Starting on TBD 2011, my comments and research will be available to paid subscribers only. (See details of sign up below). Those readers who have followed my commentary for a few months, should have an idea of what to expect. I rely on over 10,000 lines of self written pattern recognition code which I have been developing for 20 years, which examines the market from 22 different angles. I also have the separate “Planes, Trains, and Automobiles” models which provide me with tape measure studies from seven additional angles as well. All my data analysis is now run on the equity only S&P 500 Index and rarely a day passes, that I don’t do additional special studies to support the existing models preliminary scans. My primary profession is one of trading the S&P indexes and options on the indexes and that is my primary research focus, so you will get a trader’s perspective. On day’s which I perceive developments I feel other trader’s/investors would be interested in, you will receive email from me outlining my observations in the manner in which you are accustomed. If conditions warrant, I will send before the market Close. I have many additional research ideas in mind which I expect to draw from in the future as well.
I do realistically expect to lose 90% of my current readers and I treasure the opportunity I have had to get to know many of you. For those new readers who have recently began following my commentary, some of my more notable work is posted at witterlester.com and here is a sample of some of my more notable commentary over the last year.
Commentary Samples
Jan 01, 2010 – Wayne’s Market Outlook for 2010 (with SP = 1151.10)
“The bullish sentiment numbers suggest a shakeup is in order. We should get a double digit correction at some time in the first six months of 2010. This selloff will likely come at an unconventional moment, possibly earlier than many markettimer’s expect. Given that the Bear Market of 08-09 is still fresh on investor’s minds, this correction should lead to a swift conversion in sentiment, shake out the weak hands, and lay the foundation for another push up in the major indexes. I am of the opinion, that equities will have a normal market year in 2010, with 3-4 down months mixed in, but a positive net conclusion, likely of the double digit magnitude. “
(Note: SP was down 8.1% Jan19-Feb3, but finished the year up 12.8%)
June 02, 2010 – Confusion Index Finds No Bear Market Around the Corner (SP=1098.38)
“It (the Confusion Index) has an excellent record of calling Bear Markets and it would be very unusual – actually unprecedented – to go into a Bear Market without a +1.0% reading at some point in the six months prior the downturn. “
July 26, 2010 – Nine to One Volume Days followed by Two Positive Price Days (SP = 1115.01)
We had a Nine to One Volume day on Thursday (July 22). Normally after a 9/1 day there is the tendency for the market to consolidate gains. To do otherwise is a sign of additional strength. The SP was up 0.82% on Friday (July 21) and was up 1.12% today (July 26). There have been 106 Nine/One Volume days since 1970. Only 20 times were they followed by two consecutive days where the S&P was up at least 0.25% on both days. Note in the table below, the S&P was 18-1 one year later with a marginal 0.43% loss on the 861124 signal and the 20th signal still in play
Aug 12, 2010 – Wayne’s Take on the Hindenburg Signal (SP = 1083.61)
“I am always leery of stating that this time is different, but I don’t see the Hindenburg Omen Signal in play using any index of equity only issues, which is not to say that the market can’t go lower for other reasons”.
Sept 26, 2010 – When September Doth Soar, You Are Promised Much More (SP = 1124.83)
When the market goes against the seasonal trend, you are usually well advised to grab onto the coattails of the market. There may not be a better example of the merit of this trading philosophy than when the market ignores September’s traditional weakness. Since 1950, September is the only month of the calendar year that has been down more times than not, negative in 34 out of those 60 years. When the market exhibits enough intrinsic strength to overcome the traditional early Autumnal headwinds, it bodes well for equities at the end of the year when the market normally has a seasonal breeze cushioning its backside. And as we will examine momentarily, the stronger the defiance of September’s traditional weakness, the more robust is the market’s gallop into the yearend, especially in the middle election year of the four year election cycle.
Oct 26, 2011 - Revisiting the Last Spinal Tap Signal (SP = 1185.64)
Much has been written through the last 3 decades on the statistical significance of a rare trading day where Up Volume leads Down Volume by a 9/1 ratio. I couldn’t help but ponder this morning whether the quantitative community relialized in those first few days of September what the market was trying to tell us as we had two consecutive days where this occurred on the S&P 500 Index. Consecutive 9/1 days are rare and puts the signal on the elite list.
