​Bull & Bear Tracker Feasting on Market Volatility

Michael Markowski  |

Based on the back tested results for the Bull & Bear Tracker’s algorithm, it’s been feasting on market volatility. During the months of January, February, March and October of 2018, which featured some of the worst days for the stock market since the election of President Trump, the Bull & Bear Tracker’s signals generated a return of 76.1%. Due to the damage that October’s carnage inflicted on the stock market’s technicals, I predict that the market’s 2018 lows will be tested by year end. Retests of the lows could enable the Bull & Bear Tracker’s signals to potentially generate additional gains of 30% or more. As of the 11/12/18 close the Bull & Bear Tracker’s signal was red.

Throughout 2018, the Bull & Bear Tracker’s signals have generated an average return of approximately 10% per month. The signals have had the highest productivity during 2018’s most volatile periods. For the October 4th to November 9th period, it generated a return of 14.9%. The January 1st through April 9th period generated a return of 62.2%. Year to date the Bull & Bear Tracker’s back tested and published signals have generated a return of 105.1% versus 4.5% for the S&P 500.

Since the beginning of the stock market; scholars, researchers and analysts have been attempting to no avail to find the “Holy Grail” of marketing timing. Investors have always sought to be out of the market during periods of substantial declines. The financial services industry has gone to great lengths to educate their clients to embrace a buy-and-hold philosophy thus remaining in market during recessions and other periods of high risk. A statistic often used by financial advisors to pacify edgy clients is that being out of the market for its best days over a long period substantially reduces gains. An example that has been widely used is that $100 invested in 1970 grew to $1,910 by 2016 under a buy and hold strategy. The amount fell to $310 assuming the $100 was not in the market for the best 25 days of the 46-year period. The statistic rarely cited in the chart below is $100 grew to $12,045 had it missed the 25 worst days during the 46 years.

Unfortunately, the best days for the bull market which began in 2009 are in the rear-view mirror. Since the S&P 500 may have already peaked after a nine-year uptrend, the market’s worst days are now on the horizon. The Bull & Bear Tracker is the solution for “the worst days of the market” dilemma which all investors will soon face. The Bull & Bear Tracker’s signals enable investors to trade inverse Exchange Traded Funds (ETF) to profit from the market’s worst days. It’s hard to fathom the returns that the Bull & Bear Tracker could have generated had it been operational during the worst days of the 1970 to 2016 period.

The Bull & Bear Tracker’s algorithm monitors the global markets 24 hours per day to predict the direction the S&P 500, the world’s largest stock market index, is heading. When the market is headed higher, the signal is green. When the market is headed lower the signal is red. The Bull & Bear Tracker is always in the market with either a green or red signal.

Exchange traded funds (ETFs), which mimic the performance of the S&P 500, are utilized to trade the Bull & Bear Tracker’s green and red signals. The ETF which can be used by an investor when the signal is green and the market is heading higher is the S&P 500 SPDR(SPY)). For example, if the S&P 500’s index consisting of 500 companies increases by 10%, the SPY would also increase by 10%. The ETF which is used by traders and investors who are betting that the S&P 500 will decline is the Direxion Daily S&P 500 Bear 1X ETF(SPDN)). It’s the inverse of the SPY. Should the S&P 500 decline by 10% the SPDN would increase by 10%.

Since the Bull & Bear Tracker’s signals proved to be very reliable during 2016, my recommendation for traders and investors when it was re-launched earlier this year was to utilize the two ETFs below to trade its signals. Both of the ETFs enable an investor to deploy 300% leverage. For example, a 10% change for the S&P 500 would be equivalent to a 30% increase for each of the ETFs.

  • Green: Direxion Daily S&P 500 Bull 3X ETF  (SPXL)
  • Red: Direxion Daily S&P 500 Bear 3X ETF  (SPXS)

The volatility for the S&P 500, which began on October 4, 2018, is not over. The S&P 500 suffered technical damage which can only be repaired by the index first retesting the October 29th low. The chart below for some of the S&P 500’s “worst days” earlier this year is a textbook case example for why the index will test its October 2018 low. It depicts the S&P 500, which was in a steady uptrend and had reached an all-time high in January 2018, then crashed to its February 8th low. After it rallied, it crashed again to just above the February low on March 23rd. Finally, the index’s low was retested again on April 2nd. The S&P 500’s retesting of the low is why it was able climb steadily from April through September to make a new all-time high. The volatility due to the retests of the February low enabled both the red and green signals to each generate returns of more than 20% from the start of 2018 through April 9th.

The chart for below for July 31st through October 31st has a similar chart pattern as the above chart. It depicts the steady uptrend of the S&P 500 to a new all-time high on September 20th. The crash began on October 3rd and the S&P 500 reached its low on October 29th. The pattern being almost identical to the above chart is why I am predicting that the signals could potentially generate a combined return of 30% from now through year end.

The Bull & Bear Tracker’s signal also performed well during April 9, 2018 to October 4, 2018 when the S&P 500 was in a steady uptrend. The Bull & Bear Tracker’s five published signals produced a combined net return of 29.0%. This compared to an increase of 11.0% for the S&P 500.

The Bull & Bear Tracker was originally developed to be a market crash predictor. From March of 2016, when it became operational through November 2016, its signals were very reliable and predicted the Brexit crash. Due to volatility being almost non-existent after Donald Trump was elected, the crash predictor was mothballed. After the signals were modified, the indicator was relaunched on April 9, 2018. The back test was conducted to cover gap from the beginning of 2018 to April 9th. See my article , “NIRP Crash Indicator renamed ‘Bull & Bear Tracker’; new signal issued”.

Subscriptions to the Bull & Bear Tracker will continue to be available free of cost until the development of the automated alert and trade execution system is completed. The new system will enable subscribers to automatically and seamlessly have their trades executed by an online broker. To subscribe click here.

The Bull & Bear tracker is the third algorithm I developed. Point is, The Bull & Bear Tracker is not a one-off. It is the third in a series of “hit-the-nail-on-the-head” algorithms that effectively and accurately enable investors to stay in the market and trade confidently such that they can have the courage of their convictions.

My first algorithm, The EPS Syndrome was developed in 2002 and was used to in my September 2007 magazine article to predict the demise of Lehman, Bear Stearns and Merrill Lynch, etc. See “Have Wall Street’s Brokers Been Pigging Out?”, September 2007. For more about the algorithm and its performance click here.

My second algorithm, Free Cash Yield was developed in 2003 to find the most undervalued companies in the market based on their Free Cash Yields. The share prices of the two companies that it discovered multiplied by 20 times within four years. One of the two companies, Think or Swim was acquired by Ameritrade for $606 million. For more information click here to view Free Cash Flow yield video.

To understand the math as to why bear markets are unavoidable, I recommend you read my October 9, 2018 article entitled, “Day of Reckoning Approaching for Market”. Below are my other October 2018 articles pertaining to why I believe that the market will be substantially lower in the coming weeks and months:

Below are the research categories that BullsNBears.com covers:

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
SPY SPDR S&P 500 265.46 1.33 0.50 97,976,706
SPXS Direxion Daily S&P 500 Bear 3X 26.99 -0.42 -1.53 7,210,721
SPDN Direxion Daily S&P 500 Bear 1X Shares 30.31 -0.18 -0.60 14,436
SPXL Direxion Daily S&P 500 Bull 3X Shares 39.69 0.60 1.53 6,801,606

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