2021 Market Outlook
By: Blake Urban
Tags: Trading, Outlook, 2021, Investing, Stock Market

Photo by eberhard grossgasteiger from Pexels

2021 Market Outlook

It has been a long time since I did a market update or a blog at all. I am hoping to increase the frequency of my posts in 2021, I will have an announcement regarding that at the end of this post.

As for the market, 2020 was a wild one. 2021 is set up to continue to be wild. 2020 was a year of record extremes, both bullish and bearish. I am not going to get into that, you all lived it and probably saw a lot of the extremes first hand. My view going into 2021 is that I still maintain my Long Term Bullish view, but I do think volatility will continue to be VERY prevalent and I do think without a sentiment and positioning reset very soon we are setting up for a very ugly and sharp correction at some point. I lean towards a correction setting up near January OPEX, if it does not occur and we continue to FOMO higher, I think we may set up for another very sharp 1–2 day move lower as we saw in June and September. I thought I would break this article down into the Bearish, Neutral, and Bullish points. I think the weight of the evidence points to higher prices long term until Sentiment and Positioning gets to similar extremes as we saw in late 2017 early 2018(quite possibly even higher), which I view as the most stretched positioning ever. We get to that point I think we see a few years of sideways and high volatility, with possibly a deep correction as well. Until then, I do think the party will continue, but I think the overly aggressive Call buyers continue to find it harder and harder to make returns with the over-leveraged aggressive style they have been using.

Bearish Metrics

First, let’s get into the Bearish data points. They are certainly present and building. Macro/Fundamentals are not my bread and butter, I prefer other metrics, but we need to touch on them here. We’ll look at Valuations. It is hard to twist Valuations into a Bullish view, they are definitely more Bearish than Bullish. However, I am going to make a few counterpoints to the common ways to view Valuations. One way that people view valuations that I strongly disagree with is the Market Cap to US GDP ratio. People love to show this because it “looks” the most Bearish:

source: longtermtrends.net

The argument against this is, corporations derive a lot more income internationally than they used to. However, I tried to find quantifiable proof of this idea, and could not find recent data. I do know that from this 2018 report: 2018SPGlobal Report those percentages have been going down in recent years, and 2020 was a 10 year low according to this report: SPGlobal2020. So it’s possible this chart might actually have some merit, and I am wrong to diminish it. I would like to see a long term chart of the percentage and how it has changed over time to see how well this metric holds up. I have not been able to find it, if someone does I am willing to change my view that this metric is “inaccurate”. For now, this is not my preferred way to view valuations. Market Cap to US GDP combined with the current percentage that SPX companies derive from foreign GDP would be much more accurate.

Moving on, still on the valuations subject. Perhaps the best valuation model I have seen is the one from Peter K Reilly. I stumbled across this model late last year I believe, and have followed it closely since then. I believe it is the best model out there for valuations. Most of the value models I have seen out there are consistently wrong and do not work well for timing the market. Valuations are consistently difficult to use for market timing. However, Peter’s model calculates fair value and does not shift to an outright bearish market view if fair value is increasing. This is an important distinction. It will take mean reversion trades short if SPX price gets extended from fair value, which we very much are right now. According to Peter’s latest post, SPX fair value is currently way down at 2550. This falls very much in the concerning category.

Continuing with valuations, one thing I have always found interesting is this chart:

The blue line is the S&P 500 PE ratio, Green is of course SPX price. Notice how high PE ratios have been a buy signal since 2000? Odd for sure, and QE is likely a big reason. But, anytime you go through an economic downturn it does have a big effect on PE ratios. If the economy can get turned back on soon, this data point will improve.

One further item to note regarding valuations, I recently published an indicator on Tradingview called “Fair P/E”:

What this looks at is PE in relation to Bond Yields, the 10-year Yield in this case. Some argue that low-interest rates make higher valuations more sustainable. I am not going to claim expert status in this area, but I find it a compelling argument. Currently, we are a bit extended for fair value according to this metric but nothing like some other historical extremes.

This chart shows that “fair” PE ratios have been in uptrends basically forever because well interest rates have been in downtrends basically forever.

