What Does History Tell Us About Weak Profiles Near The 200-day?

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WEAK PROFILES CAN LEAD TO SIDEWAYS MOVEMENT

While it would have been easy to say “we are going to be left behind” as the S&P 500 rallied sharply off the initial plunge low in 2015 and made it all the way back to 2100, the market was still trying to clear 2100 in July of the following year. When the market was in a position to put together a more stable and sustainable rally (left side below), the TS score was sitting at 100, which is quite a bit more attractive from a risk-reward perspective relative to the TS score of 17 after the first push above the 200-day in 2015.

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FAVORABLE RISK-REWARD SETUPS VS. UNFAVORABLE SETUPS

TS scores cannot predict the future; they simply help us assess the odds of good things happening on a longer-term basis relative to the odds of bad things happening on a longer-term basis. Does the 2019 TS score look more like the “take a measured approach” scores of 9 and 17 that were present before rallies failed in 2011 and 2015 or does the present score look more like the “this is a much more attractive risk/reward profile” scores of 82 and 100 that were present before satisfying and sustained moves higher in the stock market? The S&P 500’s TS score during the trading session on Monday, February 11, 2019, was 7, which is much more in line with the “take a measured approach” scores.

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UPDATING SIMILAR HISTORICAL SETUPS

This week’s stock market video updates recent historical cases covered in previous videos. The video opens with a review of some of the most significant corrections and bear markets, allowing us to better understand what is in the realm of possibility over the next twenty years.

SPEAKS TO NEXT FEW MONTHS RATHER THAN NEXT FEW DAYS/WEEKS

Q: With a TS score of 7, is it possible the market continues to rally sharply and confidently moves above the 200-day moving average?

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Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit ...

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