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QUESTION:

Livio,

The S&P500 did a bullish reversal in February, but the market went below the crash point in early March. At the time, was the monthly a false bullish signal compared to the daily and weekly which were warning crash?

Peter

ANSWER:

Peter,

No. Sometimes, monthly reversals can be good for a trend as they consolidate momentum for a short time. However, on a short-term basis, Daily For example, it indicates only one unit of time and can offer a buying opportunity. May exceeded the April high peaking on the 1st so from that short-term perspective, it was correct. However, the Monthly level is where you tend to manage portfolios rather than higher risk trading. In fact, portfolios usually are sure to manage 70+% of their holdings using monthly trend modeling.

So while there was a brief correction into May with the lowest closing and June was an outside the monthly reversal to the upside, you will notice that on the Monthly level the sell occurred in October.  The February bullish reversal to the upside closed above the April high! This is also why I have stated many times that a SHIFT IN TREND DOES NOT unfold until you elect a Monthly reversal; in this example February.

Remember that trend can flip back and forth many times on the daily level within a year, and perhaps 2 to 4 times on the weekly level. That does not hold true on the Monthly which can remain in a trend for extended periods of time. This is the reason Investment firms and fund managers primarily follow our Monthly Wealth Preserver model because they cannot flip back and forth for brief 1 to 2 month corrections. Nonetheless, fund managers spot entry points on the daily and weekly reversals. Thus, as shown in the Daily insert a manager holding funds in cash during the months of May, could have entered the market in early June. This could have earned investors approximately a 2% bonus just for a managers patience and watching the chart signals.

I’ll take a bonus any day of the week. How about you?

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