I got the idea for this indicator from https://www.suredividend.com/interest-rates-valuation/ and my indicator can be found here: https://www.tradingview.com/script/JGR9rbIY-FAIR-P-E-BASED-ON-INTEREST-RATES/. All my other tradingview scripts are here(all free): https://www.tradingview.com/u/bigurb/

I think we have beat the valuation metric to death, we have a LOT more to cover so let’s get to it. Continuing with the bearish metrics. There are some extremes we have not seen since the 90’s. I don’t believe this period is an exact repeat of the 90’s bust, but there are some similarities that are worth considering. One, the number of IPO’s is scary right now. This chart is from Sentimentrader and is hard to view in a bullish manner:

credit: sentimentrader.com

The number of IPOs in one year, according to this chart is the highest this century:

Similarly, the number of secondary offerings is…high:

credit: sentimentrader.com

SPACs…I very rarely say anything HAS to end badly, but I do think this one has a high probability of ending badly. One thing I will say that is somewhat “different” this time versus the 90’s is the leaders are real companies with massive growth characteristics, and gigantic “moats”(a nice way of saying monopolies). In the 90’s the leadership stocks were very similar to these SPACs, just a lot of speculation on ideas that are going to be hard to deliver. These SPACs could be like every other mini-bubble that has developed on a sector level many times over the years. Every year there is a sector, sometimes several sectors in a bubble. 3D printing, crypto, pot stocks, EV, solar, etc. Sometimes you get repeat bull runs in these sectors, but usually, after a huge bear market lasting several years. I think that is what we are seeing with these SPACs here. This does not mean the ENTIRE market is necessarily in a bubble and HAS to end badly. It certainly could mean that, but it does not have to.

The next Bearish data point is some positioning/sentiment metrics are extreme. Some of these are more short term in nature, and some of them have not worked great as contrarian indicators when you actually test them empirically. However, it can’t be argued the bullish options speculation is at levels never seen before. Yes technically in the 90’s options speculation was higher, but overall volumes were lower and notional values much lower.

Sentimentrader has a metric called the Options Speculation Index, which IMO is superior to just pure Put/Call ratios:

credit: Sentimentrader.com

It’s been high most of the year, sans March. And it hasn’t mattered for the most part. What this index does is use data from TheOCC: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics which breaks down notional values of Calls bought to Open, Sold to Open, Sold to Close, etc. This is a more comprehensive view of the Options market than pure P/C ratios. However, it still lacks quite a bit in predictive power. It is a great concept, and I do have a lot of ideas on how to improve upon this idea. I have some backtests of this metric that I will be releasing in a book that I hope to have finished in early 2021, more details of that will be found in the announcements at the bottom of this post.

GEX is a metric that I have been able to build into a directional model that actually has better predictive power than the Options Speculation Index. It is not without its flaws, but it is a step up. Some details of how I did this will also be in my book. That being said, GEX recently hit a record high again:

credit: Squeezemetrics.com

This has been a warning signal in the past, this time so far we have escaped without any pain. I do think we see several more record highs on this metric. One thing that is drastically affecting these options metrics is the increase in short-dated call volumes. I have seen a lot of evidence that a lot of this Call activity is not being held long term. This has a huge effect not only on the standard P/C ratios but most other Options metrics. I did a study of Options OI compared to PC ratios, and it does seem that there is decent evidence a lot of these Calls are not being held: https://twitter.com/bigurbman/status/1332359579351605252?s=20

So I think there is some skew that might need to be accounted for in this data. However, I really can’t put this data in the Bullish category, but I do think it is often overcited as a predictor of massive impending doom. When you actually run tests on this data, you find it doesn’t often mean doom. It can, but often times it doesn’t.

