Tharp's Thoughts Weekly Newsletter (View On-Line)


kenThis November: Learn Ken Long's Swing Systems and How to Day Trade Them

Beginning on Friday, November 8th, you can attend Ken Long's popular Swing Trading Systems workshop from 8am to 4:30pm, then from 6pm to 9pm, Ken will teach a new workshop, Turbo Trading Systems.

After three days of this schedule, you may want to stay on to trade them Live with Ken for 2 days, beginning the following Monday (November 11th).

For more information or to see the full workshop schedule, click here.

 


Article

Editor's Note: Please note that this Monthly Update will be an abbreviated version for a few reasons. Earlier this week, Dr. Tharp had surgery on one of his eyes to correct his vision. The surgery left him unable to read or write very well for a few days. Because of this, RJ Hixson filled in at the last minute to write the Monthly Update in Van's place. In addition, we experienced a delay yesterday as the internet was down at the VTI offices for the majority of the day. We know that many of you look forward to this edition of the newsletter each month and we appreciate your patience and understanding.

RJMarket Update for the Period Ending September 30, 2013

Market Condition: Neutral Quiet

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I always say that people do not trade the markets; they trade their beliefs about the markets. Consequently, I'd like to point out that these updates reflect my beliefs. I find the market update information useful for my trading, so I do the work each month and am happy to share that information with my readers.

If, however, your beliefs are not similar to mine, then this information may not be useful to you. If you are inclined to perform some sort of intellectual exercise to prove one of my beliefs wrong, simply remember that everyone can usually find lots of evidence to support their beliefs and refute others. Know that I acknowledge that these are my beliefs and that your beliefs may be different.

These updates are in the first issue of Tharp's Thoughts each month. This allows us to get the closing month's data. These updates cover 1) the market type (first mentioned in the April 30, 2008 edition of Tharp's Thoughts and readable on our web site), 2) the five-week status on each of the major U.S. stock market indices, 3) our four star inflation-deflation model plus John Williams' statistics, and 4) the movement of the dollar. I now report on the strongest and weakest areas of the overall market in a separate SQN® Report. I may come out with that report twice a month if there are significant market changes.—Van K. Tharp

Part I: Commentary—The Big Picture

The big news this week of course is the so-called US federal government shutdown.  Van commented today that while the government has to shut down if it goes beyond the debt ceiling, it is perfectly fine to continue operating each year on a non-balanced budget.   Such are the rules of the “stupid game” the government has elected to play.  So perhaps they’ll raise the debt ceiling to $18-20 trillion and then continue to operate at $1 trillion per year deficits.   There should be a rule that they have to shut down at the point where the yearly expenses go over the income received. What would you give the chances of that happening? 

Next month, we’ll check the www.usdebtclock.org website to see if there has been any noticeable change in the figures. 

Part II: The Current Stock Market Type Is Neutral Quiet

Each month, Van looks at the market SQN® score for the daily percent changes in the S&P 500 Index over 200, 100, 50 and 25 days. For our purposes, the S&P 500 Index defines the market.    

The 200-day market SQN remains in strong bull mode, the 100-day market SQN is neutral while the 50-day is bear.  Finally, the shortest term, the 25-day market SQN, is also neutral.  Long-term, the market still shows some strength but the intermediate and shorter term measures are not so strong.  The only thing keeping the market from looking very dangerous is the ongoing quiet volatility.

(to see a larger version of the charts below, click here)

charts1-3

(to see a larger version of the charts above, click here)

Part III: Our Four Star Inflation-Deflation Model

In the simplest terms, inflation means that stuff gets more expensive, and deflation means that stuff gets cheaper. There’s a correlation between the inflation rate and market levels, so the inflation rate can help traders understand big-picture processes.  However, the CRB:CCI index was discontinued on April 17th.   As a result, Van switched to the ETF called DBC to look at commodity prices.  He kept the prior years’ CCI data (from 2005 to 2012) as a reference since the DBC data does not go back that far.

