After the major indices began pulling back from their highs in late September, then subsequently bounced in the beginning of October, our disciplined, rule-based market timing system shifted from “confirmed buy” mode to “neutral” mode on October 5. This change in our market bias perfectly coincided with the peak of the bounce off the lows of late September. In “neutral” mode, we can be positioned either long or short, but position size of all new trade entries will be lighter than usual, in order to reduce risk. Also, our portfolio will be primarily (or fully) in cash, with only a few positions in either direction.
As we entered into neutral mode on October 5, we began exiting all long positions in individual stocks and started focusing primarily on swing trading ETFs with a low correlation to the direction of the overall stock market (ie. currency, commodity, fixed income, and international ETFs). One week later, on October 12, the necessary signals were generated for a new “sell” signal (click here to review each of the five different modes of our timing model). The recent changes in our sentiment, based on our market timing system, are shown on the daily chart of the PowerShares QQQ Trust ($QQQ) below. Notice how the timing model is designed to keep you out of trouble when the going gets rough:
As broad market conditions have been eroding over the past month, subscribers of The Wagner Daily newsletter who have been following the signals of our market timing system should be quite happy now because they would have been out of all long positions of individual stocks just a few days before last Friday’s (October 19) big decline, thereby avoiding substantial losses and the pain that is now being felt by traditional “buy and hold” investors right now. While many subscribers of our swing trading newsletter like to follow the exact entries and exits of our individual stock and ETF trade picks, there are also many traders and investors who subscribe merely for the benefit of knowing when to be in and out of the market, and how much exposure to assume, while trading their own trade picks and ideas. The accuracy of our market timing system alone is worth the price of the subscription (as low as $2 per day) many times over, especially when market conditions rapidly change, as has been the case over the past month.
To receive immediate notification of when our market timing system eventually shifts back to a new “buy” signal, sign up for The Wagner Daily newsletter by clicking here. To learn how to trade stocks and ETFs with a “no nonsense” short-term trading system that works, check out our comprehensive online trading course at https://www.morpheustrading.com/services/stock-trading-video-course.