- Nobel Laureate Shiller says Current Market is Eerily similar to late 1920s, October 4, 2018
- Frenzied Market Blow Off Underway, October 3, 2018
BullsNBears.com covers the research categories listed below.