SELL signal

Today we got a SELL signal in our Navigate the Stock Market System.  There were technical reasons and geo-political concerns.

 

VIX is a reliable indicator within our system.  The VIX is calculated from both call and put options of the S&P 500 and looks out about 30-days into the future.  The VIX is a widely used measure of market risk.  The VIX moved up 27% today and that is not good for the S&P going forward.  With the huge one-day, run-up in VIX, our VIX indicator flashed SELL.  In addition, our price indicator has been trending down since the end of January (with a lot of bouncing along the way) and it also finally called a SELL today.  One of our statistical measures went over the top to a SELL signal.  Another negative: at the close Friday the S&P 500 was over 15% above its 200-day moving average and that is the level where the correction started in January 2010.   (I wanted to get a sentiment reading tonight, but RYDEX has still not published their closing Asset Value data that we use for the Sentiment indicator.  It is probably a neutral indicator; I just wanted to see how it moved.  I’ll report on it tomorrow night.)

 

On top of that, we had geopolitical concerns from more turmoil in the Middle East and that caused a spike of about 6% in oil prices today.  That spooked the market over the expectation of $4.00 gasoline this summer and the possibility it could go higher.  

 

The key to trading stocks is to trade what you see; not what you think.  I think this will be about a 10% correction from top to bottom and we’ll be fine afterward.  What I see is the NTMS analysis giving a SELL signal.

 

So…I will be selling my retirement accounts tomorrow so I will about 30% invested overall.   Since I am now 100% invested in stocks, I am way overexposed for any rational portfolio.  The only thing that would change my mind would be a HUGE reversal that would create a BUY in the NTSM system tomorrow; that is not likely.  The odds favor an up day…but not a huge reversal.