Uncle Sam has a Dirty Secret: The System Addict

"Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you do, you are dead." PTJ

Election years are bullish and we need to look at our inter market relationships to time our entries.

The election cycle can tell us to keep our eyes open for the market to move up or down. The magnitude of a move can also be quantified using seasonality.

We can also look at historical moves.

Jeffrey Hirsh made this chart and said. “This updated S&P 500 Election Year Seasonal Pattern chart underscores the market’s tendency to be weaker in April and May after big Q1 gains in election years 1956, 1964, 1972, 1976, 1988, 1996, 2012.”

What I thought was interesting was the fact that we did not see the same September and October draw down that we usually see.

What about 2020? The market exploded higher at the end of the year even though the market was down in Q1 2020.

What did the inter market analysis say at that time?

Bitcoin was one of the first signals that we got that we could see liquidity flowing in to the market. We also got the same one in 2016.

Before the 2016 election Bitcoin was moving sideways for most of the year and then it had a band squeeze breakout in May.

In 2020 Bitcoin moved sideways and then had a band squeeze break out signal in July.

This is significant, because both of these break outs happened before the election. During periods where the market was chopping around. Then they pulled back and moved higher in October through the election.

These signals told us what was coming.

Take a look at what happened in October before each election. Bitcoin moved higher. While the market was riddled with fear, bitcoin was saying that somewhere in the world we had a risk on apatite and they were hungry for stocks.

As bitcoin is moving sideways in one of the longest consolidation periods in it’s history, I would watch for an October breakout for two reasons.

1. To take advantage of as a trader.

2. To see what direction we are headed.

If Bitcoin moves higher the market will follow.

Two more charts to watch…

The nasdaq 100 vs. small caps.

Here is an interesting point. The high before the 2020 election happened in the summer of 2020. In August. This years high was in July. Two summer reversals in the election season. We are also in the right part of the cycle for small caps to outperform.

Continue to watch this ratio to figure out where you should be positioned.

Link to live chart for you to add to your watchlist.

Another way to figure out if this market is going to turn over is looking at the NYAD line.

The bull/bear indicator is bullish. The AD line is bullish. Stay long until it changes.

Link to live chart for you to add to your watchlist.

Tomorrow I will update the portfolios for everyone. Both portfolios are at new equity highs. Futures over 40% now and the retirement portfolio is over 20%.

Below I will update our systems, signals and our reversal models. The reversal model has been on fire.

That portfolio has only been live for one month and we are up 16% in that portfolio.

SYSTEM ADDICT