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A PAUSE AT RESISTANCE ON THE WAY TO NEW ALL TIME HIGHS?

After our tactical SAMMY indicator flashed a buy signal the stock market commenced a strong rally back to our previously identified resistance zone. Given the current status of an array of both strategic and tactical supply and demand indicators, the odds remain favorable for the path of least resistance to remain an eventual assault on new all-time highs. However, the price will likely need some time to overcome this obvious resistance zone, so an assault on new all-time highs will likely be delayed until the stock market has digested the gains made during its sharp rally.

TATY   —   A REPRESENATIVE OF A FAMILY OF STRATEGIC SUPPLY AND DEMAND INDICATORS

TATY has not touched the 160 level shown by the blue line on the attached first chart since January 2018, when the buying fever broke after the stampede higher following the 2016 election. However, TATY continues to paint out numbers consistent with demand remaining in the superior position to supply. For more than three decades, when TATY is making bottoms in, or near, the red zone surrounding the 140 level these conditions have reflected an ongoing bull price trend. So, currently TATY continues to generate objective numbers, which remain consistent with an ongoing bull trend. No indicator is perfect in this business of dealing with uncertainty, but in the absence of objective information to the contrary, investors will likely continue to be rewarded by being significantly exposed to equities in their asset allocation.

Yes, we are aware of the current dire warnings of the dreaded inverted yield curve, but even if those warning turn out to be accurate, history suggests for such a change to affect equities may take months. We cannot measure what may be, but we do a consistently and accurately measure what is, and for now those measurements are saying the odds favor demand over supply.

SAMMY   —   A FAMILY OF TACTICAL SUPPLY AND DEMAND INDICATORS

SAMMY recently flashed a buy signal, which is shown by the blue vertical line on the attached second chart above. The stock market has responded with a powerful rally back to the previously identified resistance zone. So this new family of indicators continues to crank out reliable buy signals for tactical intermediate trades, some of which may turn into long term capital gains trades, as we march through time and additional signals are triggered. While testing has shown SAMMY signals to be extremely accurate, investors need to be aware, that the shorter the time frame, the less accurate signals tend to be. So SAMMY will likely have misses from time to time, but its construction will tend to make it a substantially profitable tool over time, if administered by an experienced professional trader with a record of success in navigating the stock market. And, I continue to evolve this family of tactical supply and demand indicators, as testing for the best prototypes never ends.

What you see above is only one prototype of this family, which there are several more representing different variations on the same theme. Over time these protypes will be winnowed down to just one survivor. I can say with some confidence that I know professional traders, which would pay a handsome price to purchase any of the prototypes rejected during the winnowing down process.  SAMMY is shown in the second chart above alone, and in the third chart with the S&P-500 overlaid.

THE BOTTOM LINE

The odds favor the current rally to struggle to overcome the resistance zone it has entered. This struggle will likely take some time to be resolved, but the current status of an array of both strategic and tactical indicators suggest the rally will overcome the resistance, which will then probably setup a renewed assault on new all-time highs. An excursion of the strategic indicator, TATY, into the caution zone surrounding the 115-125 level would substantially change the outlook for new all-time highs.

 

DISCLAIMER: Optimist Capital LLC, does not guarantee the accuracy and completeness of this report, nor is any liability assumed for any loss that may result from reliance by any person upon such information. The information and opinions contained herein are subject to change without notice and are for general information only. The data used for this report is from sources deemed to be reliable, but is not guaranteed for accuracy. Past performance is not a guide or guarantee of future performance. Optimist Capital LLC, and any third-party data providers, shall not have any liability for any loss sustained by anyone who relied on this publication’s contents, which is provided “as is.” Optimist Capital LLC disclaim any and all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. Our data and opinions may not be updated as views or information change. Using any graph, chart, formula or other device to assist in deciding which securities to trade or when to trade them presents many difficulties and their effectiveness has significant limitations, including that prior patterns may not repeat themselves continuously or on any particular occasion. In addition, market participants using such devices can impact the market in a way that changes the effectiveness of such device. The information contained in this report may not be published, broadcast, re-written, or otherwise distributed without prior written consent from Optimist Capital LLC.

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