Relative Strength Indicator Predicted Current Pullback

The weekly relative strength market timing indicator (RSMTI) signaled the current equity market pullback on January 24, 2014 when the indicator crossed below its 21-week moving average.  The daily RSMTI provides earlier signals than the weekly RSMTI and is more useful for identifying short-term trends.  However, when the weekly RSMTI crosses below its 21-week moving average, it is an indication of more protracted pullbacks, many of which extend for several months.

The daily and weekly RSMTI are still below their respective 21-period moving averages, although the daily RSMTI has gained some ground recently.  The weekly RSMTI is still well below its 21-week moving average and the monthly RSMTI is declining and threatening to cross below its 21-month moving average.  Simultaneous negative RSMTI signals from all three periods would have serious implications for the equity market.

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Recession Model Forecast 04-01-2014

The following article updates the diffusion index, recession slack index, aggregate recession model, and aggregate peak-trough model through March 2014.

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Brian Johnson’s New Book is Now Available on Amazon

Option Strategy Risk / Return Ratios: A Revolutionary New Approach to Optimizing, Adjusting, and Trading Any Option Income Strategy

Option Strategy Risk/Return Ratios introduces a revolutionary new framework for evaluating, comparing, adjusting, and optimizing option income strategies. Drawing on my background in option-pricing and on decades of experience in investment management and trading, I developed these tools specifically to manage option income strategies.

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Non-Farm Payroll (NFP) Model Forecast – March 2014

This article presents the Trader Edge aggregate neural network model forecast for the March 2014 non-farm payroll data, which is scheduled to be released tomorrow morning at 8:30 AM EDT.

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Posted in Economic Indicators, Fundamental Analysis, Market Timing, NFP Forecasting Model | Tagged , , , , , , | 2 Comments

03-31-2014 AAR Strategy Update Posted

The March 31, 2014 AAR Strategy update is now available on the AAR Subscribers page.  If you are not currently a subscriber and would like to learn more about the strategy, there is a detailed description on the AAR Strategy page.

The AAR strategy is a conservative, long-only, asset allocation strategy that rotates monthly among five large asset classes: large-cap U.S. stocks, developed country stocks in Europe and Asia, emerging market stocks, U.S. Treasury Notes, and commodities. The strategy was inspired by the Ivy League portfolio and uses trend and technical filters to reduce downside risk.

If none of the five candidates pass their respective trade filters, the AAR strategy remains in cash for the month.   Stop-loss orders are used on every trade to control losses and to facilitate position sizing.

Brian Johnson

Copyright 2014 – Trading Insights, LLC – All Rights Reserved.

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Recommended Reading 03-27-2014

Readers repeatedly ask me for book and article recommendations, especially new traders who are interested in learning more about trading and investing.  Education is the single most important prerequisite for trading success.  Look for periodic posts with my  personal recommendations for books, articles, and other educational resources. A complete list of all past recommendations is available on the Recommended Reading page.

Brian Johnson’s Recommendation

Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications (New York Institute of Finance)

by John J. Murphy

This may be the best single resource book on technical analysis.  It assumes no prior knowledge of technical analysis and provides a comprehensive look at many of the popular tools used by market technicians.  It is one of the first books I purchased when I began learning about technical tools and I highlighted or dog-eared nearly every page for future reference.  I continue to be fascinated by the potential of technical indicators and this book provided the inspiration for much of my own proprietary research work.

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No Post This Week

I have done some preliminary work on developing a standardized indicator to identify and quantify divergences between price and other indicators. Rather than program multiple divergence indicators, I hope to develop a single divergence function that could identify divergences between price and any other indicator.   This is still a work in progress.  If successful, the divergence indicator will be the topic of a future article on Trader Edge.

I am in the process of finishing the first draft of my first book on option income strategies, so there will not be a new market-related or research post this week.  I plan to resume weekly posts next Thursday.

Brian Johnson

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Recession Model Forecast 03-01-2014

The following article updates the diffusion index, recession slack index, aggregate recession model, and aggregate peak-trough model through February 2014.

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Posted in Economic Indicators, Fundamental Analysis, Market Timing, Recession Forecasting Model | Tagged , , , , , , , , | Leave a comment