Short interest is another metric I have seen cited as mega bearish. I have mixed emotions on this, and I debated not putting it in the bearish category. As always, the most “bearish” looking charts get the most shares. This one is very popular right now:

The problem I have with it is how “zoomed in” the Y-axis is for one. What is the difference between 2.25% and 1.75%? Not a huge amount. But, on this chart, it looks like a massive difference. But, yes it is not necessarily bullish here. However, don’t just take everything you see at face value, question everything. If you do that, you may notice that the story is a bit more complex: Here is Sentimentrader’s NYSE Short Interest report:

credit: Sentimentrader.com

It hasn’t been updated since March, but you can get the updated data from here: https://www.nyse.com/markets/reports

If you look at that report, NYSE Short interest is 13.8 million. That would put this chart somewhere around this level:

credit: Sentimentrader.com

Still low, but not quite as scary as the other chart. Yes, if you put this versus Market Cap like the first chart, it would probably be low. But, I don’t know if that is necessarily the best way to normalize this data. Sentimentrader normalized this by comparing it to the average daily SPX volume, the commonly called “Days to Cover” or Short Interest Ratio. This is an interesting view:

credit: Sentimentrader.com

It’s definitely low but has been much lower historically. And the last time it was very low, well it wasn’t all that bearish. How about Nasdaq Short Interest:

credit: Sentimentrader.com

The story is not quite the same. Has not been updated since September, but that is recent enough to suggest it probably is still relatively high here, especially after the volatility we had since then.

The Nasdaq Short Interest Ratio is similar to NYSE(volumes have been much higher this year if that normalizes the number will go up, this uses one-year average volume so mid-2021 this will improve most likely):

credit: Sentimentrader.com

Another clear Bearish metric right now is the Sentimentrader Dumb Money/Smart Money indicator. This is essentially a black box aggregated sentiment and positioning gauge. Dumb money is printing record high levels:

credit: Sentimentrader.com

Above the red threshold is not inherently bearish, but does mean forward returns tend to be anemic:

credit: Sentimentrader.com

In order for the market to get to the levels, I think it can in the next 1–2 years, this will need to reset at some point. It tends to move fairly quickly and it would not be unprecedented for this to improve with a decent correction.

Here is another interesting metric that Sentimentrader recently shared:

credit: Sentimentrader.com

Interesting, but eye-balling the long-term chart it does seem like it has been “very bearish” many times and did not mark a major top. It is a risk and something to watch though.

That metric is similar to the SKEW Index:

credit: Sentimentrader.com

It looks really scary, but the bottom line is these levels only increase the probability of a large move, but are not all that predictive of a large move:

credit: Sentimentrader.com

It very often is a false signal, but it is worth paying attention to. A crash is never a high probability, even with SKEW high. But, most major crashes had a high SKEW reading prior to the crash.

Neutral Metrics

The next metric is the survey-based positioning is mostly at or near multi-year highs. I am not wild about survey based-positioning metrics, I prefer actual positioning metrics. That being said, AAII, FMS, NAAIM, etc. are all “high”. What’s that mean for forward returns? Well, it’s not always what you think actually. FMS for instance when it gets “extremely bullish” is actually not a contrarian indicator:

credit: Sentimentrader.com

Also, Sentimentrader has a metric called the AIM Model. This aggregates many of the survey-based positioning metrics, into one model:

credit: Sentimentrader.com

Bearish right? Not really:

credit: Sentimentrader.com

It’s not as bullish as when people are answering with a massively bearish view, but it’s not bearish per se. I could easily have stuck this in the bullish category as far as that goes. But, it’s hard to. I’ll leave it in the neutral category, but I actually think this data leans slightly bullish. It takes a long period of these surveys at extremes before we sometimes see issues. We are not there yet.

The next metric I also view to be neutral but moving toward being bearish. That is cash levels. One way to look at this is Mutual Fund Cash Levels:

credit: Sentimentrader.com

However, the mutual fund industry has been massively disrupted by index funds. The vast majority of them underperform the indexes, so they have been steadily moving to being in equities a lot more and try to time the market less. Also, they simply are a smaller part of the market now with the proliferation of indexing. At face value it looks massively bearish, I don’t view it that way. Hard to call it bullish either.

AAII respondents still have a decent amount of cash compared to the average of the last 10 years:

credit: Sentimentrader.com

Not bearish IMO, but not wildly bullishly like it has been much of the year.

NYSE and NASDAQ both have reports, called “Free Credits”, and “Margin Debt”. When you look at these it’s a mixed picture. NYSE Free Credits:

credit: Sentimentrader.com

This is really just the amount of cash available in margin and cash accounts. Not a chart you see a lot because it is hard to twist this one too bearish.

