Trading Lesson: What's Next for the Market? How to Read the Data

10/12/2018 3:24 pm EST


Mike Turner

President, Turner Capital Investments

Well, that was quick. The swift drop in the major averages has affected just about everyone. So far, it’s more than 5% for the S&P 500 (SPX) and DJIA, and almost 10% for the Nasdaq 100 (IXNDX), S&P 400 (SP400) mid-caps, and Russell 2000 (RUT) small caps, writes Mike Turner Thursday.

We all know, intellectually, that these drops can happen, but it’s still tough emotionally when we’re in the midst of it. Nobody likes losing money.

Of course, there are two types of investors. Those who plan for these events in advance and those who don’t. Fortunately for my clients, I plan in advance.

Watch Mike Turner’s MoneyShow Dallas presentation: How to always be on the right side of the market. Always.

As of late Wednesday, October 10, I was almost 100% in cash. Beginning the previous week, I received some data that told me a move to the downside was imminent.

As you might guess, my algorithms generate a huge amount of data each week. Several years ago, I wanted to take a look to see if a subset of these data could be used to help me make investment decisions.

I specifically looked at the relationship between the new buy signals vs. the new short sell signals that my algorithms generate on a weekly basis. I track these data on a chart that I call the Turner Bull/Bear Oscillator.

The Oscillator shows the number of new buy signals (the green line) compared to the number of new short sell signals (the red line). The S&P 500 ETF (SPY) is overlaid in the background in gray.
For most of the past 3 years, the new buy signals have been tracking above the new short sell signals and the market has been strongly bullish. However, when the number of new short sell signals moves higher than the number of new buy signals, that’s historically been a time that there’s an increased likelihood of a market selloff.

Here’s my Turner Bull/Bear Oscillator from the last week in September. The red line had just nudged above the green line. I used this signal to move my stop prices higher than I normally would because of this warning.


It turned out to be a good move. I pushed the stops higher on several stocks that had performed well and realized nice gains when the stocks stopped out (you do use stops on all your positions, don’t you?).

Which direction will the market take from here? Will it continue moving lower or turn back higher? I don’t know and nobody else knows either. But I’ll continue to read the data and the signals that are generated and invest accordingly.

The MoneyShow Dallas was a resounding success. I met many current clients and even more new people who are ready to take advantage of Market-Directional Investing. There aren’t any more events I’ll be attending this year, but we’ve already started planning for 2019.

The MoneyShow Orlando is in February and I’ll be playing a big role in helping investors who are not yet my clients, to get back on track after this latest downward move. My existing clients are already on track and looking forward to the next move in the market… bull or bear.

The Orlando Money Show – February 7-10, 2019.

Stop guessing and start measuring.

If you’re interested in learning more about how I manage money using the Market-Directional Investing methodology, you can read more here.

Mike Turner: how to measure a market, in a short video.

Recorded: MoneyShow San Francisco, August 24, 2018.

Duration: 4:22.

Mike Turner: Rule 1 of Investing, his new book in a short video.

Recorded: MoneyShow San Francisco, August 24, 2018.

Duration: 3:42.

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