Date

DBC

XLB

Gold

XLF

Total Score

Dec ‘05

347.89

30.28

513

31.67

Dec ‘06

394.89

34.84

635.5

36.74

Dec ‘07

476.08

41.7

833.3

28.9

Dec ‘08

352.06

22.74

865

12.52

Dec ‘09

484.42

32.99

1,104.00

14.1

Dec ‘10

629.53

38.47

1,410.25

16

Dec ‘11

564.37

33.5

1,574.59

13

Dec ‘12
DBC

556.08
27.79

37.54

1,664.00

16.39

Oct ‘12

27.56

36.03

1719

15.9

0

Nov ‘12

28.10

36.7

1726.5

15.76

1

Dec ‘12

27.78

37.54

1664

16.39

1

Jan ‘13

28.47

39.5

1664.75

17.38

1

Feb ‘13

27.13

38.56

1576.9

17.64

-2

Mar ‘13

27.31

39.18

1598.25

18.21

-2.5

Apr ‘13

26.27

39.55

1469.00

18.70

0

May ‘13

25.86

40.30

1394.00

19.84

-2

Jun ‘13

25.13

38.35

1192.00

19.45

-2

Jul ‘13

25.93

40.48

1333.50

20.49

-1.5

Aug ‘13

26.66

40.43

1394.75

19.44

-0.5

Sep ‘13

25.76

42.01

1328.10

19.91

-1.5

Looking back over the most recent two-month and six-month periods provides the current month’s score, given in the table below.

Month

CRB2

CRB6

XLB2

XLB6

Gold2

Gold6

XLF2

XLF6

Total Score

 

Lower

Lower

Higher

Higher

Lower

Lower

Lower

Higher

 

Sep-13

 

-1

 

 +1

 

-1

 

-1/2

-1 1/2

It was another month where the deflationary forces seem to be winning.  8 of the last 9 months and 7 of the last 12 have been deflationary months in Van’s model.   And in the last nine months the exception was zero, not inflationary.

In his article last week on where the stimulus goes, D.R. mentioned the slowing velocity of money in the economy, which is a deflationary force.  This shows up in the money multiplier chart that Van highlights every few months.  In 2013, the multiplier has been heading lower and is about to tie its lowest level since the financial crisis — and for the last few decades for that matter. 

chart4

Part IV: Tracking the Dollar

Since its peak in July, the USD has been on a downtrend that recently gathered strength.  The large drop came shortly after Fed Reserve Chairman Bernanke announced the continuation of the QE program. 

chart5

General Comments

Longer term, the competitive stimulus measures from central banks propels the big picture.  Short term, multiple markets continue to offer plenty of opportunities to prepared traders.  The keys are awareness, preparation, and execution. 

Van will be in India in early November, so I will be doing the update again next month.

These monthly market updates are not intended for predictive purposes; rather, they’re intended to help traders decide which of their trading systems should work best in the current market conditions. In bear markets—which are almost always volatile by nature—shorter-term strategies, and those that allow going short, tend to work better than long-only or intermediate/longer-term systems.

Which of your trading systems fit this current market type? Of course, this question implies that you have multiple trading systems and that you know how they perform under various market conditions. If you haven't heard of this concept or the other concepts mentioned above, read my book, Super Trader, which covers these areas and more, so that you can make money in any kind of market condition.

Crisis always implies opportunity. Those with good trading skills can make money in this market—a lot of money. There were lots of good opportunities in 2012, and many more to come in 2013. Did you make money? If not, then do you understand why not? The refinement of good trading skills doesn't just happen by opening an account and adding money. You probably spent years learning how to perform your current job at a high skill level. Do you expect to perform at the same high level in your trading without similar preparation? Financial market trading is an arena filled with world-class competition. Additionally, and most importantly, trading requires massive self-work to produce consistent, large profits under multiple market conditions. Prepare yourself to succeed with a deep desire, strong commitment and the right training.