However, when you look at Margin Debt, it is not as healthy:

credit: Sentimentrader.com

But if we look at the “normalized” view, it is not as scary:

credit: Sentimentrader.com

And of course, Sentimentrader has combined these two. The result is this:

credit: Sentimentrader.com

Looks scary, but unfortunately, there is no normalized version of this. As a percentage of market cap, this wouldn’t be that scary.

Here are the same three charts for Nasdaq:

credit: Sentimentrader.com

credit: Sentimentrader.com

credit: Sentimentrader.com

Doesn’t look nearly as bearish as the FinTwit masses are saying in regards to cash levels. I don’t buy the argument that everyone is “all-in”. But, DYOR, and be skeptical of everything, including what I say.

VIX, VVIX, and SPX correlations are another metric that is worth watching. We recently lost the positive correlation, which is a good sign, but positive correlations for an extended period of time add to downside risks substantially.

Another metric that I have slid into Neutral territory, for now, is insider selling ratios. It’s moving towards the bearish camp slowly, but it has more room to go. This is not as reliable for tops as many people think(works great for bottoms though), but we do often see it at extremes for extended periods of time before a major top:

credit: Sentimentrader.com

credit: Sentimentrader.com

Bullish Metrics

How could there possibly be a bullish argument? Well, I still see plenty. First and foremost, we have to start with the FED. I know some don’t like that, but the reality is if you do not factor in the FED, stimulus, and QE you will likely find yourself browsing ZeroHedge every day wondering why the crash still has not happened. QE has distorted markets, there is no way around that. I am not saying it is good, or that I agree with it. But, it is a factor and there is nothing I can say or do that will change that fact. We have to adapt to it, not fight it.

This year’s QE was massive, the biggest we have ever seen. I think I saw that it is actually bigger than ALL of the other QE programs COMBINED. I can’t find where I saw that, but I think just looking at this chart it seems very likely:

credit: Sentimentrader.com

It’s fairly easy to see the relationship between SPX returns and QE programs:

credit: Sentimentrader.com

It’s not perfect and there are of course times that SPX has been able to rise without QE and times it has gone down with QE. There is a myriad of studies that have been done, proving a strong correlation between the Balance Sheet and forward SPX returns. It’s not a metric that should be ignored. Recently it has started to climb again.

Something else I track regarding FED activity is the SOMA balance. This is, the way I understand, basically an emergency fund for the FED. It is a very liquid source of funds that can be tapped into if needed. Suffice it to say, that is at a VERY high level here: https://www.newyorkfed.org/markets/soma-holdings

For understanding why I also track SOMA and not just the Total Balance Sheet that most track, watch the podcasts that Barton Options has been on before, like the Market Huddle here:

This is a deep dive on the FED from Barton that I think is a must-watch.

One final chart in regards to FED and stimulus, M2 Money Supply:

Fed is bullish, and they look to be a long way from easing. They will eventually ease and the markets will most likely struggle when they do. My best guess is we see over 4000 on SPX before that happens, possibly mid 4000’s. Then I think we see another 2015–16 repeat, but I think it has potentially be “bigger” in terms of downside, at least initially. This is all projecting WAY into the future and is very hard to do, but this is my best “guess” at the moment.

The next bullish metric is COT. For COT, I track it a bit differently than most do. I like to watch the Dealers in the TIFF reports. Through backtesting, I have found them to be the most reliable. I got the idea originally from Freecotdata.com. He separates the Dealer category from all other categories. Dealers are still far from scary levels here:

credit: freecotdatacom

credit: freecotdata.com

I like to aggregate the COT Dealers from all Equity Indexes into one chart. The result of that is this:

Here is a Tweet I made in October, explaining in simple terms that this is bullish:

COT Dealers aggregated is one of the more reliable metrics I have found. DIX is another, and I will get to DIX shortly. Backtests of COT Dealers will also be in my book.

DIX, as I showed above, printed some record high prints after the March crash. These strong clusters of DIX prints have had a tendency to create multi-year bull runs. Especially when you combine it with QE and COT Dealers also printing very high levels at the same time. So that is a long term bullish view of DIX, but shorter-term DIX did have a big “cooling off” period the last few months. Probably no coincidence that the FED balance sheet also cooled off some during this time. Recently, DIX has strengthened considerably. Now in very recent history TSLA being added to DIX has distorted it significantly. Still, even prior to TSLA’s addition DIX was getting pretty healthy, with a 47.3 print on the 11th of December, prior to TSLA being added. It’s hard to argue with the consistency of this indicator.