UDT=100*UPVOL/(UPVOL+DNVOL), a 90 equates to the commonly referred to 9/1 ratio.
The results speak for themselves, 15-0 after six months for an avg 15% return. In this latest case, we got a third 9/1 day on the third day, September 3. I found only one other UDT3 > 90 on August 3, 1984. These type thrust measures are the reasons we post 8.75% months in what is normally the worse calendar month (Sept) of the year and go eight straight weeks without a 2% correction.
Dec 03, 2010 – Three Strong Intermediate Tape Signals this Week (SP = 1224.71)
Over the last three days, my models have identified three different Bullish Intermediate Tape Signals. A summary of this week’ highlights are provided below.
1. A Bullish Sequence of Lopsided Volume Days 25-2 over the next 12 months
2. A Two Day Volume Burst, UDT2=91.71, 19-1 six months later
3. A Three Day Breadth Thrust, ADT3 = 82.78, 21-1 six months later
February 09, 2011 – A Corn Seasonal (Corn up 3.6% the following day)
Below is my model’s scan of Corn on this day each February and I have Corn nonnegative 23 years in a row on the best match to tomorrow’s Date.
March 01, 2011 – Jan-Feb Barometer (SP = 1306.33)
The outlook on the intermediate front is still positive. February followed January’s 2.26% gain with a 3.20% showing. Since 1950, there have been 23 years where both January and February posted positive gains. The remaining 10 months of the year were positive in 22 of those 23 years. In the one failure in 1987, the S&P rallied an additional 18.5% before succumbing to double digit interest rates in September-October.
March 21, 2011 – An Important Three Day Breadth Thrust Signal (SP = 1298.38)
Today’s ADT3=100*SUMADV/(SUMADV+SUMDEC) = 82.396
The table below shows all ADT3s of 81.319 to 82.395 since 1970. I have occasionally received stronger signals in the past, but it is extremely rare to get a scan that is 20-0 in forward S&P performance at both the three and six month time intervals. The one 12 month loss was a fractional 0.43%.
July 06,2011 – The Pre 4th Volume Thrust (SP= 1339.22)
We noted over the weekend that last week’s S&P Breadth numbers (ADT5) were the strongest since Casey Stengel and the ‘Amazing Mets’. Those same weekend comments also referenced a special circumstance Volume study (Double Barreled Lopsided Volume Thrust) which documented the market’s past performance after a rare sequence (10 10 90 90) of Lopsided Volume days. This pattern availed itself last Friday, and when spotted in a positive intermediate price trend, is what my Computer Scan considers the strongest four point pattern (20-1) of Lopsided Volume Days. In case you missed it or desire a second look, that study is now posted at witterlester.com.
Wayne Whaley Bio
I received a graduate degree in Operations Research from the Georgia Institute of Technology in 1981 with heavy emphasis in statistics, the study of probabilistic models, forecasting, simulations and time series analysis. I then spent 1981 to 1993 working in the defense industry in Huntsville, Al. I have been actively modeling the stock market since 1986 and have been trading S&P indexes and options since 1988, professionally as a registered Commodity Trading Advisor (CTA) since 1994. I made an official career change in 1993 and joined Witter & Lester, who has been a registered CTA since 1989. In May of 2010, I was the recipient of the Charles Dow Award from the Market Technicians Association for a research paper I penned, titled “Planes, Trains & Automobiles”, a survey of Momentum Thrust Signals. It is listed on our website, witterlester.com along with several other papers I have written in the last year. A description of our two S&P futures trading programs is included on the site as well. Our Stock Index Program has been in existence since 1989 and has had seven straight profitable years 2004-2010. The Redstone Program, which is an options trading program has made money in 9 of the last 10 years with 2008 the exception (down 4.8%). Wayne currently has over 1000 subscribers who receive his free daily market commentary.