About the Author: R.J. Hixson is a devoted husband and active father. At the Van Tharp Institute, he researches and develops new products and services that help traders trade better. He took a bit of Latin in high school but remembers better his spoken French lessons. He can be contacted at “rj” at “vantharp.com”.

 

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Trading Education

We are excited to release our November schedule which includes two brand new workshops, presented by Ken Long.

October 3-14

Peak Performance 202

Peak Performance 203

Limited space still available. Call to register.

November 8-10

Swing Trading Systems Workshop
with Ken Long

8:00am-4:30pm

November 8-10

NEW! Turbo Charge these Swing Systems
with Ken Long

6:00pm-9:00pm
Stay late and Ken will show you how to use swing trading systems to catch intra-day moves.

November 11-12

NEW! Live Trading for Turbo Systems
with Ken Long

2 days of live trading alongside Ken Long

November 16-17

 Oneness Awakening Weekend
with Van Tharp and Janie Guill

December 8-15

The Annual Super Trader Summit

Click here to learn about the Super Trader Program

To see the full schedule, including dates, prices, combo discounts and location, click here.

2014 dates will be coming in the next few months. If you are in South Africa and would like have Van host a workshop there, please contact us at van@vantharp.com. There is a possibility he will be visiting South Africa in early to mid 2014.

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Trading Tip

September 2013 SQN® Report

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There are numerous ETFs that now track everything from countries, commodities, currencies and stock market indices to individual market sectors.  ETFs provide a wonderfully easy way to discover what’s happening in the world markets.  Consequently, I now use the System Quality Number® (SQN®) score for 100 days to measure the relative performance of numerous markets in a world model. 
The SQN 100 score uses the daily percent change for a 100-day period. Typically, an SQN score over 1.45 is strongly bullish and a score below -0.7 is very weak. We use the following color codes to help communicate the strengths and weaknesses of the ETFs:

  • Green: ETFs with very strong SQN scores (0.75 to 1.5).
  • Yellow: ETFs with slightly positive SQN scores (0 to 0.75).
  • Brown:  ETFs with slightly negative SQN scores (0 to -0.7).
  • Red: Very weak ETFs that earn negative SQN scores (< -0.7).

The world market model spreadsheet report below contains most currently available ETFs; including inverse funds, but excluding leveraged funds.  In short, it covers the geographic world, the major asset classes, the equity market segments, the industrial sectors and the major currencies. 

World Market Summary

This month does not look all that different than last month.  The US market segments are largely neutral.  Much of the rest of the world remains neutral or worse.  China and the Netherlands remained the strongest countries.  Latin and South America is the weakest region by a good margin. 

In the currencies, there’s one spot of strength, a bit of weakness but mostly neutral.  The Chinese Yuan stands as the strongest currency with Australian Dollar, the Brazilian Real and the Indian Rupee exhibiting the greatest weakness. 

Pharmaceuticals, aerospace, and biotech are very strong SQN scoring industrial sectors with REITs and utilities being the weakest. 

chart7

(to see a larger version of this chart, click here)

The next chart shows real estate, debt instruments, commodities and the top and bottom ETFs for the past 100 days. 

chart7

Weakness abounds in the commodities, real estate, and debt categories.  Everything in these categories is either brown or red with the exception of oil and livestock which are green.

In the list for the top spots, you see several China related issues, pharmaceuticals, aerospace, and biotech.  The weakest list includes a large number of debt issues. 

Summary

Van’s newest table measures the percentage of ETFs in each of the strength categories.  This month, there was a slight weakening overall from last month but the largest change in any one category was 4%.  Two thirds of the ETFs are in Neutral and Bearish rankings. 