FANGMAN+T DIX is strong here as well:

Another bullish metric is, this one: https://www.frbsf.org/economic-research/indicators-data/daily-news-sentiment-index/

The Daily News Sentiment Index. It has actually been pretty reliable at getting extreme near major tops. Still has a long way to go.

We have some good, reliable, broad reports available for derivatives positioning, but for equity positioning, we have to dig a bit. I have already shared the Cash and Margin reports from NYSE and NASDAQ. But, occasionally I run across this chart:

It still has a long way to run in my view.

What about Social Sentiment indicators? Well, there are a lot of different ones out there, but many of them are really small sample sizes so I have a hard time trusting them. For example, CME has this one here:

It’s usually near the bottom of that page. However, one issue I have with it is if you look at the bottom of the page, the # of tweets it references is usually pretty small. I wonder if it is just trading people that use certain hashtags, like #ES_F. If so the sample size will be small. That being said, Barnabe on Twitter(great follow) ran some tests on it:

It does seem to have some value. Also, check out the work he linked in that post from MarketStream. Looks really promising.

That being said, I also recently stumbled across this post from themarketear.com:

I don’t share the view that Twitter is the only one left bearish, and I think I have shared a lot of evidence in that regard already, with more to come. But, I do think this chart reflects the anecdotal evidence I have seen on Twitter… People have fought this rally for the vast majority of the time since April. I flipped when I saw DIX and COT… do what they do at major lows. Follow the data not opinions. I don’t go to Twitter to see anyone’s view on the markets, you shouldn’t either. I go to Twitter to see new ways to analyze markets, that’s it. And for that, it is an absolute gold mine. There are so many good follows out there sharing massive amounts of great information. I may not agree with their market views, but if the metrics they track could be something I can use, I jump on it. Look at the positives, not the negatives. At some point, I definitely need to update my very old post of the best follows.

Next up, is one of my favorite aggregate bull/bear indicators out there. There are several, Citi Panic Euphoria, CNN Fear and Greed, etc. The best one from some testing I have done is the BofA bull/bear indicator.

credit: themarketear.com

Yes, it is high, but it is still lower than it was in January 2020, and much lower than January 2018. IMO, with the massive money printing operation the FED went on this year, this may get to a higher level than it was then before we have a major top. I think the ride to that level will be bumpy due to the implications of record GEX levels being hit many times along the way, but I lean towards this needing to go much higher before a major top.

Another is this aggregate positioning gauge. If you don’t want to be crazy like me and manually track all of this data, you can find this post every few weeks:

Yes, it is beginning to get elevated here. But, it has plenty more to run. As TME said, VIX has yet to come in. Often times it takes months of VIX pegged near a multi-year low to get a major top to form. There are bears out there somewhere still, and it shows in IV staying bid.

Next up, is price action. And well, this will be the simplest of everything in this post. Price action is still bullish, really no way to analyze it that shows it in a different light. Price action analysis is subjective, but there are ways to quantify it. When doing so, it is really hard to view it as bearish here.

Sentimentrader has done several studies in the last few months on Breadth and Momentum. I will get to Breadth next, suffice it to say it is also bullish long term here. But, check out the posts from Sentimentrader on what happens with a market with this strong of momentum and breadth(hint: it’s bullish long term). Also, Troy Bombardia has started blogging on bullmarkets.co again. There are several momentum and breadth studies in his recent posts you can take a look at.

Next up is breadth. And yes, it is bullish here. To some extent you could make an argument it is too bullish. Once breadth gets this good it really can do nothing but weaken. Sure it can stay strong like this for a while, but eventually, it will slow down. Yes, there is such a thing as breadth being too strong, you test it yourself and find out. However TOO STRONG breadth usually just results in short term weakness, but long term bullishness.

Couple the recent breadth strength with the breadth thrusts we saw earlier this year, and breadth is just bullish long term here. Hard to argue that it isn’t. Doesn’t guarantee anything of course, just says something about probabilities.

