Anybody caught this downturn ?

I was wondering if anyone has caught the recent downturn in advance with a good timer or timing rules?
Is this downturn something serious or is it just a bottom for a new advance???
Some thoughts?

Werner

w:

 Perhaps the "Stealth Bear" is revealing itself.

Bill

I didn´t catch it…
Let´s see what´s going to happen in the next two weeks. I am very curious about it…

Best regards,
Miguel Barbosa

I got lucky:

I had a multiyear high at 06/05/2015 since then down 12%.

I figured if now the market gets a leg down my DD will be even further, because in a downturn it is hard to produce any Alpha.
And Earnings Trends Specy is looking weak (though my models did not Signal to get into cash).

Three Days ago I used added (fully margin based) Shorts on VLO (ETF emerging markets) and Longs on TLT.
(270 k was my port, I added 200k in hedging based on margin) I added another 40k of cash to my stock account today to hedge with this even more (Probably short german dax).

My reasoning was: There is recession talk in germany, Volkswagen (which is a good proxy) sold 20% less in China, 60% of the earnings from Volkswagen is produced in china, so they are likely to produce a loss for 2015 (that absolutely nobody expected, earnings expectation in Germany do not reflect this at all). People start to understand this, 5% downleg yesterday in germany.

Germanys industry made a huge (export based) bet on china, they are boxed in pretty well right now. China numbers are all tuned. If germany falls into recession, the rest of Europe will, so china and Europe are toast (will go to recession end 2015).

Emerging markets (Brazil, Agentina, Russia, Korea) are in trouble too. Australia is in trouble (low commodity prices) I just see no way who the US will not be affected and I think earnings expectations might be to high (Oil profits evaporated, high dollar weighs on earnings). Dollar Carry Trades are under pressure, this might fire up the dollar even more (close carry Trade = Buying Dollar)

The only (not very) strong Player left is the US, but that storm might be too big, so ultimately it might be also dragged into recession.
I will stay hedged for know.

Regards

Andreas

2 of my R2Gs just switched Monday to bonds or 1/2 Bonds + 1/2 Equity:

https://www.portfolio123.com/app/r2g/summary/1216869
https://www.portfolio123.com/app/r2g/summary/1150171

I can’t imagine the Fed raising rates if they think the US economy is about to be dragged down. They’re not under any pressure at all from an inflation point of view - in fact quite the opposite.

I have no quant indicator for a downturn but chart patterns, feeling and common sense pushed me to warn my followers of a seasonal correction last Saturday. As my port is hedged about 60% against the SP500 since december, I changed nothing.
Short interest in stocks is high but still far from 2007-2008 level. It is not (yet) concerning and may even fuel a nice rally if it is “only” what I think it is: a seasonal correction. May be wrong. Hope the best and prepare the worst.
BTW: I had also timed the 2011 correction with chart patterns on various time frames and indices. But I was not able to time the bottom so it was useless.

You can’t catch a downturn like this. You can only look at the big picture. Both the US and Australian market have been signalling weakening conditions for weeks. If the current trend continuous the MAC-US and the MAC-AU will generate sell signals soon. Here are today’s charts of both indicators.

However, the US economy is not near a recession, but in the middle of an ongoing expansion, as is evident from various recession indicators we follow at iMarketSignals and also from the Conference Board Leading Economic Index Aug-20-2015 release:

“The Conference Board LEI for the U.S. decreased slightly in July, primarily the result of a sharp
decline in building permits. The LEI’s six-month growth has slowed compared to the second half
of last year, but the strengths among its components remain widespread. The CEI for the U.S.
continued to improve through July but its six-month growth rate has also moderated. Despite the
recent decline in the LEI, the current behavior of the composite indexes and their components
suggest that the economy should continue to grow at a moderate pace in the coming months.”




We caught the downturn and that can be seen in our ports on C2. On August 7th I posted a couple of charts on the forums here that lead to our thinking. I don’t believe these charts could be created on P123 but the simple 10 month ma of the SPX was giving a sell signal for more than a month.

Decisionpoint on Stockcharts.com has been calling this top as well. In addition many good macro economists including @RaoulGMI anticipated the decline as part of a domino effect starting with the decline in oil. If your a fan of Norman Fosback and his hi-lo indicator it was signaling a market top as well.


And I also posted this from John Hussman. Yeah sure its John Hussman but so what, it should have been a chart that made you think more than twice about being long.


