Timing Pundit Market Timing Signals

Signal names have changed. The Long Term signal is now the Secular signal. The Alpha signal is being retired. It stopped working well since about 2021. It is being replaced by the Hybrid signal which is a combo of the Secular and some parts of the Alpha signal.

Signal Explanation

The Secular signal is not a trend following system. There are no moving averages or pattern recognition. It monitors the correlation between NDX and VXN which is the NASDAQ volatility index. And it monitors market breadth as measured by the percent of NASDAQ Comp stocks above their 200 day moving average. VXN is calculated from option data, not price volatility. Normally NDX and VXN go in opposite directions. They are negatively correlated. As major market tops form, the correlation usually turns positive. VXN starts rising as NDX goes higher and higher. Fund managers are buying Puts for portfolio protection for one thing.

If the positive correlation gets high enough and market breadth is in the right range, a sell signal is issued. There have only been 7 signals since 2006. One of those was 10/31/2007, the exact market top before the Great Financial Crisis. Another one was 11/17/21, 3 days before the market top before the 2022 bear market. Both signals stayed out until after the bottom was in. The other 5 signals were short false starts which were still profitable. The Hybrid signal generated 54 sell signals in the same time frame with a 60% win rate. the Long Term signal had a 93% win rate.

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