Here is the 20 period moving average of AVRT, the Total Advance-Decline Volume ratio. It makes it very clear to see the Breadth thrust off the lows(and past ones), and the current elevated Breadth levels still.

Another of my favorite metrics that is also aligned bullishly here is the “Hedge Fund Exposure” Indicator from Sentimentrader. Now the calculation of this is black box and comes from Hedge Fund Research, Inc. But, I have found it to be much more useful than the very popular “Hedge Funds are RECORD LONG!!!” chart that has been mass circulating. I think there are some problems with that chart, but I won’t get into that here. Here is the Sentimentrader Hedge Fund Exposure chart:

credit: Sentimentrader.com

Next up is Equity Fund Flows:

credit: Sentimentrader.com

All the talk recently about this chart has been the record inflows we saw a few weeks ago, for a single week. Yet, few are mentioning the MASSIVE outflows we have seen most of the year. Now, this is looking at ETF and Mutual Fund flows, it does not include index funds. And we know that people are moving to indexes over managed money solutions, so the base flow should be outflow most weeks. But, the outflows this year have been extreme. This is bullish until we see several weeks or even months of heavy inflows, IMO.

The Great Rotation Trade

There has been a lot of talk of the rotation from Growth to Value, from large caps to small caps. Mid Summer I made several Twitter posts, with data to back up the idea, that we might be on the verge of a rotation out of tech/large caps and into small/mid-caps. We definitely saw that rotation. However, now I do think I am seeing enough evidence that we may see that rotation pause for a bit, and maybe see a bit of a counter-rotation. As always, the exact timing is very difficult. For whatever reason, I have always found the timing of spread trades to be very difficult. Timing, in general, is the hardest part of trading in my view.

Here is one piece of evidence. I am not going to go through every single bit of evidence I am tracking on this, but this I think sums it up fairly well:

If you start to look at component DIX prints within the two sectors you see some similar things. Also, if you look at the characteristics of Russell momentum, it does not follow a similar protocol to SPX or Nasdaq momentum. The backtests of the current momentum/price-action for Russell are starting to show some signs of a pause coming.

The bigger question I think for this trade, and for trades like the Emerging Markets trade as well, is will it continue long term. As always, I don’t know for sure, but I do think we can continue to see this outperformance for another 6 months to 1 year on RTY and EEM. I think there will be some pauses along the way, but we may see this continue. People forget because it has been so long since it has happened, but Russell and Emerging Markets have both have periods lasting sometimes years where they outperformed SPX.

Emerging Markets it really comes down to the USD, IMO. I think small caps also in many ways benefit from a weaker dollar, but the correlation is not as strong as for EEM:

The inverse correlation here is very strong. So the question becomes, what is the long term prognostication for the USD? Well, that is a hard question, and I find currency markets to be the most difficult to predict due to the lack of transparency in positioning data there. Dealers are heavily long the USD in the Futures market, but the Futures market is a tiny fraction of the USD positioning. In fact, USD Dealers being heavily long historically is the one market that COT data does not work like the others. More often than not, the USD does rally some when Dealers are heavily long, but long term we tend to see more USD weakness. This is a short term concern for the market as a whole here, USD is building a case for a mean reversion counter-trend rally. But, longer-term I think the bear case for USD still exists.

The one thing I have found most consistent for predicting long term USD price moves is simply taking a look at what each of the Central Banks are doing. Long term supply and demand are what moves markets, and the US FED in the last year has been by far the most aggressive money printers. This is not the only factor, on the demand side there is traditionally fairly strong demand for USD since it is the reserve currency and a lot of global debt is denominated in USD. But, I do think the supply side of the equation may need to continue to balance out to weaker USD prices for the next year, maybe two before it finally stabilizes. It takes a while for all this printing to work through the system. As I said already, currency prices are very hard to predict, but this is my best attempt.

A Brief Talk about 2020

I don’t want to make the case that 2020 was not bad, it certainly was. Personally, for me, it was good financially. But most other aspects were not good, and I can tell you if I could flip it and have a bad financial year but the other aspects be good, I would take it in a heartbeat.

I will be the first to admit, I have not always taken proper care of my “Mentals”. I think there is a long history of people neglecting this aspect of their life in modern society. It’s time we all do something about that and start being proactive instead of reactive. I am going to try to do my part in 2021.

