My Trading Licks

The legendary Paul Tudor Jones once referred to the 200 day moving average as his way to “keep from losing everything.” When prices move below the 200 day, you just get out, plain and simple.

And with those words began a generation of traders defensively staying above that “line in the sand”, without realizing that the greatest buying opportunities in history were those that were born beneath it.

Another one of those opportunities may already be in progress as TVO, our volume oscillator, recently reversed towards positive values. Once again it looks like TVO knows bottoms, and our members were able to take advantage of the signal to go long near the recent S&P 500 lows… And with just one trade, we’re now on track to make back most of our losses from 2018.

While this sounds hard to believe, this has happened before, most notably in ’09 and as recent as 2014, when our SPY options gained over +600% in just a few weeks after a sharp correction, that most thought was the start of a new bear market (sound familiar?).

But there are folks out there who are still downright convinced that our system only works in bull markets. Well, if you’re ever lucky enough to find such a system (or if you happen to be the next Tudor Jones), then making a fortune should be as simple as just getting out (or shorting) when the next bear arrives, right?

Well, as the shorts (and the bulls that are still in cash) are now realizing, things are not that simple. And the big question is how do you know when it’s really a bear market (aside from the textbook -20% definition)? On Christmas Eve it sure felt like one, but now, not so much.

In a few weeks when we’re back at all time highs, the “bear market of December 2018” will be a distant memory (just like those deep corrections in 2011 and 2015). The only difference between then and now, all depends on your state of mind. When it comes down to it, whether you’re a bull or bear, there’s plenty of money to be made (and lost) on both sides of the 200 day line, plain and simple. -MD

Sentiment: SKITTISH – Market distribution is heavy and aggressive and big institutions are selling to preserve their capital.

Volume: -2% – Today’s volume was lower than the previous session.

Real Feel: FRIGID – Bulls were in control of the session with a fair amount of selling under the surface.

Cycle: X-OVERBOUGHT – Retail investors have bitten off way more than they can chew.

Portfolio: HOLD – The market is in a period of indecisiveness and the best place is on the sidelines.

Next Day Move: SIDEWAYS DOWN - The probability that SPY will close positive in the next session is 53%.

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The indicator descriptions in the above graphic represent general market sentiment. The actual TVO System signals and trades are listed below in the Members Area. To view, please Login. Not a Member? Join us.