Date

Very Bullish

Bullish

Neutral

Bearish

Very Bearish

 

> 1.5

0.75 - 1.5

0 - 0.75

0 - -0.7

< - 0.7

January 31st

27.1%

39.6%

20.7%

6.4%

4.7%

February 28th

10.3%

45.2%

24.4%

11.9%

7.5%

March 31st

39.2%

25.5%

19.1%

9.0%

6.4%

April 30th

49.1%

21.1%

14.8%

8.0%

6.2%

May 31st

29,2%

23.6%

19.9%

12.3%

14.2%

June 30th

2.1%

31.0%

23.2%

22.0%

20.9%

July 31st

8.2%

33.5%

29.0%

13.3%

15.2%

August 30th

1%

15%

46.4%

19.3%

17.5%

Sept.  30th

1%

13.8%

42.3%

23.0%

19.1%

What's Going On?

Two things to note

  • September was not much different from August without many strong trends. 
  • Any way you divide up the database, most groupings can be described as neutral and slightly bearish. 

We’ll see if October brings any big changes to the model. 

The markets always offer opportunities, but to capture those opportunities, you MUST know what you are doing.  If you want to trade these markets, you need to approach them as a trader, not a long-term investor.  We’d like to help you learn how to trade professionally, trying to navigate these markets without an education is hazardous to your wealth.

All the beliefs given in this update are my own. Though I find them useful, you may not.  You can only trade your beliefs about the markets.


MatrixTrading Beyond the Matrix

Matrix Insight Entry

Van,

Hands down the biggest transformation I have experienced since reading Trading Beyond the Matrix is my relationship with my Divine.  My Divine is Saint. Michael.  In a very short time I have come to the realization that He has been with me all thirty-six years of my life.  He has been in my thoughts and in my words and in my actions all these years and I had no idea. 

I was born and raised in Scranton, a small city in northeast, PA.  I was raised by public school teachers in an Irish Catholic family.  During my formative years I always felt some sort of spiritual connection with a higher power.  That said, I always defined that connection through the lens of the Catholic Church.  As I got older, my relationship with the Church faded and I found myself having little or no spiritual beliefs or connections.  For my thirtieth birthday, my wife and I traveled to London to visit some long time friends who had recently moved there. During that trip, something strange happened.  Internally, I started to question who I was, where I was going and what I wanted from life.  I will never forget the moment this feeling hit me as I was standing in front of Harrods department store and started feeling empty inside.  On the surface, all was good.  I was newly married to the woman of my dreams and I had been practicing law in Philadelphia for the past few years. Regardless I felt empty, had doubts and wanted some important questions answered.  

Thus I began the slow and not so steady process of answering all the questions that consciously or subconsciously all people want answers to; namely who, what, when, where, why and how.  I started where, unfortunately, many people with the same urge start, the "self help" section of hell at Borders and the like.  The good news was that I discovered an unknown passion for trading.  The bad news was that it would take another six years before I even had a clue about how to the answer the questions I had about myself and "my" world.  

I cannot remember how I found my way to that Van Tharp Institute given that I now appreciate how shoddy our memories are.  That said, I believe I was listening to Libby Adams and she referenced a "trading group" she was working with.  From that point, I read Trade Your Way to Financial Freedom and I was hooked on the Van Tharp Institute and its principles.  Unfortunately, my trading habits and beliefs were terrible and my trading account was very kind to reaffirm this.  Also, I had stopped practicing law and was involved in a failing start-up with my Dad.  Even though I did all the things the "guru's" suggested, little or nothing changed in my life.  Eventually, I stopped trading, shut down the start up and returned to being a lawyer.  I essentially surrendered to the notion that maybe my questions would never be answered and that's just "life."

Through it all there was one constant in my search for answers and that was your weekly and monthly articles and updates.  I was no longer trading but still intrigued by the concepts coming out of Cary, NC.  I now believe that my Divine was pushing me in the right direction, despite my best efforts to thwart this process.  About two years ago, I first noticed your Oneness Awakening workshop and your description of your experience with Oneness.  From that moment, the need to attend was a must.  However still unconscious and determined to stay stuck in my ways, I did not attend the Oneness Awakening workshop until April, 2013.  