All,

Goev said, “You can’t catch a downturn like this.” I respectfully differ in opinion. Our Market Risk Analysis system predicted this downturn all the way back on June 28. I posted a link for P123 members in this thread, with a link to my free article ‘Big Change Coming To The Market This Week .’

At the time, several P123 members poo-pooed my warning saying that riding out the downturns and staying fully invested was the most prudent approach. ‘You can’t time the market,’ etc. However, our IV portfolios have been mostly in cash since early July, and we have sidestepped the downturn entirely.

I continue to urge fellow members to master technical analysis in addition to quantitative analysis. I eschewed technical analysis for much of my 30-year career but dedicated many hours to learning and understanding it the year before the 2007 economic crash. That paid off big by getting me and my subscribers in cash from October 2007 to March 2009.

Much of TA is useless for intermediate-to-long-term investors, but TA is not voodoo. If you choose the right indicators with the right settings, it provides identification of supply and demand and pricing trends, which will aid you in minimizing drawdowns and maximizing returns.

I appreciate goev’s excellent US economic analysis at iMarketSignals, but it is becoming quite clear that the largest economy in the world may be at the beginning of an economic crash. I’m not talking about the US. China is now the largest economy and the driver of the world’s economic prospects. A catastrophe there may be imminent, bring the US and the rest of the world down with it. Every crash is different, and the next one will be different from previous ones. Like they say about wars, we’re always fighting the last one with our current approaches.

I’m afraid that a combination of the highest debt load in the history of the world, a currency crisis resulting in extensive emerging market defaults, and Depression-era deflation might be what we face next. It’s time: the average rally lasts 4.5 years, and this one has drawn on for six years-plus, based on artificial, worldwide central bank stimulation, resulting in massive sovereign debt creation.

FYI, in this week’s Value Alert Newsletter I am writing an extensive article on how far the market could drop, what to expect next, and how to make money from the situation. There is no obligation, it is free and will be posted Sunday evening. If you’re interested, the index for the free back issues of the Value Alert Newsletters is at this link.

I’m not advertising anything here. In fact, I may be closing IV soon and retiring. I would just like to share some proven methods to help others avoid financial pain as I head out the door. Perhaps my free newsletters will have some ideas that you can put to use with your portfolios.

Hi Werner,

I have already asked about this back in April:
https://www.portfolio123.com/mvnforum/viewthread_thread,8638#45196

As far as my positions, i have 25% in cash which I will most likely put to work end of September.

Since March our (SPY-IEF) Market Timer has been signalling an allocation 25% Stocks and 75% bonds or cash.
http://imarketsignals.com/2015/spy-ief-market-timer/


Market Timer 3-9-15.png


Market Timer 8-17-15.png

Interesting discussion. Thanks for all your inputs and comments. Fascinating to see how some of the advanced memebers disagree on the market (oh, what else is new). Geov is not seeing any danger (yet). Christopher is seeing big carnage ahead.
And we all have our “obvious” reasons for our opinions.
Market timing is indeed a trecherous beast to come to terms with.

Sevensisters,
thanks for pointing this out. We already had a similar discussion in April.
That would have been a great time to go short.

Update of this chart, we’ve now broken through the 10 month ma and PMO had already rolled over. Keep it simple


Brad, Georg, dmicsa, Thank you. Three Senior members say we are going lower, if this is true, everybody
on p123 now has the posibility to react. I will inform my r2g users about this thread!!!

1000000000000000000 Thank you!!!

Andreas

Interesting chart Brad. RSI breakdown, MA penetration and MACD/PMO turnover occuring simultaneously. Looks like the clearest signal on the multiyear chart.

If the market follows the script then I suppose there will be a bounce back to MA perhaps next week but with no strong reason to continue higher and the usual seasonal weakness things are looking pretty grim.

I guess one could make the argument that now is as good a time as any for a speculative secular short position.

“I guess one could make the argument that now is as good a time as any for a speculative secular short position.”

That might be true. Or it is just the opposite: A great opportunity to go LONG.
I will go long on Monday as soon as down-volume diminishes.

Youre right Sterling, I would expect a wicked bounce sometime next week but it would still be a bear market bounce. I’m not trying to trade the SPX on the short side yet as I think the easiest and safest trade are the variations of the long Treasury, EDV, TLT and TMF. This irony in this cycle is that despite all the work we’ve all done on systems and models, our gains have primarily been due to QE.


QE market returns.PNG