All this being said, yes 2020 was bad. But, I will say I think one thing that helps is to not get caught up in the whole idea that of constantly thinking about that and repeating the same mantra of “2020 sucks” over and over. A lot of what drives your psychological perspective is the constant repeating of the bad things and never considering the good. People very early in the year started saying “2020 is the worst year ever!” and it stuck. Yes, here at the end of the year, I can’t give 2020 too much credit. But, look at the bright aspects to modern life. Poverty levels continue to go down over time. Death rates from most major diseases continue to go down. It’s hard to believe but global conflict is actually continuing to go down every year. Modern technology, while there are some issues, does provide many conveniences that were inconceivable in the past. I am not just talking about the internet, consider things like air conditioning, and how much different life was before that invention. Consider the modern supply chain and how much easier that makes things.

Announcements

I have a few announcements to make regarding the blog and my other project, a book I have been working on. I have for years blogged for free and not charged anyone a dime for any of my work, including my Tradingview indicators and a lot of one on one chat sessions with a lot of people over the years. I like to think I have helped a lot of people, and I have donated a massive amount of my time to help people. I feel very good about doing that, and I hope to continue to do a lot of that in the future.

That being said, I have always considered selling a small part of my knowledge base for a small fee. That is why I wrote a book. I plan to sell it for $30 on Amazon, a cost that I think is extremely fair and very reasonable. The last thing I ever would want to do is sell something unless I thought the value of it greatly exceeded the price. I feel like this book will do that. I have titled the book, Sell Signals. The reason for that is, I am primarily an SPX trader, and “Sell Signals” are very hard to come by. Now the title Sell Signals in my case is a bit misleading because I am not a big believer in getting net short SPX very often. There are rare times that I do, but I primarily focus on varying my levels on long exposure. For me, a “Sell Signal” is a place I would reduce long exposure, most of the time until we get to the point that we’re seeing an overwhelming amount of sell signals, at which point there is the potential I would get flat or even net short. The reason I do this is, I have done 1,000’s of backtests and seen 1,000’s of backtests that others have done that show the strong upwards bias of SPX. Shorting it, very often, doesn’t work. That is why I focus on the long side primarily.

So in this book, I am going to be sharing many of my best backtests and metrics for identifying increasing probabilities of market tops. Nothing is 100%, and sell signals are very difficult in this market, but I am sharing some of the best ones I have ever found. I am not going to focus much on the buy side, that part is inherently easier(nothing is easy per se in markets, but knowing when and where to buy is much easier for sure). In addition to the book, I will be limiting access to my Discord server to those that have purchased the book roughly one week from the publication of this blog post. In there I intend to provide further value, starting this weekend with a Zoom call that I plan to make a weekly thing going forward. I also will be giving away a free copy of my book to select Discord members. You can still get in the Discord for free with this link until I eventually take it down:

http://discord.gg/suRdysp

In addition to this, I plan to get back to a more active blogging schedule, but I am going to base it on engagement. For years, I have mostly blogged to a very small audience and never asked for likes or follows. Well, going forward I will be looking for milestones to be reached to commit to further scheduled postings. The first milestone I would like to reach is 1000 Medium followers. If I get that I will commit to one large post per month, updating everyone on what I am seeing in the market. Beyond that I could eventually commit to bi-weekly blog posts at certain thresholds, and even weekly posts at certain thresholds. Eventually, a weekly YouTube video could happen. Then we could work towards a weekly live stream potentially. But, let’s just work towards that 1000 Medium followers mark first, and then we can get to the rest later.

Also, I posted a while back that if anyone wanted to blog on my Medium publication, I am opening up that possibility. There are really not any trading specific publications on Medium, so offering mine as a possibility to others. Just send me a message and we can talk.

Finally, I have updated my affiliate page. An easy way to support the blog is to use these links. In some cases, you get a discount, and I get a small kickback as well. It is a win-win for all involved.

Affiliate Links:

AMAZON AFFILIATE LINK

TRADINGVIEW REFERRAL

INTERACTIVE BROKERS REFERRAL

COINBASE REFERRAL

SENTIMENTRADER REFERRAL-coming soon

That is all for now. Have a good 2021 all!