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TPA Analytics: Introducing The TPA Marketscope

By Jeffrey Marcus | July 2, 2020

Turning Point Analytics utilizes a time-tested, real-world strategy that optimizes the client’s entry and exit points and adds alpha.   TPA defines each stock as Trend or Range to identify actionable inflection points.

“In the short run, the market is a voting machine, but in the long run, it is a weighing machine.”  – Benjamin Graham

WORLD SNAPSHOT – COMMENTS & CHARTS          Thursday, July 02, 2020

General comments first and macro tables at the bottom.  Links for Explanations of Technical terms at the bottom of the report.

 

INTRODUCING THE TPA MARKETSCOPE

 

TPA MARKETSCOPE EXPLAINED

Market timing is not a complete investment strategy in and of itself, but should be utilized as a tool for successful investing.  Knowing when stocks are at extremes can present investors with opportunities and help them to avoid pitfalls.  The TPA Marketscope uses a set of carefully watched indicators to assess if the market is at or near extremes.  When the market is oversold, risk-return favors buying and not selling and when the market is overbought, risk-return favors selling and not buying.

TPA MARKETSCOPE

, TPA Analytics: Introducing The TPA Marketscope

The seven indicators below were developed after years of observation and the extreme limits used have historically been levels that mark short-term and medium-term inflection points.

Indicators explained:

  • Short term market score – is a daily analysis of the S&P500 relative to the normal distribution using the 2 standard deviation Bollinger Band. TPA then adjusts the score by the amount of overbought or oversold as measured by RSI.
  • Percent stocks above or below the 2 standard deviation Bollinger Band – Bollinger Bands identify ranges using standard deviations away from a moving average. They, therefore, measure volatility (the width of the band) and extremes (using normal statistical distributions). In a normal distribution, 2 standard deviations identifies 96% of all occurrences.  As a stock reaches the extreme of the 2 standard deviation Bollinger Band, it becomes more probable that the price will regress back to the mean.  TPA has found that historically market reversions are very likely when 40% of stocks are above or 60% of stocks are below the 2 standard deviation Bollinger Band.
  • Percent stocks above the 50DMA – when a large number of stocks (85%) are trading above their 50DMA, the market is at an overbought extreme. When a small number of stocks (15%) are trading above the 50DMA, the market is oversold.
  • Percent stocks RSI above 70 or below 30 – RSI is a measure of the speed and size of a recent move in a stock or index; the greater the price move and the quicker that move has taken place, the higher RSI. TPA has found that historically market extremes occur when 30% of stocks are trading above RSI 70 or when 55% of stocks are trading below RSI 30.
  • Percent stocks 50DMA>200DMA – This is a longer-term measure of extremes. An uptrend is defined when short term prices consistently trade above longer-term prices. An example of an uptrend is Last > 20DMA > 50DMA > 200DMA.  Technically, a long-term uptrend is defined by the 50DMA trading above the 200DMA.  TPA has found that historic oversold extremes occur when 22% or less stocks are trading 50DMA>200DMA.  The overbought extreme has become trickier since it has been declining since 2010 as a small number of TECH stocks have garnered an increasingly large percentage weighting in the S&P500.  Currently, the extreme is approximately 40% to 50% of stocks trading 50DMA > 200DMA.

TPA notes that not all of these indicators are equally consistent.  Clients should use the “Historical Importance” comments to determine the weight they will assign to each alert.

 

CLICK ON LINKS BELOW FOR TECHNICAL INDICATOR EXPLANATIONS:

ASCENDING – DESCENDING TRIANGLE

BASING-TOPPING-CONSOLIDATION

BREAKOUT (Breakdown)

CHANNEL & RANGE

DIRECTIONAL MOVEMENT INDEX (DMI)

DOUBLE BOTTOM or DOUBLE TOP

MACD-MOVING AVERAGE CONVERGENCE-DIVERGENCE

MOVING AVERAGES

RELATIVE STRENGTH & PEER STOCK PERFORMANCE

REPEATING PATTERNS

RSI-RELATIVE_STRENGTH

SUPPORT, RESISTANCE, BREAKOUT, BREAKDOWN

TREND

ALWAYS REMEMBER: No strategy exists in a vacuum – always evaluate the relevant sector & market.

Over 80% of portfolio performance is determined by sector and market forces (Ibbotson & Kaplan study – January/Febuary2000)

 

Turning Point Analytics Disclaimer

Turning Point Analytics (TPA) is only one of many tools that an investor should use to make a final investment decision.  TPA is an overlay on top of a client’s good fundamental or macro analysis.  TPA does not create or provide fundamental analysis. The information in this communication may include technical analysis.  Technical analysis is a discipline that studies the past trading history of a security while trying to forecast future price action.  Technical analysis does not consider the underlying fundamentals of the security in question and it does not provide information reasonably sufficient upon which to base an investment decision.  Investors should not rely on technical analysis alone while making an investment decision.  Before making an investment decision, investors should consider reviewing all publicly available information regarding the security in question, including, but not limited to, the underlying fundamentals of the security and other information which is available in filings with the Securities and Exchange Commission.  The information and analysis contained in reports provided by TPA are copyrighted and may not be duplicated or redistributed for any reason without the express written consent of TPA. The information in this communication is for institutional or sophisticated investors only.  By accepting this communication, the recipient agrees not to forward, and/or copy the information to any other person, except as permitted, or required by law. TPA does not guarantee accuracy or completeness. TPA is a publisher of technical research and has no investment banking or advisory relationship with any company mentioned in any report.  Reports are neither a solicitation to buy nor an offer to sell securities. Past performance is in no way indicative of future results. Opinions expressed are subject to change without notice.  TPA will provide, upon request, the details of any past recommendations. TPA’s analysis and recommendations should not be used as the sole reason to buy or sell any security. TPA may compensate brokers and intermediaries for sales and marketing services. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results.  It should not be assumed that the methods, techniques, or indicators presented will be profitable or that they will not result in losses. Statements, data, and analysis made by TPA or in its publications, are made as of the date stated and are subject to change without notice. TPA and/or its officers and employees may, from time to time acquire, hold, or sell a position in the securities mentioned herein. Upon request, TPA will furnish specific information in this regard. TPA will not be held liable for losses caused by conditions and/or events that are beyond TPA’s control, including, but not limited to, war, strikes, natural disasters, new government restrictions, market fluctuations, and communications disruptions.

2020/07/02
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