Van I can tell you the workshop truly exceeded my expectations.  When I left Cary on Sunday evening I felt light, free and calm.  It was unlike I had ever felt before in my life.  The feeling lasted for a few days and all kinds of wonderful and random experiences filled my days.  I think my wife looked at me and wanted to ask, "who are you and what have you done with my husband."  After a few days the feeling faded but left me hungry for more.  I tried to read and follow the principles in the binder that was given at the workshop but always seemed to run out of steam.  This pattern continued until last month while away on vacation.

Last month my wife, daughter and I went to Umbria in the Italian countryside to join our friends who live in London (yes the same friends) on vacation.  It was a wonderful and relaxing trip and gave me the opportunity to read Trading Beyond the Matrix (the book sat on my shelf since Oneness Awakening in April).  I could not stop reading the book.  The combination of the book, the beauty of the scenery and the presence of close friends and family changed my life forever!  

The biggest single transformation was / is my connection with my Divine.  This principle was discussed at length during the Oneness Awakening workshop, but truly did not resonate with me until I read the book.  I have no explanation as to the timing, but all of a sudden I found myself having constant conversations with my Divine.  How did I know I was not just talking to myself?  The FEELING I have inside when I am bonding with my Divine.  Since that vacation and in just one short month, my bond with my Divine grows stronger every day.  I find myself asking for help, guidance and love on a regular basis and my questions are finally being answered.  

In fairness to you and hopefully to other people that will read this, there are some specific things that have happened that I would like to share. First and foremost, as a teenager and young adult I had a small fascination with Saint Michael.  I have no explanation for this other than He seemed to have some "mythological" characteristics that were interesting and appealing.  I had read that when He appeared to people in the old testament He would state, "do not be afraid."  At Oneness Awakening we were asked to choose a divine and Saint Michael was who popped in my mind.  As a trial lawyer I was shocked when I got home to note that in most portrayals of St. Micheal He holds the scales of justice in his hands (scales of justice are often referenced in the Courts).  I was equally intrigued that you referenced St. Michael in your book.  I truly believe that I have been very afraid of many things for a long long time (despite my type "A" personality) and all the while St. Michael has whispered to my heart, "do not be afraid."  He is with me now as I write this.  In fact I now know He has been with my every second of every day of my life!

As my bond with Saint Michael continues to grow, my life is unfolding in ways I could not imagine.  I feel as though I have a personal Guide to help me with and through anything and everything.  It is an untapped resource that I am just learning how to use.  St. Michael  has given me my life's mission.  The following words came to me while flying home from Italy.  They came to me from somewhere deep inside and are not words I would be able to think or write without guidance:

"The only way out of this is to bond with me.  Through a bond with me, you can help all those that are still asleep.  The more you bond with me the more you will awake and be drawn to Oneness.  Do not be afraid, anywhere you create unity there will be success."  Go now my Bodhisattva."

These words were very powerful to me for two main reasons.  First, I knew they confirmed my bond with my Divine as they came from somewhere other than between my two ears.  Second, and most important, they gave me a mission and purpose in life.  I will let my Divine guide me to accomplish the goal that He set forth in those words above.  I feel as though I have clarity and the questions I set out to answer six plus years ago are now being answered.  I know that I have a long way to go in my personal growth but I am most excited about the journey.  Finally, I am truly happy for no reason and that is the best reward of all.  If I could help just one person begin the same transformation I would consider my life a success.  However, I plan to constantly evolve and improve so I can fulfill my life's mission to unite as many people as possible.

Love and thanks to all those who read this and enjoy it!

Matt S.

 

Editor's Note: Recently, we wrote to you to tell you about a new contest. We want to hear about the one most profound insight that you got from reading Van's new book, Trading Beyond the Matrix, and how it has impacted your life. If you haven't purchased Trading Beyond the Matrix yet, you can do so here. When you are ready to tell us about your insight, send an email to van@vantharp.com. We are looking forward to hearing from you. If we pick your submission we will share it this newsletter.

 

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October 3, 2013 #649

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