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Market Timing

Monday, May 25 2020
This week could determine the direction for the stock market (SP500) for the next Bull or Bear "run".

Graph #1
As you can see in Graph 1 immediately below, the SPY fell like a rock in Feb/Mar 2020 (Leg#1 down), but recovered to what the "pros" say is the normal
"Retracement Point" ( ).  These "Mr. Know It All's" claim that all bear markets tend to bounce up from their first bottom until the market has recovered about 50% of its first drop.  From there, the market will decide if it will continue up or to fall back down for its 2nd drop ("Leg#2 down).  BTW, most of the time in bear markets the market does just that, but these are not normal times.

So far, the market has followed the above to the tee, but it has hit two stages of uncertainty from late April until now (go to Graph #2 below)

Graph #1

Graph #2
Graph #2 below is simply an expansion of the second half of Graph #1 (to make my comments below easier to see in the graph).

The purple "flat market" or "sideways pattern" in Graph #2 shows the uncertainty around the retracement point very well.  As can be seen in this purple pattern, the market bounced around in a plus/minus 2.25% range for 21 days (if that isn't uncertainly, what is it?).  And, you can see that the SPY hit (but failed to break above) the SPY 200-Day EMA line 4 times (blue line).

But then, on May 18th the SPY broke out of the purple pattern AND sprung above the 200-Day EMA as shown in the smaller, brownish pattern. The market has traded in this very small range for 5 days; 4 of which closed above the 200 EMA.
So, that leaves us here on May 25th wondering what will happen next. My guess (not MIPS') is that, over the next several days, the market will break above the 200 EMA decisively and go up from here for a while.  Even with that opinion, I still believe that the market will re-test its March lows before it goes back into a real bull market. . My opinions are OK, but I follow MIPS...  So should you.!!!

Graph #2
Good Trading ...

Paul Distefano, PhD
CEO / Lead Developer
MIPS Timing Systems, LLC
Houston, TX
408-234-8348 (Cell)
Posted by: Dr. G. Paul Distefano AT 07:32 pm   |  Permalink   |  Email

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